annual results fy2019implats-reports.co.za/results/annual-results-2019/pdf/presentation.pdf ·...

ANNUAL RESULTS FY20195 September 2019

ANNUAL RESULTS FY2019

Certain statements contained in this presentation, other than the statements of historical fact, contain forward‐looking statements regarding Implats’ operations, economic performance or financial condition, including, without limitation, those concerning the economic outlook for the platinum industry, expectations regarding metal prices, production, cash costs and other operating results, growth prospects and the outlook of Implats’ operations, including the completion and commencement of commercial operations of certain of Implats’ exploration and production projects, its liquidity and capital resources and expenditure and the outcome and consequences of any pending litigation, regulatory approvals and/or legislative frameworks currently in the process of amendment, or any enforcement proceedings. Although Implats believes that the expectations reflected in such forward‐looking statements are reasonable, no assurance can be given that such expectations will prove to be correct. Accordingly, results may differ materially from those set out in the forward‐looking statements as a result of, among other factors, changes in economic and market conditions, success of business and operating initiatives, changes in the regulatory environment and other government actions, fluctuations in metal prices, levels of global demand and exchange rates and business and operational risk management. For a discussion on such factors, refer to the risk management section of the company’s Integrated Annual Report. Implats is not obliged to update publicly or release any revisions to these forward‐looking statements to reflect events or circumstances after the dates of the Annual Report or to reflect the occurrence of unanticipated events.

Disclaimer: This entire presentation and all subsequent written or oral forward‐looking statements attributable to Implats or any person acting on its behalf are qualified by caution. Recipients hereof are advised the presentation is prepared for general information purposes and not intended to constitute a recommendation to buy‐ or offer to sell shares or securities in Implats or any other entity. Sections of this presentation are not defined and assured under IFRS, but included to assist in demonstrating Implats’ underlying financial performance. Implats recommend you address any doubts in this regard with an authorised independent financial advisor, stockbroker, tax advisor, accountant or suitably qualified professional.

Forward‐looking and cautionary statement

2


Business outlook

Agenda

Group overview

Operational overview

Financial review

Nico Muller Mark MunroeGerhard Potgieter

Meroonisha Kerber

Market review

Sifiso Sibiya Nico Muller

3

OVERVIEWNico Muller, CEO


• 1 Shaft 2.11 million• Marula 1.68 million• 20 Shaft 1.52 million• 12 Shaft 1.18 million

Group safety overview

9

8

7

5

6.88

6.356.01

5.30

0

1

2

3

4

5

6

7

8

0

2

4

6

8

10

12

14

FY2016 FY2017 FY2018 FY2019

FATALITIES & LOST‐TIME INJURY FREQUENCY RATE

LTIFR*

FATALITIES

• Rtb Services 12.92 million• Refineries 11.79 million• 14 Shaft 3.79 million• 9 Shaft 2.93 million• 6 Shaft 2.42 million

Fatality Free Shifts

• Good safety performance regressed in Q4

• 1 fatality in Q1

• 4 fatalities in Q4

• FIFR improved 28% to 0.047 per million man hours worked

• LTIFR improved 12% to 5.30 per million man hours worked

• 9 out of 15 millionaire sites

5*per million man hours worked


Group sustainable development

6

Schools Support Programme• 10 local schools in Rustenburg

• Upgrades at Bersebaand Dimapo Primary Schools

• Renovations to Marula’shistoric Karabo early childhood development centre

Luka & Mogonowater infrastructure

• Installed 6.3km of piping

• Upgraded water reservoir and pumping station

• Assisted local municipality to deliver water to Luka North

Ga‐Kgwete and Ga‐Mashishielectrification

• Supplying electrical infrastructure to 207 homes close to Marula

Hurricane Idaisupport

• Donations of– Water treatment

chemicals– Medical supplies– Antibiotics– Food– Fuel

R2m

US$0.5mR26m

R6m

R6m


Group sustainability overview

Healthstewardship

Socialinvestment

Environmentalcustody

R86msocial investment spend• Education support• School infrastructure• Road infrastructure• Water reticulation• Enterprise development

R200m

23%

US$4m

spent on enterprise and supplier development programmes

invested in housing and living conditions

increased spend on “local‐to‐site” suppliers

in SA (R1.6bn)

invested in socio‐economic development

at Zimplats

of Zimplats’ total annual procurement spend from

local suppliers

71%

ZEROLevel 4‐5 environmental incidents since 2014

42%

26%

rigorous third‐party review of all TSF confirm integrity of all facilities

decrease in Level 3 environmental incidents

12%fewer lost time injuries

323

37%

5 730

Wellness Leadership Award

TB incident rate per 100 000, significantly lower than estimated national average of 570

fewer cases of noise induced hearing loss

receiving ART treatment

Tailings dams

water used is recycled

7

26%reduction in new cases of

pulmonary TB

In recognition of Zimplats’ mental health support

programmes

ALLmanaged operations are ISO14001:2015 certified

R2m

SO2emissions are within AEL requirements


Description FY2019 FY2018 Var (%) Remarks

Tonnes Milled Mt 19.47 19.36 1 • Improved performance from Impala

Concentrate production

Mine‐to‐market productionImpalaZimplatsTwo RiversMimosaMarula

Third‐party purchased

Pt koz

Pt kozPt kozPt kozPt kozPt kozPt koz

Pt koz

1 498

1 30868826914712283

189

1 574

1 31666927416312585

259

(5)

