IMP
IMPO
Impala Platinum Holdings Limited - Consolidated Interim Results for the
six months ended 31 December 2005
Impala Platinum Holdings Limited
(Incorporated in the Republic of South Africa)
Registration No. 1957/001979/06
Share code: IMP
ISIN: ZAE 000003554
Issuer code: IMPO
LSE: IPLA
ADR: IMPUY
("Implats" or "the company")
Consolidated Interim Results for the
six months ended 31 December 2005
Key features
Sales increased by 28% to R7.9 billion
Group production up 7% to 938,000 ounces of platinum
Headline earnings increased by 78% to R28.06 per share
Interim dividend of R10 per share, doubled from the previous year
Special dividend of R55 per share declared
Revenue per platinum ounce up by 24% in rand terms and 18% in dollar terms
Margins improve from 33% to 42%
Group unit costs contained to a 4.2% increase
Announcement of BEE transaction with Royal Bafokeng Resources and Implats
employees
R4.3 billion cash to be returned to shareholders through interim and special
dividend
Balance sheet
As at As at As at
(all amounts in 31 December 31 December 30 June
Rand million 2005 2004 2005
unless otherwise stated) (Unaudited) (Unaudited) (Audited)
ASSETS
Property, plant and 10,564.9 8,571.6 10,035.0
equipment
Investments 1,482.0 1,101.9 1,276.9
Other non-current assets 625.6 629.5 609.2
Current assets 9,393.4 7,338.0 8,895.3
Total assets 22,065.9 17,641.0 20,816.4
EQUITY
Capital and reserves 14,886.0 12,120.6 14,110.3
Minority interest 160.2 109.5 159.8
Total equity 15,046.2 12,230.1 14,270.1
Provision for long-term 341.6 274.4 299.5
responsibilities
Borrowings 14.9 - -
Deferred income tax 2,546.7 2,067.4 2,381.1
liabilities
Current liabilities 4,116.5 3,069.1 3,865.7
Total equity and 22,065.9 17,641.0 20,816.4
liabilities
Income statement
Six months to Six months to Year to
(all amounts in 31 December 31 December 30 June
Rand million 2005 2004 % 2005
unless otherwise (Unaudited) (Unaudited) change (Audited)
stated)
Sales 7,920.2 6,188.4 28.0 12 540,8
On-mine (2,313.5) (2,024.3) (14.3) (4,109.5)
operations
Concentrating (566.8) (526.3) (7.7) (1,043.3)
and smelting
operations
Refining (282.4) (247.2) (14.2) (502.1)
operations
Amortisation of (334.0) (276.4) (20.8) (628.8)
mining assets
Metals purchased (1,633.6) (1,157.9) (41.1) (2,488.9)
Increase in 514.8 65.4 687.2 454.8
metal
inventories
Cost of sales (4,615.5) (4,166.7) (10.8) (8,317.8)
Gross profit 3,304.7 2,021.7 63.5 4,223.0
Net foreign (76.5) (316.2) 75.8 32.5
exchange
transaction
(losses)/gains
Other operating (154.7) (154.3) (0.3) (318.9)
expenses
Other (125.1) 73.2 (270.9) 292.2
(expense)/income
Interest income 168.6 106.9 57.7 249.8
and other gains
- net
Finance costs (10.2) (37.0) 72.4 (54.3)
Share of profit 40.8 204.2 (80.0) 203.7
of associates
Royalty expense (379.1) (231.2) (64.0) (414.9)
Profit from sale - 3,156.2 - 3,155.0
of investment in
Lonplats*
Impairment of - (1,451.3) - (1,033.8)
mining assets
Profit before 2,768.5 3,372.2 (17.9) 6,334.3
tax
Income tax (942.8) (358.4) (163.1) (1,080.4)
expense
Profit for the 1,825.7 3,013.8 (39.4) 5,253.9
period
Profit
attributable to:
Equity holders 1,814.7 3,009.8 (39.7) 5,237.6
of the company
Minority 11.0 4.0 175.0 16.3
interest
1,825.7 3,013.8 (39.4) 5,253.9
Earnings per
share (expressed
in cents per
share)
- basic 2,764 4,529 (39.0) 7,920
- diluted 2,757 4,524 (39.1) 7,914
Weighted average 65.7 66.5 (1.3) 66.1
number of shares
in issue
(millions)
*Comprising Western Platinum Limited and Eastern Platinum Limited ("Lonplats")
Statement of changes in shareholders" equity
