IMP
IMPO
Implats - Audited consolidated annual results for the year ended 30 June 2006
Impala Platinum Holdings Limited
(Incorporated in the Republic of South Africa)
Registration No. 1957/001979/06
Share code: IMP
ISIN: ZAE000003554
Issuer code: IMPO
LSE: IPLA
ADR: IMPUY
("Implats" or "the company")
Consolidated annual results for the year ended 30 June 2006 (Audited)
- Safety levels at record lows
- Gross platinum production steady at 1.846 million ounces
- Record production at Impala Platinum of 1.125 million ounces
- Sales up by 40% to record R17.5 billion
- Headline earnings per share up 39%
- Final dividend of R22.00 per share
Balance Sheet
As at As at
(All amounts in Rand millions 30 June 30 June
unless otherwise stated) 2006 2005
ASSETS
Non-current assets
Property, plant and equipment 12,270.1 10,035.0
Investments in associates 1,167.9 901.2
Available-for-sale financial investments 761.1 276.4
Held-to-maturity-investments 108.2 99.3
Other receivables 611.3 609.2
14,918.6 11,921.1
Current assets
Inventories 2,936.0 1,721.1
Trade and other receivables 3,585.6 3,189.9
Cash and cash equivalents 1,864.4 3,984.3
8,386.0 8,895.3
Total assets 23,304.6 20,816.4
EQUITY
Capital and reserves
attributable to the equity
holders of the holding company
Share capital 362.6 120.4
Other reserves 114.0 (506.1)
Retained earnings 13,373.5 14,496.0
Ordinary shareholders interest 13,850.1 14,110.3
Minority interest 214.8 159.8
Total equity 14,064.9 14,270.1
LIABILITIES
Non-current liabilities
Borrowings 11.3 -
Deferred income tax liabilities 2,922.8 2,381.1
Provision for employee benefit obligations 187.5 64.6
Provision for future rehabilitation 335.4 234.9
Derivative financial instruments 38.2 -
3,495.2 2,680.6
Current liabilities
Trade and other payables 4,741.1 3,582.4
Current income tax liabilities 926.9 280.0
Borrowings 11.3 3.3
Derivative financial instruments 65.2 -
5,744.5 3,865.7
Total liabilities 9,239.7 6,546.3
Total equity and liabilities 23,304.6 20,816.4
Income Statement
Year ended Year ended
(All amounts in Rand millions 30 June Change 30 June
unless otherwise stated) 2006 % 2005
Sales 17,500.2 39.5 12,540.8
On-mine operations (4,722.7) (4,109.5)
Concentrating and smelting (1,129.6) (1,043.3)
operations
Refining operations (545.2) (502.1)
Amortisation of mining assets (622.5) (628.8)
Metals purchased (4,326.2) (2,488.9)
Increase in metal inventories 1,161.0 454.8
Cost of sales (10,185.2) (22.5) (8,317.8)
Gross profit 7,315.0 4,223.0
Net foreign exchange transaction 177.8 32.5
gains
Other operating expenses (340.0) (318.9)
Other (expenses)/income (147.6) 292.2
Other gains - net 303.8 249.8
Finance costs (58.5) (54.3)
Share of profit of associates 114.8 203.7
Royalty expense (851.8) (414.9)
Profit from sale of investment in - 3,155.0
Lonplats
BEE compensation charge (95.3) -
Reversal of impairment/ 583.1 (1,033.8)
(impairment) of assets
Profit before tax 7,001.3 10.5 6,334.3
Income tax expense (2,616.2) (1,080.4)
Profit for the year 4,385.1 (16.5) 5,253.9
Profit attributable to:
Equity holders of the company 4,345.4 5,237.6
Minority interest 39.7 16.3
4,385.1 5,253.9
Earnings per share (expressed in
cents per share)
- basic 6,607 (16.6) 7,920
- diluted 6,589 (16.7) 7,914
Dividends to group shareholders
(expressed in cents per share)
- final dividend June 2006/5 2,200 22.2 1,800
proposed
- interim dividend December 1,000 100.0 500
2005/4 paid
- special dividend paid 5,500 -
8,700 2,300
Summary of Business Segments
(All amounts in Rand millions, unless otherwise stated)
Mining segment
Total
Mining
Impala Marula Zimplats Mimosa segment
for the year ended
30 June 2006
Total sales 16,864.9 511.1 1,037.9 436.0 18,849.9
Cost of sales 10,926.3 416.2 606.2 207.0 12,155.7
Gross profit 5,938.6 94.9 431.7 229.0 6,694.2
Profit for the
year 3,350.3 402.6 305.1 174.8 4,232.8
for the year ended 30
June 2005
Total sales 12,040.6 237.0 696.1 304.8 13,278.5
