Strike losses put brakes on Impala

Impala Platinum, the world's second-biggest extractor of the metal, is reviewing capital projects, and warns costs next year "will not be pretty" as it deals with the aftermath of the recent five-month strike.

CEO Terence Goodlace said this week that Rustenburg operations halted by the strike were now operating at 65% of capacity, but should be back to prestrike levels in October as planned. Cost levels were expected to normalise in financial 2016.

The company lost 312000 ounces of platinum production because of the strike, and it expected 140000 ounces to be lost during the ramp-up process. It could lose up to 70000 platinum ounces at its Zimbabwe operations in financial 2015 after deteriorating ground conditions at its Bimha mine forced the withdrawal of all workers while detailed investigations were being carried out.

An analyst said: "It has been one setback after the other for Impala. They have done well to conserve cash, but they really need to invest to bring down the cost curve. The strike means that this has been delayed."

Impala is busy with three major capital projects in the Rustenburg area, including the construction of two new shafts and ramping up 16 Shaft, which was commissioned last year.

The new shafts are crucial for future production with older shafts being mined out and grades declining.

Due to the strike and difficult ground conditions, 16 Shaft is now expected to reach full production of 185000 ounces only by 2020, compared with the previous target of 2018.

Impala said build-up of full production of 125000 ounces at the 20 Shaft project was delayed by a year to 2019, while first production from 17 Shaft would take place only in financial 2020, a year later than planned.

The company halted its dividend for the first time since at least 1990, according to Bloomberg data, and cut back on capital expenditure. Its cash reserves were R4.3-billion at the end of June, a decline of 13%. Impala reported a loss of R129-million, down from a profit of R1.07-billion.

Goodlace said the company remained committed to reaching production of 850000 ounces at Rustenburg, previously targeted for 2018. Output was 709200 ounces last year, when there were no major work stoppages. Total production for the year was 1.18-million ounces, down 26%.

Anglo American Platinum has been cutting jobs, closing shafts and selling assets, but Impala's aim was to raise productivity . "We are about establishing business for the long run; it is not about restructuring now."

The market rewarded Amplats for its tougher stance, sending its share price up 13% since the beginning of the year while Impala sank 22% and third-biggest producer Lonmin fell 25%.

Platinum prices hardly reacted to the strike.