Impala Platinum Holdings Limited - Results23 Aug 2001
Registration No. 1957/001979/06
Share Code: IMP
ISIN Code: ZAE000003554
Phenomenal year for Implats
Key features
Financial performance
* Headline earnings double the previous record year
* Dividends more than doubled to R38 per share, plus special dividends of
R30 per share
* Basket of metal prices (in dollars) up 47%
* Rand revenues boosted by 20% depreciation against the dollar
Operational performance
* Breaking free from growth constraints
- 2 million ounces of platinum by 2006
- Platinum production at a new high (up 8%)
- Major new projects announced
- Significant strategic acquisitions
* Steady production at the Impala operations, but disappointing cost and
safety performance
* New CEO takes up the reins
Annual Results
for the year ended 30 June 2001
Income Statements
(R million)
           Company                                           Group
        2000   2001                                    2001        2000
    (Audited)  (Audited) for the year ended 30 June  (Audited)   (Audited)
                        Turnover                       11 969.1    7 003.6
                        Cost of sales                  5 120.3     3 900.8
                        On-mine operations             2 330.1     1 997.6
                        Concentrating and
smelting operations                                    492.5       440.7
                        Refining operations            333.3       307.9
                        Amortisation of mining assets  212.2       139.9
                        Metals purchased               1 968.8     698.8
                        Other costs                    117.1       96.6
in metal inventories                                   (333.7)     219.3
                        Operating income               6 848.8     3 102.8
    (33.3)    (62.9)    Other income/(expense)          94.5        62.0
    763.3     4 111.1   Net financial income           383.3       228.2
                        Share of pre-taxation
income from associates                                 1 031.4     332.8
                        Royalty expense                (890.3)     (406.4)
    730.0     4 048.2   Income before taxation         7 467.7     3 319.4
    (0.2)     7.6       Taxation                       2 815.2     1 061.9
    730.2     4 040.6   Income after taxation          4 652.5     2 257.5
                        Outside shareholders' interest 5.4         2.5
    730.2     4 040.6   Attributable income           4 647.1     2 255.0
                        Earnings per share (cents)
                        - basic                        7 024       3 422
                        - diluted                      6 970       3 388
                        Headline earnings
                        per share (cents)
                        - basic                        7 024        3 383
                        - diluted                      6 970        3 348
                        Cash earnings per share (cents)
                        - basic                        10 030       4 517
                        - diluted                      9 953        4 471
                        Dividends proposed and declared
                        Old accounting basis (proposed)
                        - special dividend
per share (cents) (paid Feb)                           3 000        -
                        - interim dividend 2001
per share (cents) (paid Feb)                           1 420        340
                        - final dividend 2001
per share (cents)                                      2 380        1 420
                                                       6 800        1 760
                        New accounting basis (declared)
                        - special dividend
per share (cents)                                      3 000        -
                        - final dividend 2000
per share (cents)                                      1 420        710
                        - interim dividend 2001
per share (cents)                                      1 420        340
                                                       5 840        1 050
                        The calculation for headline
eanings per share is based
on the basic earnings per
share calculation adjusted for
the following items:
                        Net income attributable
to shareholders                                        4 647.1      2 255.0
                        Less: profit on sale of
Messina Limited                                        -            26.1
                                                       4 647.1      2 228.9
Balance sheets
(R million)
           Company                                             Group
  2000     2001                                     2001       2000
  (Audited)(Audited)   as at 30 June                (Audited)   (Audited)
  591.4    824.5       Non-current assets           6 547.8    4 230.3
  5.5      5.6        Property, plant and equipment 5 230.6    3 357.3
                       Investments in associates and
  527.9    423.5       subsidiaries                 791.6      694.0
  58.0     162.2       Other investments            213.8      95.5
  -        233.2       Receivables                  233.2      -
                       Prepayments                  78.6       83.5
  37.5     9.4         Current assets               5 162.3    4 504.3
                       Inventories                  779.3      439.6
  37.5     9.4         Receivables                  1 345.4    958.0
  -        -           Cash and cash equivalents    3 037.6    3 106.7
  628.9    833.9       Total assets                 11 710.1   8 734.6
                       EQUITY AND LIABILITIES
  612.5    810.5       Capital and reserves         6 430.0    5 625.6
  13.2     13.3        Ordinary shares              13.3       13.2
  537.8    562.8       Share premium                562.8      537.8
                       Translation reserve          (0.5)      (0.4)
                       Retained earnings before
  61.5     234.4       proposed final dividend      5 854.4    5 075.0
                       Retained earnings after
