Impala production rates normalised back to full capacity

The coronavirus pandemic significantly disrupted and impacted business performance during the second half of the financial year and resulted in an opportunity cost of mine-to-market PGM concentrate production of 290 000 6E ounces.

The release of previously identified excess inventory mitigated the impact on reported production and refined 6E production declined by 8% to 2.8 million ounces.

Operational resilience enabled sustained delivery of refined metal to customers and the Group benefitted from robust pricing for primary products and achieved record financial results.

Reported unit costs were impacted by lower volumes, additional investment in development and changes in ore mix, which impacted yield. These compounded the impact of inflationary pressures and a weaker rand, increasing stock-adjusted unit costs by 12% to R13 345 per 6E ounce.

This excludes abnormal production costs of R1.3 billion. If these were included, stock adjusted unit costs would have increased by 18% to R14 067 per 6E ounce.

Pricing for the Group’s primary products was robust and, together with rand depreciation, drove substantial improvements in the Groups’ financial performance. Revenue improved by 44% to R69.9 billion, gross profit increased to R23.3 billion and headline earnings increased to R16.1 billion.

The Group generated R14.4 billion of free cash flow after capital investment of R4.2 billion and ended FY2020 with gross cash of R13.3 billion, net cash of R5.7 billion and liquidity headroom of R16.1 billion, notwithstanding the acquisition of Impala Canada, the payment of the R973 million interim dividend and expenditure incurred to induce the early conversion of the US$250 million bond.

Gains in safety and efficiency at Impala Rustenburg resulted in upward revisions to the planned production profile at the operating complex, negating the need for large-scale retrenchments. In Zimbabwe, operations continued to excel despite increasing socioeconomic pressures.

The operational turnaround and renewed social stability at Marula sustained, yielding substantial financial value and, at Two Rivers, a project to increase processing capacity was approved and advanced during the year.

The competitiveness of the Groups’ portfolio was enhanced by the acquisition of Impala Canada, a mechanised, high-margin primary palladium producer which further diversified Implats’ operating footprint.

Production rates at most operations normalised back to near full capacity by year end and the risk of material disruptions as a result of the pandemic are now steadily receding.

FY2021 production volumes will be supported through the planned release of accumulated inventory. Group refined production is estimated at between 2.8 and 3.4 million 6E ounces. Implats expects Group stock-adjusted operating costs of between R14 500 and R15 500 per 6E ounce and capital expenditure of between R6.0 and R6.8 billion.

This guidance is based on an assumed R/US$ and C$/US$ exchange rate of R16.63/US$ and C$1.35/US$, respectively and does not account for further potential Covid-related public health disruptions.

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