Our opinion on the current state of IMP

Impala Platinum Holdings (Implats) ranks as the world's third-largest producer of platinum group metals (PGMs), navigating challenges including aggressive union actions and legislative uncertainties over the past seven years. The company's strategy, as stated by its CEO, focuses on developing a portfolio of long-life, low-cost, shallow, modern, mechanized mining assets, mirroring the approach Anglo American Platinum has adopted for a decade. The demand for platinum, particularly for use in auto catalysts for diesel trucks, has recently diminished, leading to a surplus of platinum on global markets despite strong markets for palladium and rhodium.

Implats plans to increase its production in Zimbabwe by 14% with the Mupani shaft becoming operational in 2022, and expects production boosts from its newly acquired Canadian operation as well. On 20th July 2023, the company announced its acquisition of a 56.52% stake in RB Plats following a mandatory offer, with Northam also deciding to sell its 34.5% holding to Implats. A significant development occurred on 28th June 2022 when Implats secured a 5-year wage agreement with the Association of Mine Workers and Construction Union (AMCU), settling on an average annual wage increase of 6.6%.

For the year ending 30th June 2023, Implats reported a 2% increase in group 6E production but saw refined production decrease by 4% and sales drop by 6%. Revenue per 6E ounce in rand terms fell by 4%, with the company citing load curtailment at its South African and joint venture operations and severe load shedding across Zimbabwe's national grid in March 2023 as significant factors. This resulted in an estimated loss of 36,000 6E ounces of production across its southern African operations.

In the quarter ending 30th September 2023, the company reported a 21% increase in 6E production, attributing volume gains as a counter to persistent inflationary pressures and minimizing the operational impact of load curtailment. However, tragedy struck on 28th November 2023 when an incident at its No. 11 shaft in Rustenburg resulted in 11 fatalities and 75 hospitalizations.

Looking ahead to the six months ending 31st December 2023, Implats anticipates a significant decrease in headline earnings per share (HEPS), estimating a fall of between 76% and 83%. This projection is largely due to a 37% reduction in US dollar revenue per 6E ounce sold, although somewhat mitigated by an 8% depreciation in the rand's value. The share price trend of Implats has been downward since March 2022, primarily due to declining PGM prices, rising costs, and the impact of loadshedding, highlighting its status as a volatile commodity share.