(1)3

(2)(9)(2)(3)

(27)

• FY2018 benefitted from once off toll contract

• Sustained production

• Ramp‐up from 16 and 20 shafts, good performance from 12 and 14 shafts• Sustained steady‐state production• Impacted by split reef mining and Eskom disruptions• Sustained steady‐state production• Impacted by community disruptions in Q3

• FY2018 benefitted from once off toll contract

Refined production Pt koz 1 526 1 468 4 • 57koz Pt stock released compared to a build‐up in the previous year

Unit cost (milled)

Unit cost (refined stock adjusted)

Unit cost (refined)

R/t

R/oz

R/oz

1 096

23 942

22 673

1 035

22 931

24 660

(6)

(4)

8

• Cost increase well contained

• Benefitted from increased production

• Benefitted from increased production and 57koz inventory release

Capital expenditureImpalaZimplatsMarula

RmRmRmRm

3 7862 0061 628152

4 6062 7671 738101

18286

(50)

• Reduce spend on 16 and 20 shaft and lower off‐reef• Lower spend on Bimha and trackless equipment• New tailings dam extension

Waterberg project Rm 19 425 96 • Purchase of 15% stake in FY2018

Group operational overview

8


1 574

1 498

19 2 3 5 16

70

1 440

1 460

1 480

1 500

1 520

1 540

1 560

1 580

1 600

1 620

FY2018 Impala Marula Mimosa Zimplats Two Rivers 3rd party receipts FY2019

Pt koz in

con

centrate

669xx6883%

83‐3%

122‐2%

269‐2%

147‐9%

189‐27%

Group movement in platinum concentrate production

Koz Pt in concentrate

9


‐

5 000

10 000

15 000

20 000

25 000

30 000

35 000

TwoRivers inconc

Zimplatsin matte

Impalarefined

IRS +Impalarefined

Mimosain conc

Marulain conc

GroupRefined

(R/Pt o

z)

REVENUE AND COST OF PRODUCTION

Cash cost Stay‐in‐business capitalReplacement capital Expansion capitalRevenue per Pt oz

Description FY2019 FY2018 Var (%)

Platinum ounces produced (refined) koz 1 526 1 468 4

Platinum ounces sold koz 1 515 1 355 12

Revenue per platinum ounce sold R/oz 31 765 25 935 22

Revenue Rbn 48.63 35.85 36

Cost of sales Rbn 41.79 34.72 (20)

Gross profit Rbn 6.84 1.14 >100

Free cash flow Rbn 7.69 (4.21) >100

Gross cash Rbn 8.24 3.71 >100

Head room Rbn 12.24 6.20 98

Net cash/(debt) Rbn 1.08 (5.33) >100

Group business overview

10


Group Mineral Resources and Mineral Reserves overview

• Attributable Group Mineral Resource estimatereduced by 2.2 million platinum ounces

− Two Rivers Merensky model update ‐1.0 Moz pt

• Buffelshoek (narrow Merensky)

• Merensky & UG2 >1 200m depth west of Kalkfontein fault

− Net production depletion ‐0.9 Moz pt

− Zimplats Hartley model update ‐ 0.3 Moz pt

• Attributable Group Mineral Reserve estimateremained unchanged

− Production depletions offset by an increase at Zimplats through the northern boundary extension at Mupani

11

For details please see Implats Mineral Resource and Mineral Reserve statement 2019

37%

37%

8%

9%6%2%

ATTRIBUTABLE MINERAL RESOURCES OF

131.6 MOZ PT

Zimplats Impala Two RiversAfplats Marula Mimosa

52%

33%

7%4%4%

ATTRIBUTABLE MINERAL RESERVES OF 21.2 MOZ PT

Zimplats Impala Two RiversMarula Mimosa

133.

8

131.

6

0.217 0.189 0.001 0.001 1.039 0.663 0.111

100

120

140

2018

Impa

la

Mar

ula

Afpl

ats

Wat

erbe

rg

Two

Riv

ers

Zim

plat

s

Mim

osa

2019

Moz

Pt

ATTRIBUTABLE MINERAL RESOURCES (Variance Moz Pt)

21.2

21.3

0.809 0.114 0.164 1.2050.001

10

15

20

25

2018

Impa

la

Mar

ula

Two

Riv

ers

Zim

plat

s

Mim

osa

2019

Moz

Pt

ATTRIBUTABLE MINERAL RESERVES (Variance Moz Pt)

133.

8

132.

1

131.

6

131.

6

125

130

135

2018

Two

Riv

ers

Zim

plat

s

Impa

la

Mar

ula

Mim

osa

Afpl

ats

2019

Moz

Pt

ATTRIBUTABLE MINERAL RESOURCES (Variance Moz Pt)

21.2

21.2

16

18

20

22

2018

Impa

la

Two

Riv

ers

Mar

ula

Mim

osa

Zim

plat

s

2019

Moz

Pt

ATTRIBUTABLE MINERAL RESERVES (Variance Moz Pt)