Attributable to equity
holders of the company
(all amounts in Share Other Retained Minority Total
Rand million
unless otherwise capital reserves earnings interest equity
stated)
Balance at 31 187.6 (708.6) 12,641.6 109.5 12,230.1
December 2004
Impact of adopting 45.0 (45.0) -
IFRS2 (Share-based
Payments) on
opening retained
earnings
Restated balance 232.6 (708.6) 12,596.6 109.5 12,230.1
at 31 December
2004
Fair value gains,
net of tax:
- Available-for- 88.2 88.2
sale financial
investments
Currency 148.7 8.6 157.3
translation
differences, net
of tax
Net income 236.9 8.6 245.5
recognised
directly in equity
Profit for the 2,231.6 12.3 2,243.9
half year
Total recognised 236.9 2,231.6 20.9 2,489.4
income for the
half year
Employee share
option scheme:
- Proceeds from 46.3 46.3
shares issued
- Fair value of 9.9 9.9
employee service
Purchase of (168.4) (168.4)
treasury shares by
subsidiary
Interim dividend (332.2) (332.2)
relating to 2005
Transactions with
minorities:
- Purchase of (34.4) 29.4 (5.0)
additional shares
in Zimplats
Holdings Limited
(112.2) (34.4) (332.2) 29.4 (449.4)
Balance at 30 June 120.4 (506.1) 14,496.0 159.8 14,270.1
2005
Fair value gains,
net of tax:
- Available-for- 100.2 100.2
sale financial
investments
Currency (100.0) (9.5) (109.5)
translation
differences, net
of tax
Net income 0.2 (9.5) (9.3)
recognised
directly in equity
Profit for the 1,814.7 11.0 1,825.7
half year
Total recognised 0.2 1,814.7 1.5 1,816.4
income for the
half year
Employee share
option scheme:
- Proceeds from 136.2 136.2
shares issued
- Fair value of 6.9 6.9
employee service
Final dividend (1,181.9) (1,181.9)
relating to 2005
Transactions with
minorities:
- Purchase of (0.4) (1.1) (1.5)
additional shares
in Zimplats
Holdings Limited
143.1 (0.4) (1,181.9) (1.1) (1,040.3)
Balance at 31 263.5 (506.3) 15,128.8 160.2 15,046.2
December 2005
Cash flow statement
Six months to Six months to Year to
(all amounts in 31 December 31 December 30 June
Rand million 2005 2004 2005
unless otherwise (Unaudited) (Unaudited) (Audited)
stated)
Net cash from operating 2,398.7 958.5 2,787.0
activities
Cash from the sale of - 4,919.8 4,919.8
Lonplats
Net cash used in other (845.1) (1,339.9) (2,420.7)
investing activities
Net cash used in (1,028.3) (2,039.4) (2,502.7)
financing activities
Increase in cash and 525.3 2,499.0 2,783.4
cash equivalents
Cash and cash 3,984.3 1,187.0 1,187.0
equivalents at
beginning of the period
Effects of exchange (10.9) (14.5) 13.9
rate changes on
monetary assets
Cash and cash 4,498.7 3,671.5 3,984.3
equivalents at end of
period
Segment information
Summary of business segments for the half year ended 31 December 2005:
(all amounts in Rand million
unless Refining Inter
otherwise Impala Marula Zimbabwe Services segment
stated) segment segment segment segment adjustment Total
Sales 7,606.9 201.9 656.0 2,571.3 (3,115.9) 7,920.2
Cost of sales 4,925.7 203.3 402.5 2,179.6 (3,095.6) 4,615.5
Gross 2,681.2 (1.4) 253.5 391.7 (20.3) 3,304.7
profit/(loss)
Summary of
business
segments for
the half year
ended 31
December
2004:
Sales 5,993.0 132.7 476.1 1,972.1 (2,385.5) 6,188.4
Cost of sales 4,336.4 194.4 362.2 1,688.8 (2,415.1) 4,166.7
Gross 1,656.6 (61.7) 113.9 283.3 29.6 2,021.7
profit/(loss)
Notes
The interim financial statements have been prepared using accounting policies
consistent with those of the annual financial statements for the year ended 30
June 2005, except for the adoption of the standards as listed below, and conform
with International Reporting Standards on Interim Financial Reporting.