Cost of sales 8,507.8 360.4 557.3 214.1 9,639.6
Gross profit 3,532.8 (123.4) 138.8 90.7 3,638.9
Profit for the
year 2,077.0 (955.4) 131.4 94.7 1,347.7
Refining Investment Inter
services and Other segment
segment segment adjustment Total
for the year ended
30 June 2006
Total sales 6,221.6 (7,571.3) 17,500.2
Cost of sales 5,336.5 (7,307.0) 10,185.2
Gross profit 885.1 (264.3) 7,315.0
Profit for the
year 715.0 (355.0) (207.7) 4,385.1
for the year ended 30
June 2005
Total sales 4,072.3 (4,810.0) 12,540.8
Cost of sales 3,460.5 (4,782.3) 8,317.8
Gross profit 611.8 (27.7) 4,223.0
Profit for the
year 538.2 3,395.7 (27.7) 5,253.9
Statement of Changes in Shareholders" Equity
Attributable to equity
holders of the Company
(All amounts in Rand millions Share Other Retained
unless otherwise stated) capital reserves earnings Total
Balance at 30 June 2004 657.9 (626.3) 10,653.2 10,684.8
Fair value gains, net of tax:
- Available-for-sale
financial
investments 76.6 76.6
Currency translation
differences, net of tax 72.6 72.6
Net income recognised
directly in equity 149.2 149.2
Profit for the year 5,237.6 5,237.6
Total recognised income
for 2005 149.2 5,237.6 5,386.8
Employee share option scheme:
- Proceeds from shares issued 53.3 53.3
- Fair value of employee 22.3 22.3
service
Purchase of treasury shares
by subsidiary (613.1) (613.1)
Final dividend relating to (1,062.6) (1,062.6)
2004
Interim dividend relating to (332.2) (332.2)
2005
Transactions with minorities:
- Purchase of additional
share
in Zimplats Holdings Limited (29.0) (29.0)
(537.5) (29.0) (1,394.8) (1,961.3)
Balance at 30 June 2005 120.4 (506.1) 14,496.0 14,110.3
Fair value gains, net of tax:
- Available-for-sale
financial
investments 414.4 414.4
Currency translation
differences,
net of tax 110.7 110.7
Net income recognised
directly
in equity 525.1 525.1
Profit for the year 4,345.4 4,345.4
Total recognised income for 525.1 4,345.4 4,870.5
2006
Employee share option scheme:
- Proceeds from shares issued 213.9 213.9
- Fair value of employee 28.3 28.3
service
Final dividend relating to (1,181.9) (1,181.9)
2005
Interim dividend relating to (661.9) (661.9)
2006
Special dividend (3,624.1) (3,624.1)
Share of revaluation reserve
in
associate 0.2 0.2
BEE compensation charge from
sale of shares in Marula
Platinum
Limited 95.3 95.3
Transactions with minorities:
- Purchase of additional
share
in Zimplats Holdings (0.5) (0.5)
Limited
242.2 95.0 (5,467.9) (5,130.7)
Balance at 30 June 2006 362.6 114.0 13,373.5 13,850.1
(All amounts in Rand millions Minority Total
unless otherwise stated) interest equity
Balance at 30 June 2004 128.1 10,812.9
Fair value gains, net of tax:
- Available-for-sale financial
investments 76.6
Currency translation
differences, net of tax 8.6 81.2
Net income recognised
directly in equity 8.6 157.8
Profit for the year 16.3 5,253.9
Total recognised income
for 2005 24.9 5,411.7
Employee share option scheme:
- Proceeds from shares issued 53.3
- Fair value of employee service 22.3
Purchase of treasury shares
by subsidiary (613.1)
Final dividend relating to 2004 (1,062.6)
Interim dividend relating to 2005 (332.2)
Transactions with minorities:
- Purchase of additional share
in Zimplats Holdings Limited 6.8 (22.2)
6.8 (1,954.5)
Balance at 30 June 2005 159.8 14,270.1
Fair value gains, net of tax:
- Available-for-sale financial
investments 414.4
Currency translation differences,
net of tax 16.3 127.0
Net income recognised directly
in equity 16.3 541.4
Profit for the year 39.7 4,385.1
Total recognised income for 2006 56.0 4,926.5
Employee share option scheme:
- Proceeds from shares issued 213.9
- Fair value of employee service 28.3
Final dividend relating to 2005 (1,181.9)
Interim dividend relating to 2006 (661.9)
Special dividend (3,624.1)
Share of revaluation reserve in
associate 0.2
BEE compensation charge from
sale of shares in Marula Platinum
Limited 95.3
Transactions with minorities:
- Purchase of additional share
in Zimplats Holdings Limited (1.0) (1.5)
(1.0) (5,131.7)
Balance at 30 June 2006 214.8 14,064.9
Cash Flow Statement
Year ended Year ended
(All amounts in Rand millions 30 June 30 June
unless otherwise stated) 2006 2005
Cash flows from operating activities
Cash generated from operations 6,497.0 3,755.5
Interest paid (40.4) (37.4)
Income tax paid (1,553.9) (931.1)
Net cash from operating activities 4,902.7 2,787.0
Cash flows from investing activities
Increase in shareholding in subsidiary (1.5) (22.2)
Purchase of property, plant and (2,176.7) (1,995.5)
equipment
Proceeds from sale of property, plant 101.7 31.9
and equipment
Increase in investments in associates (151.7) (82.3)
Payment received from associate on - 22.1
shareholders loan
Disposal of investment in associate - 4,919.8
Loans granted - (617.5)
Loan repayments received 36.5 41.7
Interest received 356.3 200.1
Dividends received 10.9 1.0
Net cash (used in)/generated from (1,824.5) 2,499.1
investing activities
Cash flows from financing activities
Issue of ordinary shares 213.9 53.3
Purchase of treasury shares by - (613.1)
subsidiary
Proceeds from/(repayments of) short-term 6.9 (548.1)
borrowings
Proceeds from long-term borrowings 10.2 -
Dividends paid to company"s shareholders (5,467.9) (1,394.8)
Net cash used in financing activities (5,236.9) (2,502.7)
Net (decrease)/increase in cash and cash (2,158.7) 2,783.4
equivalents
Cash and cash equivalents at beginning 3,984.3 1,187.0
of year
Effects of exchange rate changes on 38.8 13.9
monetary assets
Cash and cash equivalents at end of year 1,864.4 3,984.3
Notes
The consolidated financial statements have been prepared in accordance with
International Financial Reporting Standards (IFRS), the South African Companies
Act and the regulations of the JSE Limited and are prepared under the historical
cost convention, as modified by the revaluation of available-for-sale financial
investments, and financial assets and financial liabilities (including
derivative instruments) at fair value through the income statement or the
statement of changes in equity. The principal accounting policies used by the
group are consistent with those of the previous year, unless otherwise stated.
Changes in accounting policies
The group has adopted the following accounting standards and interpretations of
standards (IFRIC) as at 1 July 2005:
- IAS 16 Property, plant and equipment (revised) - impact described below
- IAS 21 The effects of changes in foreign exchange rates (revised) - no impact
- IAS 39 Financial Instruments: Recognition and Measurements (revised) - no
impact
- IFRS 4 Insurance contracts - no impact
- IFRS 5 Non-current Assets Held for Sale and Discontinued Operations - no
impact
- IFRIC 6 Liabilities arising from Participating in a Specific Market - Waste
Electrical and Electronic Equipment - no impact
- IFRIC 7 Applying the Restatement Approach under IAS 29 (Financial Reporting in
Hyperinflationary Economies) - no impact
- IFRIC 8 Scope of IFRS 2 (Share Based Payments) and AC 503 Accounting for BEE
Transactions - impact described below
- IFRIC 9 Reassessment of Embedded Derivatives - no impact
IAS 16 Property, plant and equipment
The adoption of IAS16 (revised) requires the group to identify significant
components of property, plant and equipment and to annually reassess the
remaining useful lives and residual values of tangible assets at each financial
year end. Any reassessment performed is applied prospectively and requires the
depreciation charge to be amended for current and future periods only. The group
changed the fixed period amortisation for certain assets to the remaining useful
lives as the basis for amortisation. The rehabilitation assets have been
included in determining the cost of tangible assets. The prospective adoption of
this standard has not resulted in a material change in the amortisation charge
for the year.