Group performance against objectives

12

Reposition Implats to the lower half of the cost curve

SAFETY PERFORMANCEFatalities reduced from 7 to 5

LTIFR reduced by 12%

OPERATIONAL PERFORMANCESustained mine‐to‐market production

Increased refined productionPGM +5%

Platinum +4%Palladium +7%

COST PERFORMANCEGroup stock adjusted unit cost ↑4%

Group unit cost per refined ounce ↓8%

IMPALA returned to profitability

MARULA turnaround sustainedGenerating cash for the Group

Optimise balance sheet and capital allocation

Improved balance sheet LIQUIDITY and CAPITAL STRUCTURER6.8bn gross profit

R7.7bn free cash flowR8.2bn gross cashR12.2bn liquidityR1.1bn net cash

Optimised CAPITAL ALLOCATIONInvested R3.9bn in CapexRepaid debt of R2.2bnConverted US$ bonds

Reduced excess processing INVENTORY57koz Pt drawdown

Sustained DIVIDEND PAYMENTS from Zimplats, Mimosa and Two Rivers

Enhance the competitiveness of the portfolio

Completed IMPALA phase 1 restructuring without disruptions

Industry leading cost performance from IMPALA with stock adjusted unit cost growing

by only 4% per annum from 2016

Industry leading processing facilitiesIRS cash cost R850/PGM ounce

Advanced WATERBERG DFS and potential funding strategies

Sustained MARKET DEVELOPMENT and supported targeted industry initiatives to grow

PGM demandR1.5bn invested over 5 years

Protect and strengthen license to operate

Improved SAFETY performance despite poor fourth quarter

No level 4/5 ENVIRONMENTAL incidents reported during the year

Reviewed all TAILING STORAGE FACILITIES design and operational management

Published information

Sustained OCCUPATIONAL HEALTHsurveillance and wellness programmes

TB well below national average

Sustained good relations with all key STAKEHOLDERS in RSA and Zimbabwe

7 day disruption at Marula

OPERATIONAL REVIEWMark Munroe, CE: Rustenburg operations


Impala

636 651 669688

627 655 581

754

0

100

200

300

400

500

600

700

800

FY2016 FY2017 FY2018 FY2019

Pt oz(000)

PRODUCTION

Pt in concentrate Pt refined

22 13923 543

27 18322 612

22 11423 856 24 005 24 945

FY2016 FY2017 FY2018 FY2019

R/oz

COSTS

Cost/Pt oz refined Stock‐adjusted

‐2 049 ‐3 097

‐6 526

1 876

FY2016 FY2017 FY2018 FY2019

Rm

FREE CASH FLOW

Description FY2019 FY2018Var(%) Remarks

Tonnes milled kt 11 211 10 947 2 • Increased contributions from 16 and 20 shafts

PGE head grade g/t 3.99 4.09 (2) • Changes in stoping width and ore pass maintenance

Platinum in concentrateRefined platinum

kozkoz

688754

669581

330

• Higher recoveries offset lower grade• 70koz excess inventory released in FY2019

Cost per platinum ounceStock adjusted

R/ozR/oz

22 61224 945

27 18324 005

17(4)

• Stock build‐up in FY2018 vs release in FY2019• Inflation of 6.5% offset by higher volumes

Capital expenditure Rbn 2.01 2.77 28 • Lower spend on 16 and 20 Shafts

Free cash flow Rm 1 876 (6 526) >100 • Improved rand basket price, inventory release

• Good operational performances from a smaller mining footprint• Significant improvement in free cash flow

− Improved operational performance

− High rand revenue basket

− Good cost and capex performance

• Good progress on restructuring plan

14


658

646

683

16.4

14.1

12.9

10.8 4.9

2.3 0.7 0.4

12.0

1.8 3.5

19.5

610

620

630

640

650

660

670

680

690

700

710

Sto

ck a

djus

ted

Pt K

ozImpala movement in platinum contribution (stock adjusted)

151includes the treatment of dumps, slag and sludge 2after replacement capital

Shaf

t clo

sed

Ram

p-up

Ram

p-up

Poor

saf

ety

perfo

rman

ce

Impr

oved

min

ing

flexi

bilit

y

Impr

oved

con

tract

or p

erfo

rman

ce

Hig

her r

ecov

erie

s

Ram

ping

dow

n

Impr

oved

mec

hani

zed

perfo

rman

ce

Hig

her v

olum

es

Platinum koz 90 20 64 119 74 30 20 71 32 105 58

Revenue R/Pt oz 27 676 29 964 27 470 26 531 30 248 30 248 29 248 30 268 28 165 28 738

Cost R/Pt oz (000) (31 522) (27 014) (28 449) (30 552) (24 707) (24 168) (29 231) (25 673) (27 786) (30 064)

Cash Profit / (Loss) Rm2 (601) 190 (122) (391) 167 122 1 147 (8) (77)

Win

der b

reak

dow

n

Hig

her s

lag

treat

men

t

1


Key projects progress

16

16 ShaftDescription FY2019 FY2018

Project completion % 92 90

Estimated completion date date Nov 21 Nov 21

Approved capital Rm 7 939 7 939

Estimate at completion Rm 7 939 7 939

Expenditure to date Rm 7 382 7 159

Estimated steady‐state achievement date Jun 22 Jun 22

Design production (Pt at steady state) koz per annum 180 180

Platinum production koz 90 74

Mineable face length (30 June) m 3 363 2 542

Stoping teams (30 June) teams 104 75

Panel Ratio (30 June)* panels/team 1.4 1.3

Average Productivity (full year)* ca/team/month 283 240

Unit cost (excl Project capital) R/Pt oz 31 522 29 885

• Project expenditure 92% complete• Mineable face length up 32%• Platinum production improved 22% (50% of steady state)• Impacted by fatal incident and premature rope failure