The group has adopted the following accounting statements as at 1 July 2005:
- IAS 16 Property, plant and equipment (revised 2003)
- IAS 21 The effects of changes in foreign exchange rates (revised 2003)
- IFRS 4 Insurance contracts
- IFRS 5 Non-current assets held for sale and discontinued operations
The adoption of these statements had no material effect on the results of the
group.
Other (expenses)/income includes the following:
- Pre tax profit on sale of the Spitzkop prospecting right for R111 million.
- On 30 November 2005 Implats advised that pursuant to its review of the
Ambatovy Project, it has delivered a formal notice of withdrawal under the
shareholders agreement. The total amount written off was R195 million
(investment in the project of R127 million and bankable feasibility study cost
of R68 million).
Headline earnings per share
Six months Six months Year to
to 31 Dec to 31 Dec 30 June
2005 2004 % 2005
(Unaudited) (Unaudited) change (Audited)
- basic (expressed 2,806 1,581 77.5 4,325
in cents per
share)
- diluted 2,799 1,580 77.1 4,322
(expressed in
cents per share)
Headline earnings per share reflects after tax adjustments for the profit on
sale of the Spitzkop prospecting right of R95 million, a profit on the sale of
the investment in Teba of R5 million and a write off of the investment in
Ambatovy of R127 million (2004: impairment of assets of R1,198 million and
profit on sale of Lonplats of R3,156 million).
Capital expenditure approved at 31 December 2005 amounted to R10,847 million
(2004: R9,471 million), of which R2,231 million (2004: R2,596 million) is
already committed. This expenditure, over a period of 5 years, will be funded
internally and, if necessary, from borrowings.
During the period under review, the group acquired an additional shareholding in
Zimbabwe Platinum Holdings Limited of approximately 0.09% for R1.5 million
(AU$0.3 million), taking the group"s holding to 87%.
The results for the comparable period have been restated for the effect of the
adoption of IFRS 2 (Share-based Payments), which reduced the earnings by R12.4
million. Basic and diluted earnings per share consequently decreased by 19 cents
per share from 1,600 cents per share and 1,599 cents per share respectively.
Interim dividend no. 76 of 1,000 cents per share, amounting to R658.3 million
and a special dividend of 5,500 cents per share, amounting to R3,620.9 million,
was approved by the board of directors on 16 February 2006; Secondary Tax on
Companies (STC) on these dividends will amount to R534.9 million.
Contingent liabilities at 31 December 2005, arising mainly from collateral
security for employee housing, amounted to R3,1 million (2004: R6,7 million).
Certain guarantees from which it is anticipated that no material liabilities
will arise were in place as at 31 December 2005:
- The holding company has provided a political risk guarantee for a facility,
made available by ABSA to Zimbabwe Platinum Mines (Private) Limited. As at 31
December 2005, the guarantee amounted to R19,9 million (2004: R2,8 million)
((US$ 3,1 million) (2004:US$ 0,5 million)). The loan is payable bi-annually over
two years which commenced in December 2005.
- The Department of Minerals and Energy for R313,3 million (2004: R103,7
million) with respect to future environmental rehabilitation costs.
- Eskom for the amount of R17,1 million (2004: R17,1 million) for the supply of
electricity.
- Registrar of Medical Aid Schemes for R5,0 million (2004: R5,0 million) on
behalf of the Impala Medical Plan.
Due to uncertainties regarding the timing and amount of the guarantees,
potential outflows cannot be quantified.