  61.5     234.4       proposed final dividend      4 275.3    4 136.9
  938.1    1 579.1     Proposed final dividend      1 579.1    938.1
                       Proposed final dividend payable
  (938.1)  (1 579.1)   by subsidiaries
                       Outside shareholders' interest  19.2    13.8
                       Non-current liabilities      1 465.2    1 195.1
                       Borrowings                   113.1      137.6
                       Deferred taxation            1 156.1    889.7
                       Post-retirement obligations  66.0       66.0
                       Provision for environmental
obligations                                         130.0      101.8
  16.4     23.4   Current liabilities               3 795.7    1 900.1
  15.4     15.3   Trade and other payables          2 282.3    1 211.3
  1.0      8.1    Current taxation liabilities      1 488.9    663.5
                  Borrowings                        24.5       25.3
  628.9    833.9  Total equity and liabilities      11 710.1   8 734.6
Consolidated statement of changes in equity
(R million)
for the year ended 30 June
                         Share     Share    Translation  Retained
                         capital   premium  reserves     earnings  Total
Balance previously
reported at
30 June 1999             13.1      517.3    1.6          2 989.7   3 521.7
Change in accounting
policy in respect of:
Proposal for dividend                                    466.6     466.6
Provision for
tax on companies                                         55.6      55.6
Restated balance
at 30 June 1999          13.1      517.3    1.6          3 511.9   4 043.9
Dividends paid                                           (691.9)   (691.9)
Net profit
attributable to
shareholders                                             2 255.0   2 255.0
on foreign
subsidiary                                               (2.0)     (2.0)
Issue of share
capital                  0.1       20.5                            20.6
Balance at
30 June 2000             13.2      537.8     (0.4)       5 075.0   5 625.6
Dividends paid                                           (3 867.7) (3 867.7)
Net profit
to ordinary
shareholders                                             4 647.1   4 647.1
on foreign
subsidiary                                   (0.1)                 (0.1)
Issue of share
capital                  0.1       25.0                            25.1
Balance at
30 June 2001             13.3      562.8     (0.5)       5 854.4   6 430.0
Cash flow statements
(R million)
            Company                                             Group
      2000         2001                                    2001    2000
  (Audited)    (Audited)  for the year ended 30 June   (Audited)   (Audited)
                          Operating activities
      (58.2)   (34.9)     Cash generated from/
                          (used in) operations         6 635.7     2 976.4
      763.3    4 111.1    Financial income             400.6       253.4
                          Interest paid                (14.4)      (22.1)
      (1.8)    (0.5)      Taxation paid                (1 339.3)   (608.3)
      703.3    4 075.7    Net cash from
                          operating activities         5 682.6     2 599.4
                          Investing activities
      (5.3)    (0.1)      Purchase of property,
                          plant and equipment          (2 075.5)   (789.2)
                          Proceeds from fixed
                          assets disposed              4.6         7.4
      23.5     109.9      Repayment of non-current
                          investments                  542.3       147.7
      (50.3)   (94.1)     Purchase of listed
                          investments                  (94.1)      (50.3)
      -        (10.1)     Purchase of unlisted
                          investments                  (10.1)      -
      -        (233.2)    Loans to related and
                          other undertakings           (233.2)     -
                          Payments made for post-
                          retirement benefits          (2.9)       (2.9)
                          Payments made to
                          environmental trust          (9.4)       (5.0)
                          Cash effect of sale
                          of subsidiaries              -           5.4
      (32.1)   (227.6)    Net cash used in
                          investing activities         (1 878.3)   (686.9)
                          Financing activities
      20.6     19.6       Issue of ordinary shares     19.6        20.6
                          Payments on short-term
                          borrowings                   (0.8)       (23.1)
                          Payments on long-term
                          borrowings                   (24.5)      (24.7)
      (691.9)  (3 867.7)  Dividends paid to group
                          shareholders                 (3 867.7)   (691.9)
      (671.3)  (3 848.1)  Net cash used in
                          financing activities         (3 873.4)   (719.1)
                         (Decrease)/increase in cash
      (0.1)    0.0       and cash equivalents          (69.1)      1 193.4
                         Movement in cash and
                         cash equivalents
      0.1      0.0       At start of year              3 106.7     1 913.3
      (0.1)    0.0       (Decrease)/increase           (69.1)      1 193.4
      0.0      0.0       At end of year                3 037.6     3 106.7
Summary of business segments
                                    Impala     Inter
Year ended     Impala                Refining   Segmental
30 June 2001   Platinum   Barplats   Services   Adjustment   Total
Sales revenue  11 532.8   116.9      1 871.6    (1 552.2)    11 969.1
income         6 478.6    59.0       362.5      (51.3)       6 848.8
The annual financial statements have been prepared using accounting policies
consistent with those of the annual financial statements for the year ended
30 June 2000, except for the adoption of International Accounting Standard
(IAS) 10 (revised) (Events after the balance sheet date).