IFRIC 8 Scope of IFRS 2 (Share Based Payments) and AC 503 Accounting for BEE
Transactions
Transactions with BEE entities involving the granting or selling of shares at a
price less than their fair value are expensed through the income statement as a
share-based payment charge. The impact on these financials statements is
reflected in the income statement as a BEE compensation charge of R95.3 million
in the current year resulting in a reduction in earnings per share of 145 cents.
The financial statements have been audited by PricewaterhouseCoopers Inc whose
unqualified opinion is available for inspection at the registered office of
Implats.
Headline earnings per share (cents)
2006 % Change 2005
- basic 6,006 38.9 4,325
- diluted 5,989 38.6 4,322
The calculation of headline earnings per share is derived from profit of
R4,345.4 million (2005: R5,237.6 million) adjusted for any non-operational gains
and losses (net of tax), divided by the weighted average number of shares in
issue. Adjustments to profit were made for sale of prospecting right (R95.7
million), sale of investment (R5.2 million), impairment write back (R421.6
million) and investment written off R127.1 million. (2005: impairment of assets
R849.8 million, sale of a toll refining contract (R72.1 million) and profit on
sale of Lonplats (R3,155.0 million)).
During the year under review, the group acquired a further 0.1 million (2005:
1.3 million) shares in Zimplats Holdings Limited for an amount of R1.5 million
(2005: R22.2 million) (AU$ 0.3 million (2005: AU $4.8 million)).
Capital expenditure approved at 30 June 2006 amounted to R11,856.2 million
(2005: R9,473.4 million) of which R2,338.6 million (2005: R2,595.5 million) is
already contracted. This expenditure will be funded internally and if necessary,
from borrowings.
Contingent liabilities and guarantees
At year end the group had contingent liabilities in respect of bank and other
guarantees and other matters arising in the ordinary course of business from
which it is anticipated that no material liabilities will arise.
Guarantees
2006 2005
Related party contingencies
Aquarius Platinum (South Africa) (Proprietary) - 146.3
Limited
Two Rivers Platinum (Proprietary) Limited 210.6 -
Collateral security for employee housing and 2.7 3.2
loans
Withholding tax on dividends - 16.0
Department of Minerals and Energy 296.9 288.0
Eskom 17.2 17.2
Registrar of Medical Aids 5.0 5.0
Total guarantees 532.4 475.7
Contingencies
Impala Platinum Limited has received a notice from the South African Revenue
Services (SARS) that it will disallow an amount in respect of the 1999 financial
year for the prepaid royalty to the Royal Bafokeng Nation. An amount of R159.2m
consisting of penalties and interest was levied by the tax authorities. An
official objection has been lodged by the company which maintains its position
that this amount is not due to SARS.
BTX Mining, a contract miner for Barplats Limited, has lodged a claim for an
amount of R49.0 million against Impala Platinum Limited following the closure of
the Barplats Mine. The company maintains its position that the claim lacks merit
and therefore no amount is due to BTX Mining.
Due to the uncertainties regarding the timing and amounts, if any, potential
outflows cannot be quantified.