Operating Statistics
Six months Six Year to
to months to
31 31 % 30 June
December December
2005 2004 change 2005
Gross
refined
platinum
production
Impala (000oz) 591 547 8.0 1,115
IRS (000oz) 347 333 4.2 733
Total (000oz) 938 880 6.6 1,848
IRS metal
returned
(toll
refined)
Platinum (000oz) 145 101 43.6 246
Palladium (000oz) 104 40 160.0 160
Rhodium (000oz) 23 27 (14.8) 54
Sales
volumes
Platinum (000oz) 833 803 3.7 1,562
Palladium (000oz) 440 394 11.7 826
Rhodium (000oz) 93 91 2.2 177
Nickel (000t) 6.7 7.0 (4.3) 14.6
Prices
achieved
Platinum ($/oz) 911 829 9.9 840
Palladium ($/oz) 207 221 (6.3) 208
Rhodium ($/oz) 2,260 1,001 125.8 1,217
Nickel ($/t) 14,218 13,945 2.0 14,592
Consolidated
statistics
Average (R/$) 6.49 6.21 4.5 6.20
exchange
rate
achieved
Closing (R/$) 6.31 5.63 12.1 6.66
exchange
rate
Revenue per
platinum
ounce sold (R/oz) 9,423 7,620 23.7 7,930
($/oz) 1,452 1,227 18.3 1,279
Tonnes (000t) 10,394 9,646 7.8 19,315
milled ex-
mine
PGM refined (000oz) 1,773 1,677 5.7 3,549
production
Capital (Rm) 948 771 23.0 1,992
expenditure
Group unit
cost per
platinum
ounce (R/oz) 4,749 4,557 (4.2) 4,548
($/oz) 732 734 0.3 735
Dividend
(relating to
reporting 1,000 500 100 2,300
period
earnings)
(cps)
Additional statistical information is available on the company"s internet
website.
Declaration of interim dividend
An interim dividend of 1,000 cents per share has been declared in respect of the
half-year ended 31 December 2005. The last day to trade ("cum" the dividend) in
order to participate in the dividend will be Friday, 3 March 2006. The share
will commence trading "ex" the dividend from the commencement of business on
Monday, 6 March 2006 and the record date will be Friday, 10 March 2006.
The dividend is declared in the currency of the Republic of South Africa.
Payment from the London transfer office will be made in United Kingdom currency
at the rate of exchange ruling on 8 March 2006 or on the first day thereafter on
which a rate of exchange is available.
The dividend will be paid on Monday, 13 March 2006. Share certificates may not
be dematerialised/rematerialised during the period Monday, 6 March 2006 to
Friday, 10 March 2006, both dates inclusive.
Declaration of special dividend
In light of the positive view of the market and the fact that Implats has
sufficient cash to pursue its growth objectives while maintaining prudent cash
management, the Board of Directors has declared a special dividend of 5,500
cents per share. The last day to trade ("cum" the dividend) in order to
participate in the special dividend will be Friday, 3 March 2006. The share will
commence trading "ex" the special dividend from the commencement of business on
Monday, 6 March 2006 and the record date will be Friday, 10 March 2006.
The dividend is declared in the currency of the Republic of South Africa.
Payment from the London transfer office will be made in United Kingdom currency
at the rate of exchange ruling on 8 March 2006 or on the first day thereafter on
which a rate of exchange is available.
The dividend will be paid on Monday, 13 March 2006. Share certificates may not
be dematerialised/rematerialised during the period Monday, 6 March 2006 to
Friday, 10 March 2006, both dates inclusive.
By order of the board
R Mahadevey Johannesburg
Group Secretary 16 February 2006
Review of operations
Production at Implats was 938,000 ounces of platinum in the six months to end
December 2005, an increase of 6.6% on the comparable 2004 period. This was
largely a result of higher production at Impala Platinum"s mining operations.
Although the emphasis on safety on a group-wide basis continues, regrettably
there were five fatal accidents at Implats during the first six months of the
financial year, all of them at Impala Platinum. (There were four fatal accidents
in the previous period). The Implats Board and management extend their
condolences to the families and colleagues of the deceased. There were no fatal
accidents at Marula, Mimosa or Zimplats during the period. In spite of the worse
performance in the first six months, the fatality frequency rate has improved by
41% over the past five years.
At a group level, the lost time injury frequency rate (LTIFR) deteriorated
marginally, by 3%, compared to the six months to December 2004. The LTIFR has
improved by more than 50% over the past five years.
Renewed emphasis has been placed on safety in the workplace and on the
elimination of all fatal accidents at work, with an emphasis on training and
leadership. The Tsiboga campaign (which means "on the look out" in Tswana)
continues to play a pivotal role.
Impala Platinum Limited (Impala)
Production at Impala Platinum, Implats" flagship operation, reached another
record level for the six months ended December 2005. Overall, platinum
production rose by 8.0% to 591,000 ounces on the back of record tonnes milled of
8.555 million, an increase of 9.3%.