* Based on producing stoping teams and 25 m panel



17

20 Shaft

Description FY2019 FY2018


Estimated completion date date Jun 19 Jun 19

Approved capital Rm 7 930 7 930

Estimate at completion Rm 7 890 7 930

Expenditure to date Rm 7 885 7 804

Estimated steady‐state achievement date Jul 22 Jul 21


Platinum production koz 74 69

Mineable face length (30 June) m 1 567 1 316

Stoping teams (30 June) teams 54 57

Panel Ratio (30 June)* panels/team 1.2 1.0

Average Productivity (full year)* ca/team/month 250 229

Unit cost (excl Project capital) R/Pt oz 30 552 29 900

• Project expenditure 100% complete• Mineable face length up 19%• Platinum production improved 7% (57% of steady state)

• New management and performance conditions

Photo: Jacques McCarthy* Based on producing stoping teams and 25 m panel


Unprofitable operation

12operational

shafts ramping up to 750koz Pt

Opex + capex* R29 006/oz

CapitalR2 472m(nominal)

Labour42 253

StatusFY2017

Free cash flow generative

6operational

shafts producing

~520koz Pt

Opex + capex* <R24 500

CapitalR1 400m

(real FY2018)

Labour~27 000

Delivering a profitable Impala Rustenburg

LABOUR

• Phase 1 restructuring successfully completed• Own support staff reduced by 1 300,

contractors increased by 700• No disruptions• 117 retrenched

• Phase 2 initiated in July 2019• Closure/divesture of 1 and 9 shafts• Section 189 issued

• Phase 3 to be initiated in FY2021• Closure/divesture of 12 and 14 shafts

OPERATIONAL

STAKEHOLDER ENGAGEMENTS

• DMR (regular constructive engagement)• SLP compliance• Mitigation of job losses

• Union (extensive consultation at all levels)• Wage negotiations underway

• Communities (extensive consultation) • Local procurement and employment• Social development

IMPLEMENTATION

• Fit for purpose structure design completed• 4 Shaft closed in FY2018• 1 Shaft on track for closure/divesture 1H2020• 9 Shaft on track for closure 2H2020• 12 Shaft profitable in FY2019• 14 Shaft improving, but still unprofitable • 16/20 shafts ramp up & optimisation ongoing• High performance culture being rolled out

$

Future statusFY2022

18

Free cash flow generative

10 operational shafts,

producing683koz Pt

Opex + capex* R26 179/oz

CapitalR2 006m (nominal)

Labour39 523

StatusFY2019

Description FY2019 FY2018 % change

LTIFR pmmhw 5.42 6.54 17

Pt Production koz in conc 688 669 3

Unit cost R/Pt oz 24 945 24 005 (4)

Face length km 21.0 20.2 4

Efficiency t/man/a 289 269 7

Recoveries % 89.15 87.84 1

*in FY2018 terms


Impala outlook

19

1110

9

76

FY2018 FY2019 FY2020 FY2021 LT

Number of shafts

658 683 640 ‐ 690

575 ‐ 625520

FY2018 FY2019 FY2020 FY2021 LT

(oz00

0)

Refined platinum production (stock‐adjusted)

Stock adjusted platinum ounces

27 000 25 600 26 300 <24 500 <24 500

FY2018 FY2019 FY2020 FY2021 LT

(R/oz)

Cost per platinum ounce (stock‐adjusted)*

Operating cost SIB capital + off‐reef

29 500 28 300 27 400 22 300 20 500

10 500 11 300 8 400

8 000 6 500

FY2018 FY2019 FY2020 FY2021 LT

Employees

Own Employees Contractors

*cost in FY2018 terms

OPERATIONAL REVIEWGerhard Potgieter, COO


Marula

7868

85 83

0

50

100

FY2016 FY2017 FY2018 FY2019

Pt ozin conc

(000

)

PRODUCTION

24 13129 278

24 87727 602

FY2016 FY2017 FY2018 FY2019

R/oz

COSTS

‐444‐670

‐299

380

FY2016 FY2017 FY2018 FY2019

Rm

FREE CASH FLOW

Description FY2019 FY2018 Var(%) Remarks

Tonnes milled kt 1 772 1 838 (4) • Community disruptions in Q3

PGE head grade g/t 4.40 4.33 2 • Reduced stoping width

Platinum ounces in concentrate koz 83 85 (2) • Lower mining volumes

Cost per platinum ounce in concentrate R/oz 27 602 24 877 (11) • Inflation, lower volumes

Capital expenditure Rm 152 101 (50) • Tailings dam

Free cash flow Rm 380 (299) >100 • Higher rand basket

• Sustained operational turnaround impacted by community disruptions during Q3

• Rand basket price benefited from higher palladium and rhodium content

• Free cash flow positive

• Initiated tailings dam extension

21

21


Two Rivers

186 182163

147

0

20

40

60

80

100

120

140

160

180

200

FY2016 FY2017 FY2018 FY2019

Pt ozin con

c(000

)

PRODUCTION

11 775 12 92514 517

17 330

FY2016 FY2017 FY2018 FY2019

R/oz

COSTS

649 662

385446

FY2016 FY2017 FY2018 FY2019

Rm

FREE CASH FLOW


Tonnes milled kt 3 405 3 455 (1) • Eskom power disruptions in Q3

PGE head grade g/t 3.52 3.63 (3) • Split‐reef and additional development

Platinum ounces in concentrate koz 147 163 (9) • Lower grade and plant recoveries