In contrast to previous reported results and in terms of IAS 10, a final
dividend and associated secondary taxation on companies (STC) have not been
provided for. Final dividend no 67 of 2 380 cents per share, amounting to R1
579.1 million, was approved by the board of directors on 23 August 2001. STC
on this dividend will amount to approximately R197 million.
Other income includes an amount of R158 million for exchange adjustments.
Investments are both listed and unlisted. The directors have valued the
unlisted investments at book value (R854 million) and the listed investments
are valued at cost (R152 million). The market value of the listed
investments, by reference to stock exchange quoted prices and closing
exchange rates, was R422 million.
During the period under review, the company issued 281 485 shares of which
264 475 were issued in terms of the share option scheme and the balance to
third parties.
Long-term liabilities consist of debentures secured by a pledge of freehold
properties, included in mining assets, with a book value of R178 million.
Half of the debentures bear interest at a fixed rate of 18.9% per annum,
with the other half bearing current interest at 12.5% per annum. All are
repayable before 30 June 2004.
Capital expenditure approved at 30 June 2001 amounted to R3 382 million, of
which R523 million is already committed. This expenditure over a period of 5
years will be funded internally and, if necessary, from borrowings.
Contingent liabilities at 30 June 2001, arising mainly from collateral
security for employee housing, amounted to R10 million.
Guarantees to Investec Bank Limited on behalf of Aquarius Platinum (South
Africa) (Pty) Limited for a loan facility amount to R525 million. This
guarantee is set to expire by 31 December 2001.
Statistics                                 2001      2000       % change
Sales revenue                 (Rm)         11 969    7 004      71
Operating income                           6 849     3 103      121
Income before taxation                     7 468     3 319      125
Attributable income                        4 647     2 255      106
Headline earnings per share   (cps)        7 024     3 383      108
Dividends per share                        6 800     1 760      286
Cash net of short term debt   (Rm)         3 013     3 081      (2)
Refined platinum
production               ('000 oz)         1 291     1 199      8
Pgm production refined                     2 464     2 308      7
Refined platinum production                1 002     1 020      (2)
Pgm production refined                     1 877     1 913      (2)
Cost per platinum
ounce refined               (R/oz)         3 156     2 711      (16)
Cost per platinum ounce
refined net of revenue
received for other metals                  (1 879)   (510)      268
Extracts from the annual report
Delivering shareholder value
Implats' mission is the delivery of real returns to shareholders,
accomplished this year by:
* A substantial increase in the share price; and
* Remarkable returns in cash, accentuated by a special dividend of R30 per
share paid in February.
Putting together the steady production from Impala, the new production from
Crocodile River mine, the concentrate bought in from other miners, the
buoyant market conditions, the sparkling performance of Lonplats and the 20%
depreciation of the Rand we had a year where:
* Every measure of income, from operating level through to attributable
income, is more than double last year's record.
* The attributable income this year was more than the sales revenue of two
years ago - a year that was then described as "fantastic".