Overall grade declined by 4.2% as volumes from mechanised mining increased and
as more difficult ground conditions at 11 shaft resulted in some dilution. A
high-level team has been set up to investigate ways of improving the grade and
to focus on quality mining.
Drill jigs (dynamic drilling technology) have been rolled out to approximately
30% of the Merensky panels. The primary benefits from the implementation of the
drill jigs are improvements in safety, productivity/efficiencies and the
reduction in physical effort required on the job. Overall, drill jigs have
resulted in a 6% improvement in mining efficiencies on the Merensky reef since
the start of their implementation.
Excellent progress has been made with the two major capital projects at Impala,
namely 16 and 20 Shafts. Together these shafts will contribute 355,000 as
replacement ounces to platinum production at Impala when they reach full
production - during 2011 for 20 shaft and 2014 for 16 shaft. Sinking of the
main shaft at 16 shaft reached 90 metres below surface at the end of January
2006, which is some five months ahead of schedule, while sinking of the main
shaft at 20 shaft was 500 metres below surface, about four months ahead of
schedule. Of the combined capital approved for these projects of R6.6 billion,
R668 million has been spent to date, and a total of R1.71 billion has been
committed.
Impala"s processing and refining operations continued to excel, with throughput
rising to record levels. Concentrator recoveries increased by 2.5% to 85.5% as a
result of the tails scavenging facility and improvements achieved at the UG2
plant.
The unit cost per platinum ounce refined at Impala was well contained,
increasing by 4.5% to R4,468 per ounce, despite the implementation of the first
phase of the two-year wage agreement (6.5% increase).
Gross refined platinum production increased by 6.6% to 938,000 ounces with PGM
production up by 5.7% to 1.8 million ounces.
The project to expand capacity to 2 million ounces at the Precious Metals
Refinery (PMR) is on track and expected to be completed by end June 2006, with
final environmental clearance anticipated by the end of 2006. The Base Metals
Refinery (BMR) expansion to 2 million ounces was successfully completed within
budget during the period. Additional capital expenditure has been approved to
enlarge the PMR"s nameplate capacity to 2.3 million ounces of platinum and
further expansion options at the BMR are being evaluated.
Capital expenditure at Impala was R717 million during the period.
Marula Platinum (Proprietary) Limited (Marula)
For the six months to December 2005, tonnes mined at Marula improved by 28% with
tonnes milled up marginally by 1.3%. The relatively low increase in the latter
was due to the milling of stockpiled material in previous periods. There was a
marked improvement in the grade mined of 38%. Platinum-in-concentrate production
rose from 17,300 ounces to 18,900 ounces, while unit costs were 7.0% lower at
R9,397/oz.
Cash breakeven has been achieved at Marula and good progress is being made with
the implementation of the new mining plan, which has been adopted to suit the
geological conditions prevailing at the mine. While the hybrid mining continues
to make steady progress, development towards conventional mining operations is
currently five months ahead of schedule.
The implementation of drill jigs is progressing well and currently stands at 70%
completion. Although the transition to owner-mining has resulted in improved
efficiencies, it has been hampered by sporadic industrial action.
The ramp-up to full production of 144,000 ounces per annum is expected to be
completed by 2009. Capital expenditure for the period amounted to R137 million.
Zimbabwe Platinum Mines Limited (Zimplats)
Despite a decline of 2.8% in tonnes milled, production of platinum-in-matte rose
by 2.6% to 43,400 ounces. The yield improved by 6% while unit costs increased by
9.0% to $1,037/oz per platinum ounce in matte. The large escalation (in dollar
terms) of the opencast contract fee had a negative influence on costs.
The transition from opencast to underground mining is currently underway and 35%
of tonnes mined are now being sourced from underground. This transition is
expected to alleviate further cost increases associated with relatively higher-
cost open cast mining operations.
Phased growth is being planned at Zimplats. A feasibility study on the expansion
to 145,000 ounces of platinum annually is currently being reviewed and will be
placed before the Zimplats and Implats boards for approval in May 2006. In the
interim, infrastructural development; power supply, water weirs and surface
earthworks, has been completed.