Cost per platinum ounce in concentrate R/oz 17 330 14 517 (19) • Lower volumes, split reef mining

Capital expenditure Rm 571 454 (26) • Deepening of the main decline• Purchase of additional development fleet

Free cash flow Rm 446 385 16 • Higher rand basket

• Split‐reef mining impacted mill grade, plant recoveries and concentrate production

• Lower grade mining will persist for the foreseeable future

• Actively addressing split‐reef challenges through opening new mining areas and increasing mining flexibility

• Remains a low cost, profitable, mechanised mining operation

22


Zimplats

290 281 271 270

0

50

100

150

200

250

300

350

FY2016 FY2017 FY2018 FY2019Pt ozin matte incl.

concen

trate sold (0

00)

PRODUCTION

1 1301 249 1 313 1 288

FY2016 FY2017 FY2018 FY2019

US$/oz

COSTS

‐32

15

73

128

FY2016 FY2017 FY2018 FY2019

US$m

FREE CASH FLOW


Tonnes milled kt 6 486 6 570 (1) • Operating at steady‐state levels

PGE head grade g/t 3.48 3.48 0

Platinum ounces in concentrate koz 269 274 (2)

Platinum ounces in matte koz 270 271 0

Cost per platinum ounce US$/oz 1 288 1 313 2 • Weaker R/$ exchange rate

Capital expenditure US$m 115 135 15 • Lower mining fleet replacement

Free cash flow US$m 128 73 75 • Higher dollar basket

• Sustained exceptional operational performance with safety challenges during the year

• Bimha mine re‐development completed in FY2019

• Negligible impact from monetary policy changes during the year

23



24

Mupani

Description FY2019 FY2018


Estimated completion date date Jul 24 Jul 24

Approved capital $m 264 264

Estimate at completion $m 260 261

Expenditure to date $m 67 37


Estimated steady‐state achievement date Jul 2029 Jul 2030

Planned Platinum production koz 0 0

Actual Platinum production koz 1.2 0

• Started producing ore in June 2019• Sustained above‐plan development rates• Steady state production date brought forward by 12 months


Mimosa

120 122 125 122

0

20

40

60

80

100

120

140

FY2016 FY2017 FY2018 FY2019Pt ozin conc

(000

)

PRODUCTION

1 463 1 511 1 5211 646

FY2016 FY2017 FY2018 FY2019

US$/oz

COSTS

‐15

27

15

‐5

FY2016 FY2017 FY2018 FY2019

US$m

FREE CASH FLOW

Description FY2019 FY2018 Var (%) Remarks

Tonnes milled kt 2 814 2 802 0 • Steady‐state production levels

PGE head grade g/t 3.83 3.84 0

Platinum ounces in concentrate 000 oz 122 125 (2) • Lower plant recoveries

Cost per platinum ounce in concentrate US$/oz 1 646 1 521 (8) • Higher insurance and sales related costs

Capital expenditure US$m 49 44 (11) • Fleet replacement

Free cash flow US$m (5) 15 (>100) • Working capital movements

• Sustained steady state production with safety challenges during the year

• Plant recoveries impacted by regional electricity network stability

• Free cash flow impacted by negative working capital movements

• Negligible impact from monetary policy changes during the year

25


IRS

• Production in the previous period benefitted from a once‐off toll refining contract (140koz platinum)

• Significant free cash flow generated − Higher rand basket price

− Inventory release (R1.7 billion)

• Strong cash contributor and a competitive advantage for the Group

669637 630 612

FY2016 FY2017 FY2018 FY2019

oz(000)

MINE‐TO‐MARKET RECEIPTS

205 197155 189

56 104

FY2016 FY2017 FY2018 FY2019

oz(000)

THIRD‐PARTY RECEIPTS

3rd party purchased 3rd party returns

1 412 1 175 1 228

3 375

FY2016 FY2017 FY2018 FY2019

Rm

FREE CASH FLOW


Receipts 000 oz 801 889 (10)

Mine‐to‐market 000 oz 612 630 (3) • Lower Two Rivers production

3rd Party receipts 000 oz 189 259 (27) • Once‐off toll refining contract in FY2018

Refined output 000 oz 772 887 (13) • Lower receipts in FY2019

Refined metal returned 000 oz 1 140 (100) • Once‐off toll refining contract in FY2018

Free cash flow Rm 3 375 1 228 175 • Higher rand basket, inventory release

26


Current status Implats Participation

Waterberg project progress

DFS on track for completion in H1 FY2020:– Technical work completed, results being

reviewed– Schedule and financial modelling being

finalised

Various applications and approvals being processed, with Mining Right possible during H2 FY2020

The Waterberg project supports our strategy to mine low‐cost, shallow, mechanised ore bodies

Current JV agreement allows for various levels of participation

Our participation not only based on positive DFS outcome:– Market supply/demand forecasts– Funding strategy – Competition for capital allocation

27

DFS fundamentals

26 million 4E oz in measured and indicated resource

Construction start to steady state in 6 years

Bulk mechanised mining, using backfill

400ktpm operation

400 000 oz/a 4E in concentrate (64% Pd, 29% Pt, 6% Au and 1% Rh)