* The proposed dividend for the year (excluding the special dividend of R30
paid in February) is 11 times the dividend of three years ago.
* The dividends for the year, including the special dividend, exceed the
share price of three years ago.
Group safety a priority
The group safety record produced a mixed result for the year. The number of
fatalities increased unacceptably to 13 from the level of seven fatalities
experienced in both 1999 and 2000. Our sincere condolences are extended to
the families and friends of the deceased. The lost time injury rate per
million man hours, however, improved by 32% to 8.5 from the rate of 12.6
reported in 2000. Fresh initiatives will clearly be required to return
Impala's safety performance to match at least best international underground
mining practice.
Phenomenal growth in earnings and profits
Attributable income and headline earnings for the year ended 30 June 2001
more than doubled to R4.65 billion (US$611 million) or 7 024 cents per share
(US923 cps). This was primarily due to an increase in sales revenue of 71%
to R11.97 billion (US$1,573 million) as a result of higher dollar metal
prices and a further weakening in the rand.
Strong growth was experienced in all areas of Implats' business.
Contribution to attributable income from Impala increased to R3 724 million
from R1 905 million in 2000. IRS generated a contribution of R300 million,
up 156% from R117 million in 2000. Attributable income from Lonplats
increased to R647 million from R220 million in 2000.
Despite an almost five-fold increase in the total dividends to 6 800 cents
per share, the anticipated level of earnings will ensure that the company
remains in a sufficiently healthy cash position to realise its growth
ambitions in the year ahead.
Capital expenditure was R2 090 million, mainly on mining decline projects
and processing capacity increases and includes the acquisition expenditure
for the mineral rights associated with the Winnaarshoek project.
The cash position net of short-term debt increased to R3,01 billion,
slightly down on the cash position at the beginning of the period as a
result of the conclusion of the Winnaarshoek transaction.
Record pgm market
The 2001 financial year was characterised by intense volatility in the
prices of pgms, with record high palladium prices exceeding US$1 000 per
ounce. This resulted in a 47% increase in the price index (weighted average
of Impala's basket of products) achieved to US$1 254 per ounce, the highest
ever recorded by Implats. While delivering record profits and cash flows to
Implats, the high prices have, as expected, begun to take their toll on
demand, particularly with regard to palladium.
Platinum demand remained firm despite the run up in prices. The metal used
in jewellery exceeded other applications owing to strong growth in China
which offset reduced demand in Japan. Platinum benefited from increased use
in autocatalysts, particularly in diesel vehicles and growth in computer
hard disc and LCD glass applications. Tightening emission control
legislation should continue to boost platinum demand thereby ensuring a
balanced market in the short to medium term, albeit at prices lower than
those achieved during 2001.
The palladium market experienced strong demand particularly from the
automotive and electronics sectors exacerbated by erratic supplies from
Russian sources and demand quickly exceeded supply. As a result, palladium
prices nearly doubled leading up to January 2001 before retreating as more
product was released out of Russia towards the middle of 2001. The high
prices have accelerated palladium substitution in dental and electronics
applications as well as the conversion back to platinum/rhodium autocatalyst
systems. Accordingly, Implats' business plan assumes further weakening of
palladium demand and prices.
Operational review
Total platinum production, which includes metals sourced from concentrate
purchased from third parties, rose by 8% to 1.29 million ounces.
Platinum production from the Impala lease area decreased by 1.7% to 1
million ounces of platinum. Tons mined from the Impala lease area increased
by 3.3% on the previous year while tons milled grew by 1.2%. Late completion
of the new UG2 concentrator circuit and subsequent problems experienced
during commissioning had a negative impact on Impala's performance for the
year. As a result, the ore stockpile grew by around 210 000 tons to 630 000
at year end.
The smelter upgrade comprising two new converters, the enhanced acid plant
and new 38MW furnace was successfully completed. The furnace refractories
developed cracks soon after commissioning and, although this did not affect
smelter output in 2001, it may necessitate premature replacement of the
refractory bricks. A claim for damages has been lodged with the supplier of
the refractories.
The inherent difficulties attendant on commissioning any major project were
compounded in the case of two significant projects during the year.