Operating Statistics
for the year 2006 2005 Variance
ended 30 June %
Gross refined production
Platinum (`000 oz) 1,846 1,848 (0.1)
Palladium (`000 oz) 989 1,029 (3.9)
Rhodium (`000 oz) 242 234 3.4
Nickel (`000 t) 15.6 16.0 (2.5)
Impala refined production
Platinum (`000 oz) 1,125 1,115 0.9
Palladium (`000 oz) 492 515 (4.5)
Rhodium (`000 oz) 129 130 (0.8)
Nickel (`000 t) 7.9 7.9 -
IRS refined production
Platinum (`000 oz) 721 733 (1.6)
Palladium (`000 oz) 497 514 (3.3)
Rhodium (`000 oz) 113 104 8.7
Nickel (`000 t) 7.7 8.1 (4.9)
IRS returned metal (Toll
refined)
Platinum (`000 oz) 246 246 -
Palladium (`000 oz) 190 160 18.8
Rhodium (`000 oz) 42 54 (22.2)
Nickel (`000 t) 2.2 1.9 15.8
Group consolidated
statistics
Exchange rate: (R/$)
Closing rate on 30 June 7.16 6.66 7.5
Average rate achieved 6.37 6.20 2.7
Free market price per
platinum
ounce sold ($/oz) 1,791 1,304 37.3
Revenue per platinum ($/oz) 1,721 1,279 34.6
ounce sold
(R/oz) 10,963 7,930 38.2
Prices achieved
Platinum ($/oz) 988 840 17.6
Palladium ($/oz) 258 208 24.0
Rhodium ($/oz) 3,015 1,217 147.7
Nickel ($/t) 15,343 14,592 5.1
Sales volumes
Platinum (`000 oz) 1,582 1,562 1.3
Palladium (`000 oz) 896 826 8.5
Rhodium (`000 oz) 193 177 9.0
Nickel (`000 t) 14.8 14.6 1.4
Financial ratios
Gross margin achieved (%) 41.8 33.7 24.0
Return on equity* (%) 28.0 26.8 4.5
Return on assets* (%) 26.5 24.0 10.4
Current ratio 1.5:1 2.3:1 (34.8)
Operating indicators
Tonnes milled ex-mine (`000 t) 20,197 19,315 4.6
PGM refined production (`000 oz) 3,490 3,549 (1.7)
Capital expenditure (Rm) 2,248 1,992 12.9
($m) 352 322 9.3
Group unit cost per (R/oz) 5,032 4,548 (10.6)
platinum ounce
($/oz) 788 735 (7.2)
Impala business segment
Tonnes milled ex mine (`000 t) 16,441 15,778 4.2
Total cost per tonne (R/t) 325 300 (8.3)
milled
($/t) 51 49 (4.1)
Pgm refined production (`000 oz) 2,003 2,062 (2.9)
Cost per PGM ounce (R/oz) 2,666 2,298 (16.0)
refined
($/oz) 417 371 (12.4)
Cost per platinum ounce
refined
Total cost of operations (R/oz) 4,745 4,251 (11.6)
($/oz) 743 687 (8.2)
Net of revenue
received for
other metals (R/oz) 812 1,872 56.6
($/oz) 127 302 57.9
Capital expenditure (Rm) 1,601 1,693 5.4
($m) 250 274 8.8
Total Impala labour (`000) 26.9 26.9 -
complement
m2 per stoping employee (m2/empl) 38.0 40.1 (5.2)
Based on headline earnings
Extracts from the Annual Report
SAFETY
The group continued to make steady progress in reducing workplace injuries and
achieved a lost time injury frequency rate (LTIFR) at 3.41 per million manhours
and a fatal injury frequency rate (FIFR) at 0.063 per million manhours which are
at all time lows.
Over the past five years, both the LTIFR and FIFR have improved by approximately
60%. In the past financial year, LTIFR improved at all Implats" operations with
the exception of Zimplats, which nevertheless remains the best performer in the
group with respect to safety.
It is however with regret that Implats reports that during the past year seven
fatalities occurred at Impala Platinum of which three were caused by falls of
ground. Behaviour-based safety initiatives and a continued focus on reducing
injuries caused by falls of ground through improved understanding of rock
engineering and support systems remain the cornerstones of safety initiatives
within the Group, and particularly at deep-level mining operations. Renewed
efforts will be required to drive Implats towards its long term goal of zero
injuries.