LOM > 45 years

FINANCIAL REVIEWMeroonisha Kerber, CFO


Income statement

Revenue up 36% to R48.6 billion

Cost of sales increased 20% on the back of the higher metals purchased and inventory

Stock adjusted group unit cost up 4.4% to R23 942 per platinum ounce

Other net expense includes R1.6 billion non‐cash loss on the mark to market of the US$ bond conversion option (FY2018: gain of R509 million)

Impairment – R2.4 billion for FY2019

Higher tax expense due to higher profits

R million FY2019 FY2018 Variance (%)

Sales 48 629 35 854 36

Cost of sales (41 791) (34 717) (20)

Gross profit 6 838 1 137 501

Impairment (2 432) (13 629) 82

Net finance costs (768) (701)

Other net expense and forex (737) (232)

Share of associates income 398 383

Profit /(loss) before tax 3 299 (13 042) 125

Tax (expense)/ credit (2 120) 2 249

Profit /(loss) after tax 1 179 (10 793) 111

Headline earnings/(losses) 3 038 (1 228)

GP margin (%) 14.1 3.2

Group unit cost (stock adjusted) (R/Ptoz) 23 942 22 931 (4.4)

29


35 854

48 629

35 85440 241

43 980

4 387

3 739

4 649

FY2018 Volume variance Metal prices Exchange rate FY2019

Revenue

Revenue up by R12.8 billion:

− Sales volumes increased by R4.4 billion. Platinum ounces sold up 12% from 1 355koz to 1 515koz

− Higher dollar metal prices of R3.7 billion, US$ basket 11% higher at US$2 237 (FY2018: US$2 023)

− Weaker exchange rate, average achieved rate 11% weaker at R14.20 (FY2018: R12.82)

ZAR revenue per platinum ounce sold of R31 765, up 22% (FY2018: R25 935)

+R8 388 million

(Rm)

30


Cost of sales

Cost of sales increased by 20% year on year largely to due to the R3.4 billion benefit of the build‐up of inventory following the furnace fire incident in the previous period

Stock adjusted unit cost up 4.4% at R23 942 despite inflation of circa 6.8%

Cash costs year on year increase of R1.7 billion

Lower depreciation following impairment of Impala assets in June 2018

Higher rand metal prices resulted in the higher cost of metals purchased

34 717

41 791

34 717

36 451 36 530 36 824 36 474 36 474

38 569

2350

1 734 79296

2 095

3 222

FY2018 Cash cost Share basedpayments

Royalties Chromeoperations

Depreciation Metalspurchased

Change instock

FY2019

(Rm)

31


EBITDA and headline earnings

EBITDA improved by R5.0 billion to R10.5 billion

Weaker ZAR resulted in exchange losses of R362 million(2018: R662 million) which included R76 million (2018:R102 million) relating to the translation of the convertibledollar bond

Other includes a non‐cash loss of R1.6 billion relating tothe mark to market of the USD bond conversion optionwhich was impacted by the increase in the Implats shareprice at year end

Higher deferred tax expense due to improved profitability

Headline earnings improved from a loss of R1.2 billion toprofit R3 billion

5 536

10 524

12 775

300 18

1 734 296 2 095

3 222 758

FY2018 Revenue Cash cost Royalties Metalspurchased

Change instock

FX gains /losses

Share ofprofits inassociates

Other FY2019

(Rm)

EBITDA

(1 228)

3 038

5 701300 15

67

926

757

FY2018 Gross profit FX gains /losses

Share of profitfrom

associates

Net Financeexpenses

Other Taxation FY2019

HEADLINE EARNINGS

(Rm)

32

Tax effects of reconciling items included in taxation line


Headline earnings by company

IRS headline profit of R2.1 billion utilising the excess capacity at Impala

Zimplats benefited from R516 million export incentives received and R136 million due to customs duty penalty refund during FY2019, as well as lower taxes

Impalamade a headline profit of R1.1 billion

Other includes the non‐cash R1.6 billion loss on the mark to market of the US$ bond conversion option (non‐taxable)

2 080

3 0381 318

1 096 251 127

77

1 757

IRS Zimplats Impala Two Rivers Mimosa Marula Other FY2019

FY2019

(Rm)

33

‐2958 ‐3107 ‐3026 ‐2825

‐1615‐1228

(1 228)

181201

1 210387

(2 958) (149) (100)Impala Zimplats Marula Mimosa Two Rivers IRS Other FY2018

FY2018

(Rm)


Cash flow

Cash generated at operations increased by R9.5 billion from the prior year as a result of higher sales volumes and improved rand metal prices

Capital expenditure was 18% lower, resulting from lower spend on ramp‐up shafts (16 and 20) and lower off‐reef development costs capitalized

Debt of R2.2 billion repaid

Overall free cash flow improved by R11.9 billion year on year to R7.7 billion

Net increase in cash and cash equivalents for the year of R5.2 billion

RmFY2019 FY2018 Variance

Cash generated from operations 11 844 2 360 9 484Operating cash flow 11 445 4 695 6 750Working capital‐ (Increase)/decrease in inventories (152) (3 521) 3 369‐ Increase in trade and other payables 312 1 126 (814)‐ Decrease/(increase) in trade and other receivables 239 60 179Finance cost paid (963) (1 025) 62Other (223) (1 336) 1 113

Net cash generated (used) from operating activities 10 658 (1) 10 659Purchase of property, plant and equipment (3 877) (4 667) 790Acquisition of interest in associate – Waterberg (19) (425) 406Other 904 463 441