The Implats and Zimplats boards identified a number of risks associated with
further expansions at Zimplats. Of the risks categorised as socio-political or
economic in nature, a number have been satisfactorily addressed, including
resolution of the foreign exchange arrangements and granting of the Ngezi
Special Mining Lease. The Zimplats and Implats boards will continue to assess
the remaining identified risks, to gain clarity on empowerment requirements and
the granting of the second Special Mining Lease. At the same time they will
closely monitor the completion of a comprehensive technical and mining
assessment in order that a decision regarding the planned expansion programme
can be taken soon.
Capital expenditure for the period totalled R73 million, an increase of 61%.
Mimosa Platinum (Private) Limited (Mimosa)
Tonnes milled improved by 13.5% to 764,000 tonnes, resulting in an increase of
16.6% in platinum production to 36,500 ounces of platinum-in-concentrate. Yield
of 3.09g/t was 3.6% higher, while unit cost per platinum ounce in concentrate
was 15,0% lower at $724/oz. Costs in rand terms decreased by 10.6% to R4,721/oz.
The project to expand production to 80,000 ounces of platinum is well underway
and is on schedule and on budget. A substantial stockpile has been created in
anticipation of the commissioning of the new plant in the middle of this year.
Capital expenditure for the period amounted to R44 million (R22 million
attributable to Implats).
Two Rivers Platinum (Proprietary) Limited (Two Rivers)
Implats and African Rainbow Minerals are joint venture partners (45:55) in the
Two Rivers Platinum project. Capital expenditure to commissioning is R1.2
billion, of which R1 billion has been spent to date (45% attributable to
Implats). The project is ahead of schedule and start-up is planned for July
2006. Full production of 120,000 ounces is scheduled for late 2007.
Impala Refining Services Limited (IRS)
Refined platinum production at IRS increased by 4.2% to 347,300 ounces with
gross profit improving by 38% to R392 million.
Aquarius Platinum (South Africa) (Proprietary) Limited (AQPSA)
Implats holds a stake of 8% in the listed company Aquarius Platinum Limited and
a 20% stake in the latter"s subsidiary Aquarius Platinum (South Africa). AQPSA
contributed R41 million to earnings for the period under review. In terms of
operating performance, Aquarius" Kroondal performed well, a contractor dispute
constrained improvements at Marikana, and the production ramp-up at Everest is
on schedule, with the first concentrate delivered to IRS during the period.
Ambatovy Nickel Project
Following a feasibility study, Implats announced its withdrawal from the
Ambatovy Nickel project in Madagascar as the project no longer met Implats"
internal hurdle rates. Mining, capital and production costs had escalated
significantly since the original feasibility study was concluded in February
2005. The cost to Implats of its participation in the project was R195 million,
of which R127 million represents the investment and R68 million the cost of the
feasibility study.
Market review
The platinum market remained tight throughout 2005 on the back of continuing
strong demand from the automotive sector, primarily driven by diesel vehicles,
as well as solid support from industrial applications. Jewellery displayed
remarkable resilience in the face of prices that rose from a low of $844 in
January, to finally exceed $1,000 by calendar year end with demand in this
sector declining by only 10%.
The palladium market moved closer to balance in 2005, due to a combination of
further substitution of platinum in gasoline engines and surging demand from the
fledging Chinese jewellery sector. Prices remained remarkably steady for most of
the year, but finally made a move towards $300 in the final quarter of the year,
benefitting from a general run in commodities and improving fundamentals.
The rhodium market moved to a deficit in 2005 as a result of ongoing strong
demand from the auto industry to meet more stringent NOX legislation and another
banner year from the glass industry, which is moving to the production of wider
TFT-LCD panels used in a variety of applications from television sets to
handheld devices. As a result the price rose 50% during the year exceeding
$3,000 per ounce at year end.
Corporate matters
BEE Transaction
During the interim period, Implats announced its proposals for a black economic
empowerment (BEE) transaction which would see the Royal Bafokeng Nation (RBN)
through Royal Bafokeng Resources (Pty) Ltd (RBR), acquire a stake of
approximately 9% in Implats by 2016. Implats believes that, when taken at an
Impala Platinum level, the stake acquired by the RBR will be equivalent to 12.3%
of units of production. Together with an Employee Share Ownership Programme
(ESOP) aimed at A, B and C level Paterson grade employees of its South African
operations, also announced during the reporting period, and credits attributed
from the sale to historically disadvantaged South Africans of a portion of
Implats" stake in Lonmin"s platinum interests, Impala Platinum will achieve the
26% BEE ownership required in terms of the Broad-Based Socio-Economic
Empowerment Charter for the Mining Industry. These calculations are subject to
confirmation by the Department of Minerals and Energy and ongoing discussions
are being held in this regard.