* The challenges of re-commissioning old equipment at Crocodile River mine
were exacerbated by an orebody more heterogenous than sampling had led us to
* In the case of the UG2 plant expansion, although the designed 30% increase
in capacity has been achieved, recoveries remain disappointingly below those
expected. This is primarily as a result of equipment unreliability in the
milling circuit which has prevented the plant from achieving steady-state
production. The solution will most likely involve some circuit re-design.
The financial disappointment of the year was the cost escalation at our
Rustenburg operations. Although total Rand costs per ounce of platinum sold
increased by a respectable 7% (just about equal to inflation), on-mine costs
increased by 13% per ton milled and 16% per ounce of refined platinum. Most
of this is rooted:
* In the need for more generous wage settlements in more successful years,
(noting that labour accounts for more than 50% of our costs), and
* In the costs of meeting the new Basic Conditions of Employment Act, and
* In an alarming metallurgical performance as new plants have struggled
through commissioning.
We are dismayed that counter-efforts and productivity improvements have not
done more to contain the effects of the negative developments (as was the
case over the preceding years). A complete review is underway.
Implats has previously stated its objective of growing production by 10% per
annum. 2001 was the year of substantial delivery. During this year alone the
company added almost 37 million attributable resource ounces of in situ
platinum into its portfolio.
Implats' growth strategy comprises three paths, namely:
* Mining projects and exploration;
* Strategic investments; and
* Processing concentrates to leverage processing and refining assets.
Growth from mining and exploration
* The Winnaarshoek project, one of Implats' major new ventures, is a
combination of the Platexco acquisition and mineral rights swaps with Anglo
American Platinum Limited. Production is expected to commence as early as
2002 with full production of 175 0000 ounces of platinum per annum by 2004.
The  agreement with Mmakau Mining (Pty) Limited and community-based
empowerment participants in the Northern Province, is illustrative of
Implats' ability to bring new projects on stream within the context of South
Africa's proposed Minerals Development legislation.
* Barplats Mines Limited's Crocodile River mine was brought into production
during December 2000. The planned mining rate of 75 000 tons per month was
achieved in March 2001. Recovery of precious metals during the first four
months of operation has been below expectations, but has improved as
operations extend into less weathered ores. A number of mining and
metallurgical improvements are in hand in order to ensure that the planned
production of 50 000 ounces of platinum per annum is achieved.
* In its exploration strategy Implats continues to pursue projects and joint
ventures both in South Africa and internationally, focussing on primary pgm
projects which have the potential to generate quality deposits. To achieve
this, Implats supports junior exploration companies, providing funding,
expertise and access to smelting and refining infrastructure. In February
2001, Implats entered into an alliance with international group Falconbridge
to explore jointly for pgm mineralisation on five continents. This alliance
has already identified a number of prospects, with exploration beginning at
Cana Brava in Brazil in mid-2001. Exploration continued at the Kennedy's
Vale project in South Africa and the Birch Lake and River Valley projects in
North America.
Growth from strategic investments
* Delivery from Implats' 27% stake in Lonplats in terms of both production
and contribution to earnings was well in excess of expectations. Lonplats is
proceeding with expansions to become a one million ounce producer. Implats
will benefit substantially from this company's profitability and growth.
* Relationships with Aquarius (Implats 10.1%) remain strong. Good
performance was once again achieved at Kroondal, with platinum production
capacity now increased to an annual rate of 130 000 ounces. The Marikana
project scheduled to begin production in late 2002 has the potential to
yield 75 000 ounces of platinum per annum.
* Implats will acquire an effective 40% stake in the Ngezi-Hartley assets of
the Zimplats group. The first phase of production from the Ngezi open-cast
mine is planned for January 2002, with full production of 180 000 tons per
month from March yielding 40 000 ounces of platinum during 2002. The
operation has huge growth potential.
* The recently announced proposed acquisition of a 35% stake in Mimosa
Platinum, a low cost producer on the Great Dyke, is another strategic
investment in this region. Mimosa is proceeding with its expansion plans to
increase platinum production by 50 000 ounces to 68 000 ounces by 2003.