PERFORMANCE
The strength of the market for platinum group metals (PGMs) continued unabated,
particularly for platinum and rhodium. The price of platinum reached an all-time
high of $1,335 per ounce in May 2006, while rhodium exceeded $6,000 per ounce in
the same month. Dollar revenues per platinum ounce sold rose by 35%, while rand
revenues were 38% higher owing to the depreciation of the local currency.
Key operating and financial performance indicators pertaining to the business
for the period under review are:
- Gross platinum production was virtually unchanged at 1.846 million ounces,
with 1.125 million ounces (61%) deriving from the Impala lease area.
- Sales were up 40% on FY2005, reaching a record R17.5 billion ($2.7
billion). This was as a result of strong dollar metal prices.
- The average rand/dollar exchange rate was R6.37/$ for the year, with the
closing rand:dollar exchange rate at R7.16/$.
- Cost of sales rose by 22% mainly due to the higher costs of metals
purchased.
- Group unit cost per platinum ounce refined excluding share based payments
was up 8.7% over the period, in part as a result of a 6.5% wage and benefits
increase granted at Impala Platinum during the period, and aggravated by lower
than expected grade and extra costs associated with the 4.6% increase in tonnes
milled.
- Profit decreased year-on-year to R4.4 billion ($693 million) due to the
impact of the extraordinary profit from the Lonplats sale in the previous year.
- Headline earnings per share rose by 39% to 6,006 cents per share (949 US
cents per share, which is an increase of 37% in dollar terms).
- Gross margins for the Group improved to 42% from 34% in the previous year,
while Impala Platinum improved to 53%.
Black Economic Empowerment
Black Economic Empowerment (BEE) has been a key focus for the Group during the
year.
At the Impala Platinum level, the company has entered into three separate
transactions to enable it to achieve BEE equity ownership of an estimated 26%.
These are:
- The sale of our stake in Lonplats" Eastern and Western Platinum mines in
September 2004 which led directly to the creation of Incwala Resources, a BEE-
resources company.
- The transaction with Royal Bafokeng Resources (RBR), our long-term
partner, in December 2005 whereby the RBR will ultimately hold approximately a
9% stake in Implats. A great deal of effort has gone into making this
transaction stand out from other BEE deals, making it sustainable, providing the
RBR with access to cash flows from the outset and ensuring that it is broad-
based.
- The creation of an Employee Share Ownership Programme (ESOP) which ensures
that some 28,000 lowest level employees will have a direct interest in the
equity of Implats.
Once these transactions have all been completed, the BEE stake at the Impala
Platinum level will exceed the 26% required by South African minerals
legislation.
At Marula Platinum, agreements have been signed with three BEE-representative
entities, namely Tubatse Platinum, the Marula Community Trust and Mmakau Mining,
to acquire a combined 22.5% stake in the operation. This falls just short of the
target of 26% BEE ownership by 2014. Once again, every effort has been made to
ensure that this transaction is affordable, sustainable and broad-based.
OPERATIONS
Impala Platinum
Record production of 1.125 million platinum ounces was achieved which was about
30,000 platinum ounces less than expected owing to lower than expected grades,
slower-than-expected improvements in mining efficiencies and the loss of three
shifts in the second half of the year due to union confederation Cosatu"s
national stayaway.
Mill grades deteriorated by 4% from the previous year, due to failure to improve
overall dillution required to offset the lower grade from the increased
mechanised tonnage. Furthermore, the expected benefits from in-stope drill jigs
have not yet fully materialised as the learning curve related to their
implementation appears now to be longer than had been planned.
Good progress is being made with the 16 and 20 shaft projects to ensure
continued annual production of between 1.1 to 1.2 million platinum ounces per
annum. The last of the third generation shafts, 20 shaft, will reach full
production of 185,000 tonnes per month in 2011 (166,000 ounces of platinum
annually), while 16 shaft, the first of the fourth generation shafts will
produce 225,000 tonnes per month (192,000 ounces of platinum annually) at full
production in 2015. Implats" total capital investment in these two shafts will
amount to R6.6 billion.