Net cash used in investing activities (2 992) (4 629) 1 637Shares purchased (111) (78) 33(Repayment)/proceeds of borrowings (2 169) 501 (2 670)Other (196) (15) (181)

Net cash (used)/ generated from financing activities (2 476) 408 (2 884)

Net increase / (decrease) in cash and cash equivalents 5 190 (4 222) 9 412

Opening balance 3 705 7 839 (4 134)

Exchange rates ‐ cash impact (653) 88 (741)

Closing cash balance 8 242 3 705 4 537

34

R million FY2019 FY2018 Variance

Net cash from operating activities 10 658 (1) 10 659

Capital (3 877) (4 667) 790

Interest received 358 182 176

Net investments 546 281 265

Free cash flow 7 685 (4 205) 11 890


Cash net of debt

Cash net of debt of R1.1 billion at 30 June 2019 (excluding finance leases) – a notable improvement on closing net debt position in prior year of R5.3 billion

RCF fully repaid during first half of the year. First tranche of Zimplats facility repaid and remainder due Dec 2019

Group headroom available of R12.2 billion comprising:

− R8.24 billion cash, including Zimplats (R945 million only R4 million of this in local currency)

− Committed RCF of R4 billion in place until June 2021, undrawn at year end

− R2 billion available on metal prepayment facility

R million June 2019 June 2018 Variance (%)

Gross cash 8 242 3 705 122

Convertible bonds (5 831) (5 489) (6)

Derivative financial instrument 151 21

Marula BEE debt (888) (887)

Zimplats debt (599) (1 167) 49

Revolving credit facilities ‐ (1 510)

Debt excluding leases (7 167) (9 032) 21

Net cash/(debt) excluding leases 1 075 (5 327) 120

Gearing ratio n/a 13.4%

35


Inventory: Platinum metal stocks

36Photo: Jacques McCarthy

160

103

50

13

70

53

0

20

40

60

80

100

120

140

160

FY2018Stock

Impala IRS FY2019Stock

FY2020Release

FY2021Release

(oz 00

0)

Excess platinum stock drawdown

Implats benefited from a 57koz platinum and associated metals inventory release in FY2019

- R3.2bn cash flow impact, gross profit R400m

Estimated value of 103 koz excess Pt and associated materials – R4.8bn

- 53 koz platinum will be released in FY2020- 50 koz platinum will be released in FY2021

Slower inventory release post year‐end due to IRS third party contract extensions


Early conversion of USD bonds

INCENTIVISED OFFER

Incentivised Conversion offer launched on 17 July and closed on 22 July

Final take‐up of 99.9% ‐ only one outstanding bond of US$200k

Total cash consideration of US$37.6m (R524.3m), including accrued interest

CCIRS cancelled and R77 million proceeds received

Remaining bondholder elected to convert and was settled in shares (no incentive premium payable)

Conversion of US$ convertible bonds

37

CONVERTIBLE BONDS 2022

Long dated debt

Stock overhang

No incentive for bondholders to convert (although in the money)

Elected to convert US$ bonds only

Higher relative cost given CCIRS i.e. 9.8% pa on R3.25 billion

NPV of future coupon payments estimated at over R800 million

Holders largely non‐resident specialist bond funds with elevated short positions

FINANCIAL IMPACTS

Incentive premium of R510 million expensed

Earnings to improve

- Lower interest charges – R319 million pa

- No longer impacted by fair value movements on the CCIRS, the conversion option or the foreign exchange translation gains/losses on the bond

Earnings per share impacted by issue of 64.3 millionadditional shares

Net debt reduced by R3 billion

Fair value of USD conversion option liability ofR1.8 billion transferred to equity on the conversion date

MARKET REVIEWSifiso Sibiya, Group Executive: Refining and Marketing


Metal price index (financial year)

• US$ basket price increased by 11% year‐on‐yearo Platinum ‐ 12% (Poor sentiment, weaker rand, soft gold price)o Palladium + 22% (Higher loadings due to new emission standards)o Rhodium + 71% (Value‐in‐use to palladium given NOx tightening)o Nickel + 10% (Recovery from ‘trade war’ concerns, underpin from EVs)

• ZAR:US$ exchange rate weakened by 11% year‐on‐yearo SA grappling with twin deficits and the inevitable ‘hangover’ post‐Ramaphoriao Anaemic growth and structural concerns regarding SOEs o Liquid currency vulnerable to global macro‐economic sentiment flows

• ZAR basket price 22% higher than the previous financial yearo Basket benefitted from diverse contributions from non‐platinum revenueso Sales mix benefited from sales of refined palladium stock

39

1 750

1 850

1 950

2 050

2 150

2 250

2 350

24 000

25 000

26 000

27 000

28 000

29 000

30 000

31 000

32 000

33 000

34 000

$/oz

R/oz

Impala revenue basket per platinum ounce

Rand basket per Pt oz US$ basket per Pt oz

Nov 18

Jul 18

Sep 18

Aug 18

Oct 18

Dec 18

Jan 19

Feb19

May19

Mar 19

Apr19

Jun19

Jul 19


30%

34%

7%

13%

13%

3%

MIMOSA

Platinum Palladium Rhodium Nickel Other FV prices and Fx

Revenue of R4.45 billion

41%

29%

17%

3%10%

IMPALA

Revenue ofR21.52 billion

28%

42%

19%

1% 4%5%

MARULA


37%

32%

21%

2%

5% 3%

TWO RIVERS


35%

35%

14%

6%

10%

IRS


31%

38%

8%

8%

10%5%

ZIMPLATS


40

PGM revenue baskets FY2019

Description FY2019 FY2018 Var (%)

