Impala Platinum has become the latest platinum group metals (PGM) company to announce belt-tightening measures and a review of operations that will likely result in layoffs as it grapples with the effects of low commodity prices.
Impala operates mines in Rustenburg, Zimbabwe and Canada. It unveiled a R10bn capital projects savings initiative over the next five years on Thursday that will see it putting its metal refinery and solar project in Zimbabwe on ice. The company will also stall projects in Canada, Rustenburg, Marula and Styldrift to ease the pressure of the low prices.
Presenting the group's half-year results to December, CEO Nico Muller said a comprehensive review of medium-term capital investment and a planned production profile is under way.
He said the company was racing against time to protect the balance sheet from the subdued prices and would make a decision in the next six months after consulting stakeholders.
"I do not think we have the luxury of taking two years to making these decisions. My expectation is that in the next six months we have to make a determination. When you are not covering your all-in sustaining costs, that represents a massive problem. I think in the next six months you are going to see announcements from Impala in terms of the extent and the operations it intends to restructure."
The low platinum price is squeezing producers including Anglo American Platinum which announced the possibility of cutting 3,700 jobs and a review of contracts with 700 service providers as part of restructuring struggling operations in response to weak prices.
Sibanye-Stillwater which previously announced that the restructuring of platinum operations would result in the loss of 4,000 jobs, said last week it had managed to reduce the number of affected workers after consulting stakeholders.
Muller said the review was necessary to assess the way forward and protect the company's balance sheet.
"There is no free lunch. The reason a capital project is approved by the board is for a specific purpose, either to improve your environment, social and governance scores or it is the subject of some expected financial return. To the extent that you make a decision to defer that or to cut it, it is the same thing with people in the organisation. Every individual in a company is there for a purpose [so] every time you make a decision to reduce employees by even one person you are foregoing a value contribution that will affect the business. I would like to sit here and say we can mitigate against all those things, but it is not necessarily correct."
Muller said as a price taker, platinum companies are at the mercy of market fundamentals.
"In 2020 we announced R50bn of capex, a couple of years later we are talking about retrenchments. I think that is a challenge. Where the wisdom of management companies can differentiate the companies is to find a solution to prevent this boom-and-bust DNA in an industry where you are a price taker. That is something we are thinking deeply about at the moment."
Impala has already cut its workforce by 3% after recruitment freezes for non-essential positions and the offer of a voluntary mutual separation packages. The company also deferred annual management salary increases in the period under review.
At Impala Canada, which produces palladium, labour was reduced by 21% as a consequence of restructuring and a change in operating strategy.
Impala, which acquired Royal Bafokeng Platinum last year, withheld a dividend payout in the period as headline earnings were R3.3bn or R3.65 a share, 78% lower than a year ago while profits for the six months to December dropped to R3.4bn from R17bn a year earlier.
Impala, which operates mines in South Africa, Canada and Zimbabwe, has been hit by the depressed PGM prices, which have eaten into the group's profits. They plummeted, resulting in a lacklustre financial performance for the six months ended December 2024.
Meanwhile, investigations are under way to find the root cause of an accident in November in which 13 employees died at Impala Rustenburg's 11 Shaft and 73 more were injured in a cage accident.
Muller said the shaft is back in operation and full production is expected in April.
"What we know for a fact is that the basic cause of the incident was associated with a weakness in the operation of a safety circuit controlling the winding operation. It was not a rope failure. It was not mechanical devices in the shaft that didn't operate properly. It was not as a consequence of a lack of investment or poor maintenance, it had to do with a failure of a safety circuit," Muller said.