Conceptual investigations are currently underway at Impala Platinum"s Mineral
Processing and Refining operations that could ultimately increase smelter
capacity to 2.8 million ounces of platinum per annum at an estimated cost of
R750 million. In March 2006, the company announced that it would embark on a
R150 million capital upgrade of the No 4 furnace, bringing total nameplate
capacity of 2.3 million ounces per annum, and allowing for both planned and
unplanned furnace maintenance periods.
Impala Platinum"s Refineries continued to deliver an excellent performance, not
only for Impala, but also for Impala Refining Services (IRS), which markets and
sells the excess capacity not used by Impala. Expansion of the Precious Metals
Refinery from 2.0 to 2.3 million ounce nameplate capacity at a cost of R50
million is currently underway, as is a feasibility study to increase the Base
Metals Refinery"s capacity from 2.0 to 2.3 million ounces of platinum per annum.
Marula
Steady progress is being made at Marula Platinum with production of platinum-in-
concentrate up by 34% on last year although this was admittedly at a slower rate
than had been anticipated. The implementation of the off-reef development plan
is exceeding expectations and is four months ahead of schedule. Plans remain on
schedule to achieve full production by the end of the 2009 financial year.
Two Rivers
The Two Rivers Platinum mine, which commenced mining this year, will reach full
production in 2008 and will provide significant additional growth to Implats"
portfolio over the next five years. Its rapid ramp up to full production has
been a credit to our partners at African Rainbow Minerals Limited (ARM), and to
the combined ARM/Implats team that has been involved in the project. This mine
will produce about 120,000 ounces of platinum per annum, over a 20-year life-of-
mine. The decision to undertake trial mining prior to startup has enabled
management to determine the optimal mining method for the orebody.
Zimplats
Implats" conservative and consistent approach to its operations in Zimbabwe was
rewarded in May 2006 when, following extensive negotiations with the Government
of Zimbabwe, Implats" subsidiary Zimplats was able to reach agreement with the
Government on the release by Zimplats of a portion of its mining claims (some
36% of the company"s resource base on the Great Dyke, equivalent to 51 million
ounces of platinum) in exchange for a combination of empowerment credits and
cash. In return, the company expects to receive security of tenure in respect of
Zimplats" long-term expansion programme in terms of a special mining lease
regime which will allow for operations of at least 1 million ounces of platinum
per annum over a 50-year life-of-mine.
The Zimplats and Implats boards announced the immediate approval of Phase 1 of
the long-term expansion plan, and the replacement of the remaining opencast
operation with underground operations. The simultaneous development of two new
underground mines at Ngezi, the further transition of existing opencast
operations to underground mines and the construction of a 1.5 million-tonne per
annum concentrator at Ngezi will require the investment of US$258 million.
Platinum production is set to rise from the current level of 90,000 ounces per
annum to 160,000 ounces per annum by FY2010. In addition, the mine will create
1,200 new direct jobs, plus an estimated 3,000 contractor jobs during the three-
year construction phase.
Mimosa
Mimosa Platinum is a highly profitable operation and the decision by joint
venture partners Implats and Aquarius to proceed with a US$14 million expansion
to increase production to 85,000 platinum ounces per annum has already been
vindicated. Incremental expansion at this operation continues to be considered.
Impala Refining Services
Although production at Impala Refining Services (IRS) declined marginally,
financially, its performance exceeded expectations, increasing by 53% and
contributing 18% to group headline profit.
IRS benefited from improved deliveries from Marula Platinum, and from Barplats"
Crocodile River and Aquarius Platinum"s Everest mines. The weaker rand for most
of the year and higher prices achieved also boosted net profit for this entity.
IRS signed offtake agreements with Aquarius" Everest mine and the Two Rivers
mine during the period.
TRANSFORMATION
A high-level committee (including several board members) is responsible for
ensuring that Implats meets not only the objectives of South African minerals
legislation, but also fundamentally transforms the nature of the company"s human
capital base to reflect the broader South African society. This Transformation
Advisory Committee drives Implats" own transformation initiative, Project
Phambili, which has started to deliver meaningful change at both a management
and operational level.
To ensure added impetus to the group"s transformation strategy and the effective
implementation thereof, a sub-committee of the board has been constituted
comprising executive directors, selected executives and several non-executive
directors.