The transactions with the RBR and the ESOP are expected to be concluded by June
2006.
Directorate
In November 2005, Mr Shadwick Bessit, the Operations Executive at Impala
Platinum"s mining and mineral processing operations was appointed as an
executive director to the Implats board, bringing the number of executive
directors on the board to five.
Financial review
The interim period of the 2006 financial year was characterised by continued
strong growth in headline earnings, principally as a result of increases in
sales volumes and metal prices. Dollar revenue per platinum ounce sold was up
18.3% with the corresponding rand revenue 23.7% higher.
Margins improved across the group with the gross margin rising to 42%. Headline
earnings per share, on a restated basis, rose by 77.5% to 2,806 cents. Earnings
per share were further enhanced as a result of the impact of the share buy-back
programme. Basic earnings per share declined by 39% as earnings in the
comparable period in 2005 had been boosted by profit from the sale of Implats"
stake in Lonmin"s platinum interests.
Sales for the period ending December 2005 increased by 28.0% to R7.92 billion
from R6.19 billion for the six months ending December 2004. In dollar terms,
sales were 22.5% higher at $1.22 billion. The main drivers of sales were as
follows:
- sales volumes up by 3.4%, resulting in a positive volume of R213 million;
- metal prices of platinum and rhodium strengthened in both rand and dollar
terms, exceeding expectations; with PGM prices and especially that of platinum
reaching record levels, overall dollar prices improved by 19.0% contributing to
a positive price variance of R1.2 billion;
- the rand/dollar exchange rate weakened during the period and closed at R6.31/$
on 31 December 2005 compared to a close of R5.63/$ on 31 December 2004. The
average exchange rate achieved for the period under review was R6.49/$ versus
R6.21/$ for the comparative period. The weaker exchange rate contributed 5.6% to
higher sales, equivalent to R343 million. The strengthening of the rand towards
the end of December 2005 from weaker levels recorded during the period, resulted
in exchange losses of R77 million versus R316 million in December 2004.
Cost of sales was up by 10.8% to R4.62 billion largely as a result of a 7.8%
increase in tonnes milled and an annual wage adjustment of 6.5% at Impala
Platinum, which employs 90% of group employees. The group unit cost per platinum
ounce produced rose by 4.2% in line with inflation, to R4,749 per platinum
ounce.
The contribution to profit by associates was R41 million, down from R204 million
in the previous comparative financial period, which included equity-accounted
profit from Implats" stake in Lonmin"s platinum interests.
Earnings contributions
As in previous years, Implats" income continued to be derived from three
sources, with the bulk from the mine-to-market operations (89%). The other two
sources of income being IRS and equity income from investments.
Contribution to headline earnings
Six months Six months
to 31 Dec % to 31 Dec %
R million 2005 contribution 2004 change
Impala Platinum 1 501 81.5 872 72.1
IRS 224 12.2 77 190.9
Marula (9) (0.5) (34) 73.5
Zimplats 74 4.0 52 42.3
Mimosa 79 4.3 51 54.9
Aquarius 41 2.2 (3) 1 466.7
Ambatovy (68) (3.7) - -
Gazelle/Lonplats - - 36 -
Headline 1 842 100.0 1,051 75.3
earnings
- Mine-to-market operations: The mine-to-market operations owned by the Implats
group contributed R1.65 billion (89%) to headline earnings. These operations
comprise Impala Platinum, Marula Platinum and Two Rivers (45%) in South Africa
and Zimplats and Mimosa (50%) in Zimbabwe. Marula reported a negative
contribution of R9 million which was a significant improvement on the loss
reported previously of R34 million. The Zimbabwe operations reported significant
increases in margins due to higher US dollar revenue and positive currency
impacts.
