Our opinion on the current state of IMP

mpala Platinum Holdings (IMP), commonly referred to as Implats, holds the distinction of being the world's third-largest producer of platinum group metals (PGM). Over the past seven years, the company has grappled with challenges stemming from aggressive union actions and legislative uncertainty.

The CEO has articulated a strategic focus on the development of a portfolio of mining assets characterized by qualities such as long life, low cost, shallow depth, modernity, and mechanization. This strategic direction aligns closely with the approach adopted by Anglo American Platinum over the past decade.

However, the market for platinum itself has been adversely affected by a recent decline in demand for autocatalysts, particularly in the context of diesel trucks. In contrast, palladium and rhodium continue to thrive in robust markets, while platinum faces oversupply issues in global markets.

In response to these dynamics, Implats has laid out plans to boost its production from Zimbabwe by 14%, driven by the Mupani shaft's commencement in 2022. Additionally, the company's newly acquired Canadian operation is poised to contribute to increased production.

A significant milestone occurred on July 20, 2023, when Implats announced its acquisition of 56.52% of RB Plats through a mandatory offer. Simultaneously, Northam announced its decision to sell 34.5% of its holdings to Implats.

On June 28, 2022, Implats reached a pivotal labor agreement, securing a five-year wage deal with its major union, the Association of Mine Workers and Construction Union (AMCU). This agreement entails an average wage increase of 6.6% per annum.

In its financial results for the year ending on June 30, 2023, Implats reported a 2% increase in group 6E production. However, refined production witnessed a 4% decline, and sales experienced a 6% decrease. Additionally, the company noted a 4% decline in Rand revenue per 6E ounce. The company attributed some of these challenges to load curtailment at South African managed and joint venture operations during the period. Furthermore, severe load shedding was experienced across the Zimbabwean national grid in March 2023, leading to an estimated loss of 36,000 6E ounces of production across southern African managed and JV operations during that period.

In a production report for the three months ending on September 30, 2023, Implats reported a substantial 21% increase in 6E production. This growth was driven by volume gains that helped offset persistent industry-wide inflationary pressures, and the operational impact of load curtailment was also minimized during this period.

However, on November 28, 2023, Implats reported a tragic incident at its No. 11 shaft in Rustenburg, resulting in the loss of 11 lives and hospitalization of 75 individuals.

In a trading statement for the six months ending on December 31, 2023, the company estimated that its headline earnings per share (HEPS) would decline by at least 20%. From a technical standpoint, the company's share price has been on a downward trend since March 2022, primarily influenced by lower PGM prices, increased operational costs, and issues related to load shedding. Notably, Implats remains a volatile commodity share, susceptible to market fluctuations and external factors affecting the PGM industry.