STRATEGIC ISSUES
In November 2005, Implats advised the market that it would be withdrawing from
the Ambatovy nickel project. Having been involved in the processing of nickel
for the last 30 years, the project initially promised to deliver favourable
returns and would have enabled the company to leverage its Base Metals Refinery
competencies, expertise and infrastructure, thereby achieving significant
economies of scale. Regrettably, the project did not meet our hurdle rates.
Nickel remains a core competency for the company and thus in April 2006, Implats
signed an option agreement with Jubilee Platinum regarding its prospective
Ambodilafa project in Madagascar, which has the potential to host significant
nickel-copper and platinum group elements mineralisation.
Implats" philosophy has always been to pay out to shareholders cash generated by
the company in excess of its own internal needs. In line with this, and given
the company"s cash generative ability, the group returned to shareholders R2.2
billion ($344 million) in ordinary dividends and R3.6 billion ($563 million) in
a special dividend declared in February 2006. This contributed to a total return
to shareholders for FY2006 of 136%. Over the past five years, total shareholder
returns have averaged 30% annually. This was in large measure possible given the
average growth of 8% per annum in sales revenue.
Shareholders will be aware that in July 2006 the board announced that Keith
Rumble would be leaving the company at the end of 2006 and that David Brown,
currently the CFO of Implats, would be assuming the role of CEO from 1 September
2006.
PROSPECTS
Prospects for PGMs remain sound. Tightening emission legislation world-wide and
increased vehicle sales will continue to underpin the platinum, palladium and
rhodium markets going forward. While the fundamentals for palladium continue to
improve, Russian and Swiss stockpiles should cap any runaway in prices. Rising
world-wide nickel production is likely to ease recent pressure on record prices.
Looking forward the group expects production to exceed 2 million ounces of
platinum in FY2007 and remains confident of its ability to increase production
to its stated target of 2.3 million ounces of platinum per annum by 2010. Given
current market circumstances, margins are expected to be maintained. Capital
expenditure is set to continue to rise to R2.9 billion in FY2007, due mainly to
the 16 and 20 shaft projects, the smelter upgrade at Impala Platinum, and the
Phase 1 expansion at Zimplats.
In line with current market conditions and an increase in production, headline
earnings are expected to be higher in the 2007 financial year.
Fred Roux Keith Rumble
Chairman Chief Executive Officer
Johannesburg
25 August 2006
Declaration of Final Dividend
A final dividend of 2,200 cents per share has been declared in respect of the
year ended 30 June 2006. The last day to trade ("cum" the dividend) in order to
participate in the dividend will be Friday, 15 September 2006. The share will
commence trading "ex" the dividend from the commencement of business on Monday,
18 September 2006 and the record date will be Friday, 22 September 2006.
The dividend is declared in the currency of the Republic of South Africa.
Payments from the London transfer office will be made in United Kingdom currency
at the rate of exchange ruling on 20 September 2006 or on the first day
thereafter on which a rate of exchange is available.
The dividend will be paid on Tuesday, 26 September 2006. Share certificates may
not be dematerialised or rematerialised during the period 18 September 2006 to
22 September 2006, both dates inclusive.
By order of the board
R Mahadevey
Group Secretary
Johannesburg
25 August 2006
CORPORATE INFORMATION
IMPALA PLATINUM HOLDINGS LIMITED
(Incorporated in the Republic of South Africa)
Registration No. 1957/001979/06
Share code: IMP/IMPO ISIN: ZAE 000003554
LSE: IPLA ADR"s: IMPUY
("Implats" or "the company")
Registered Office
3rd Floor, Old Trafford 4, Isle of Houghton, Boundary Road, Houghton 2198 (PO
Box 61386, Marshalltown 2107)
Transfer Secretaries
South Africa: Computershare Investor Services 2004 (Pty) Limited
70 Marshall Street, Johannesburg 2001. (PO Box 61051, Marshalltown 2107)
United Kingdom:
Computershare Investor Services PLC
The Pavilons, Bridgwater Road, Bristol, BS99 IAZ
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
Date: 25/08/2006 08:00:22 AM Produced by the JSE SENS Department
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