Platinum $/oz 827 943 (12)

Palladium $/oz 1 185 975 22

Rhodium $/oz 2 568 1 501 71

Nickel $/t 12 649 11 488 10

Basket$/Pt oz sold

R/Pt oz sold

2 237

31 675

2 023

25 935

11

22

Exchangerate R/$ 14.20 12.82 11

REVENUE CONTRIBUTION BY METAL


WORLD LIGHT‐DUTY VEHICLE SALES BY REGION – 2019 FORECAST

2018

(millions)

2019(est.)

(millions)

2018growth

(%)

North America 17.3 16.92 ‐2.2

Western Europe 16.15 16.38 1.5

China 27.75 24.46 ‐11.9

Japan 5.20 5.33 2.5

Rest of the World 28.22 26.83 ‐4.9

Total 94.62 89.93 ‐5.0

• Automotive marketso 2019: Weak first half performance ‐6.6% (2018: +3.5%)o Contraction driven by:

– 12.4% YtD decline in China, weak GDP growth and trade uncertainty exacerbated by inventory management ahead of China 6

– Slowing US growth after strong recovery post GFC– Decline in Western Europe on trade and Brexit woes– Japan eking out growth ahead of October tax

o Pace of decline in diesel share beginning to moderate; but structurally has spurred better‐than‐expected gasoline volumes

o Stronger 2H expected, but at risk from global slow‐down and trade tensions – downward revisions to expectations in the medium term

• Platinum jewellery marketso Pleasing growth in India and the US together with a stable outlook for

Japan insufficient to offset a challenging outlook in Chinao 2018 PGI retail barometer points to sobering outlook for Chinese market

which faces increasingly nuanced consumer market a declining promotional wallet for data indicates slowing declines in China

• Investmento 1Q19 Platinum ETF flurry has moderated in 2Q19, while paper positioning

indicates potential for price‐support o Bar and coin likely to be small positive driver in 2019 o Palladium disinvestment from ETFs continues, while paper positioning

reduced post March sell‐off

Demand

41


Supply and demand balances

• 2019 platinum market to remain in surplus (+ 200 koz)o Demand expected to increase by 7%

Automotive down marginally on weaker global production

Jewellery lower on a struggling Chinese Market

Industrial benefitting from capacity adjustments

Investment up on 1Q19 ETF purchases

Flat underlying mine volumes, but pipeline release and secondary supply growth

• 2019 palladium market to remain in deficit (‐700 koz)o Demand estimated to increase by 9% due to lower ETF sales

Automotive +6%, loadings offsetting volume declines

Industrial ‐3%

Continued preference of gasoline systems over diesel

Flat underlying mine volumes, but pipeline release and secondary supply growth

• 2019 rhodium to see shrinking surplus

Including Investment / ETF Movements

42

‐ 800

‐ 600

‐ 400

‐ 200

‐

200

400

600

800

2018 2019

Supply/Demand Balance

Platinum Palladium


PGM market outlook

• The outlook for global growth remains murky with no short‐term resolution to uncertainties caused by trade‐wars, Brexit and rising geo‐political tensions.

• The structural underpin from technological developments and evolution, together with tightening legislation is vital to maintain the trend of tightening demand and supply in the medium‐term:

o Market development activity has seen discussion on platinum for palladium substitution move from meeting rooms to the R&D labs of major fabricators with indicative volumes and timing now visible in the medium‐term outlook

o Together with HDD, this has the potential to drive fundamental demand growth/pull

• Rest of the metals all enjoying strong supply/demand fundamentals, driven by:

o Palladium: Automotiveo Rhodium: Automotive and Industrialo Limited potential near‐term supply response

43

OUTLOOKNico Muller, CEO


Group outlook

Business area Unit FY2018 actual Guidance (February 2019) FY2019 actual Guidance

FY2020

Refined platinum production:Group Pt oz (refined) 1.47 million 1.50 – 1.60 million 1.53 million 1.45 – 1.55 million

Concentrate platinum production:

Impala Pt oz (in concentrate) 669 000 650 000 – 690 000 688 000 640 000 – 690 000

Zimplats Pt oz (in concentrate) 274 000 270 000 – 280 000 269 000 265 000 – 280 000

Two Rivers Pt oz (in concentrate) 163 000 160 000 – 170 000 147 000 140 000 – 160 000

Mimosa Pt oz (in concentrate) 125 000 115 000 – 125 000 122 000 110 000 – 125 000

Marula Pt oz (in concentrate) 85 000 80 000 – 90 000 83 000 80 000 – 95 000

IRS (third party) Pt oz (in concentrate) 259 000 170 000 – 180 000 189 000 170 000 – 185 000

Group unit cost R/Pt oz 22 931 23 900 – 24 800 23 942 25 500 – 26 500

Group capital expenditure Rbn 4.61 4.1 – 4.3 3.8 4.2 – 4.5

45

ANNUAL RESULTS FY20195 September 2019

annual results fy2019implats-reports.co.za/results/annual-results-2019/pdf/presentation.pdf ·...

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