* Through its current and future effective stakes in Zimplats and Mimosa,
Implats, together with its partners, has access to about 85% of the primary
pgm resource of the Great Dyke, which is the largest undeveloped pgm
resource in the world, second only in importance to South Africa's Bushveld
* The Two Rivers joint venture with Anglovaal Mining Limited should lead to
the establishment of a 100 000 platinum ounces per annum mine in 2004. This
follows the successful bid by the Implats/Avmin joint venture for the Dwars
Rivier reserves. Avmin will operate the project, with technical and other
input from Implats, while Implats - through subsidiary IRS - will benefit
from a life-of-mine concentrate offtake agreement.
Processing concentrates
Impala Refining Services ("IRS"), which utilises surplus smelting and
refining capacity to process third party concentrates, had another
exceptional year. The incremental pgm ounces generated through IRS are
produced at vastly reduced capital costs and associated operating risks. The
benefit that accrues to Implats from its "bought-in" ounces represents an
overall reduction in the unit costs of processing Implats' in-house
concentrate production and in future the significant minority shareholdings
will also contribute to earnings.
Production from IRS amounted to some 587 000 ounces of pgms and 9 534 tons
of base metals, of which, 267 000 ounces pgm was purchased from third
parties and 320 000 was toll refined.
Challenges and opportunities
A number of challenges and opportunities lie ahead for Implats.
* Safety is an area of primary concern. Following several internal and
external audits, a programme of behavioural motivation for both management
and employees is being undertaken. New safety initiatives will be introduced
in order to achieve a step-change reduction in the number of accidents.
* Implats is proactively managing the impact of HIV/AIDS. A recent anonymous
blood testing study conducted at Impala's 8 Shaft, confirmed an HIV
prevalence of 16% which is significantly below the levels of 25 to 30%
currently reported in the industry. An anonymous attitude survey also
produced encouraging findings indicating high levels of understanding and
education amongst employees regarding HIV/AIDS. During the year Implats
commissioned an independent actuarial report to determine the potential
financial impact of HIV/AIDS. The report indicates that costs for medical
treatment, absenteeism, training and costs to maintain productivity, could
amount to R86 million per year at a peak in 2011. However, if current
education and intervention programmes are successful in only halving the
rate of new infections amongst employees, there would be a dramatic
reduction in HIV/AIDS costs to R46 million at the expected peak of the
epidemic in 2011. This is a credible scenario if prevalence levels amongst
Impala employees have indeed peaked as our research suggests.
* Although Lonplats is expected to continue to deliver excellent returns to
Implats during the year ahead, we recognise that the full value of this
investment is poorly reflected in the Implats share price. Attention to this
unfinished business continues.
* The future of the Gencor shareholding is being constructively addressed by
the Implats Board, in association with the Board of Gencor, to ensure a
satisfactory outcome for the shareholders of both companies.
The year ahead
With both the platinum and palladium markets adjusting to structural shifts
against a background of global economic uncertainty we can be fairly certain
that these results will not be repeated next year. In all probability we
will produce results quite a bit better than the previous year, which at
that time was an all-time record high for Implats. This is impressive enough
in itself.
Based on the performance reported and anticipated, and in line with the more
generous end of the dividend policy the Board has declared a dividend for
the year of 6 800 cents, including a final dividend of 2 380 cents, payable
on 4 October 2001.
A copy of the Annual Report was posted to shareholders today.
Michael McMahon                 Keith Rumble
Chairman                        Chief Executive Officer
23 August 2001
A copy of the Annual Report is available on the Internet web site:
Alternatively please contact the Group Secretary, via e-mail at or by post at
P.O. Box 61386, Marshalltown 2107, South Africa. Telephone: (011) 481 3900
Registered Office
3rd Floor, Old Trafford 4
Isle of Houghton
Boundary Road
Houghton 2198
(P.O. Box 61386, Marshalltown 2107)
Transfer Secretaries
South Africa: Mercantile Registrars Limited
8th Floor
11 Diagonal Street
Johannesburg 2001
(P.O. Box 1053, Johannesburg 2000)
United Kingdom: Lloyds Bank TSB Registrars
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West Sussex
BN99 6DA