Operating margins
Six months to Six months to
Entity 31 Dec 2005 31 Dec 2004
Impala Platinum 50 40
Zimplats 34 22
Marula (1) (47)
Mimosa 49 28
IRS 15 14
Implats group 42 33
- IRS, housing Implats" third-party refining services, contributed R224 million
to group headline profit, an increase of 190%. Given the lower risks and capital
requirements of IRS, margins at this entity are lower than at other operations
within the group. Margins for the 2006 interim period were 15%. Sales for the
period rose by 30.4% to R2.6 billion with a 4.3% increase in platinum production
to 347,300 ounces. This resulted in an increase in its contribution to group
headline profit to 12.2% as compared to a contribution of 7.3% in the previous
interim period.
- Equity income from investments of R41 million was from Implats" holding in
Aquarius Platinum SA, largely due to the higher US dollar receipts.
Attributable earnings to equity holders declined by 39.7% to R1.81 billion as a
result of the profit on the sale of Lonplats in the previous six months.
Balance sheet structure and cash flow
The emphasis on maintaining a strong balance sheet continues to ensure that
there is sufficient funding for the group"s planned future capital expenditure
over the next five to ten years.
Cash from operating activities during the interim period totalled R2,399 million
and the net increase after accounting for investing and financing activities was
R525.3 million. After funding of the capital expenditure programmes, dividends
and investments to 31 December 2005, the net closing cash position was R4.5
billion, up 22.5% from the comparable period.
Consistent with previous statements in this regard, the Board has decided to
return a significant amount of cash to shareholders, and to this extent has
declared a special dividend of R55 per share on 16 February 2006. The special
dividend combined with the interim dividend and STC payable will result in a
total cash outflow of R4.8 billion. This will deplete the surplus cash on hand
as at 31 December 2005.
Capital expenditure
Group capital expenditure for the 2006 interim period totalled R948 million as
compared to R771 million in the previous interim period. The bulk of this
capital expenditure, R717 million, was spent at Impala Platinum and mainly on
the development of 16 and 20 Shafts. The Zimbabwean operations accounted for
capital expenditure of R94 million, and Marula R137 million.
Prospects
The platinum market is expected to remain tight for the medium term, again led
by the auto sector, which is striving to meet stricter emission legislation
worldwide. The market is expected to be well supported by a resilient jewellery
sector. The future direction of the palladium market depends on the extent of
refined stocks, and the sustainability of its use in the jewellery trade.
Automotive usage should ensure that the rhodium market remains
firm in the short- to medium-term.
From an operational perspective Implats is on track to reach 2.3 million ounces
of platinum production per annum by 2010, with the potential for further upside
presented by its Zimbabwean operations. The company remains highly cash
generative, and given its track record and continued focus on cost containment
and efficiency improvements, margins are expected to remain at healthy levels.
Given the current exchange rate and prevailing metal prices, the headline
earnings (excluding the impact of the recently announced BEE transaction but
including the impact of STC relating to the special dividend) are expected to be
20 to 30% higher than the previous financial year.
FJP Roux K C Rumble Johannesburg
Chairman Chief Executive Officer 16 February 2006
Corporate information
Registered Office
3rd Floor, Old Trafford 4, Isle of Houghton
Boundary Road, Houghton 2198
(P.O. Box 61386, Marshalltown 2107)
Transfer Secretaries
South Africa: Computershare Investor Services 2004 (Pty) Limited
70 Marshall Street, Johannesburg, 2001, (P.O. Box 61051, Marshalltown, 2107)
Facsimile +27 11 688-5200 Telephone +27 11 370-5000
United Kingdom: Computershare Investor Services plc
The Pavilons, Bridgewater Road, Bristol, BS13 8AE
Directors
FJP Roux (Chairman), KC Rumble (Chief Executive Officer), S Bessit, DH Brown, CE
Markus, JM McMahon*, MV Mennell, TV Mokgatlha, K Mokhele, NDB Orleyn, LJ Paton,
JV Roberts, LC van Vught
*British
A copy of this Report is available on the Internet web site:
http://www.implats.co.za
Alternatively please contact the Company Secretary, via e-mail at
alan.snashall@implats.co.za or by post at P.O. Box 61386, Marshalltown 2107,
South Africa.
Telephone: (011) 481 3900
Date: 16/02/2006 08:01:09 AM Produced by the JSE SENS Department
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