interim results fy2020implats-reports.co.za/results/interim-results-2020/pdf/presentation.pdf ·...

INTERIM RESULTS FY202027 February 2020

INTERIM RESULTS FY2020

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


▪ Marula 2.22 million

▪ 20 Shaft 2.00 million


▪ Zimplats 1.50 million

Group safety overview

5

9

8

7

5

3

6.88

6.35

6.01

5.304.83

0

1

2

3

4

5

6

7

8

0

2

4

6

8

10

12

14

FY2016 FY2017 FY2018 FY2019 H1FY2020

FATALITIES & LOST-TIME INJURY FREQUENCY RATE

LTIFR*

FATALITIES

▪ Rtb Services 13.20 million

▪ Refineries 12.01 million




Fatality Free Shifts

▪ A good period of safety performance regressed in last quarter of FY2019 and into the first quarter of FY2020

▪ 3 fatalities in H1 FY2020

▪ LTIFR improved 9% to 4.83 per million man hours worked

▪ TIFR improved 6% to 11.92 per million man hours worked

▪ 9 out of 16 millionaire sites

*per million man hours worked


Group sustainable development

6

Committed to effecting change in gender equality

One of 325 companies globally and one of only eight South African companies

Received an A rating for disclosures, awareness and management of water security risk

R36 million spent on social projects in South Africa in H1 FY2020

Road construction in Freedom Park and Kutlwanong near Rustenburg

Industry leaders in employee accommodation and living conditions

Spent R94 million on housing in H1 FY2020


Group operational overview*

7

Description H1 FY2020 H1 FY2019 Var (%) Remarks

Tonnes Milled Mt 10.31 10.24 1 • Including tonnage from Impala Canada

Concentrate 6E production

Mine-to-market production

ImpalaZimplatsMarulaImpala CanadaMimosaTwo Rivers

Third-party purchased

6E koz

6E koz

6E koz6E koz6E koz6E koz6E koz6E koz

6E koz

1 533

1 342

652299124

8120138

190

1 560

1 376

673293118

-132161

184

(2)

(2)

(3)26

100(9)

(14)

4

• Concentrator issues at Mimosa and Two Rivers

• Ramp-up from 16 and 20 Shafts, offset by 1 and 9 Shafts

• Sustained steady-state production

• Improved operational performance

• Production included from 13 December 2019

• Breakdown in the milling circuit during Q1

• Lower grade and poor concentrator recoveries during Q1

• Higher receipts from third-parties

Refined 6E production 6E koz 1 317 1 589 (17)• Stock build of 135koz compared to previous period when 66koz was

released

Unit cost (milled)

Unit cost (refined 6E stock adjusted)

Unit cost (refined)

R/t

R/6E oz

R/6E oz

1 157

13 157

12 312

1 049

11 413

10 885

(10)

(15)

(13)

• Impala (1# restructuring, development), Marula (stoping), Canada costs

• 11% increase in costs, reduction in grade, mill failures

• Inventory reallocation between Impala and IRS

Capital expenditure

ImpalaZimplatsMarulaImpala Canada

Rm

RmRmRmRm

1 925

998686204

37

1 707

1 017657

330

(13)

24

(>100)(>100)

• Right of use assets capitalized R117m

• Reduced spend on 20 shaft

• Lower spend on project capital

• New tailings dam extension (R117m), fleet replacement (R52m)

• New inclusion

* Includes 18 days from Impala Canada


1 560

1 533

8

7

7

6 12

21

23

1 500

1 510

1 520

1 530

1 540

1 550

1 560

1 570

1 580

1 590

1 600

FY2019 Impala Canada 3rd party Receipts Marula Zimplats Mimosa Impala Two Rivers FY2020

6E

koz

in c

on

cen

trat

e

H1 H1

koz 6E in concentrate

Group movement in 6E concentrate production

8

652-3%

8100%

1246%

2992%

120-9%

138-14%

1904%


-

2 500

5 000

7 500

10 000

12 500

15 000

17 500

20 000

22 500

Marulain conc

TwoRivers in

conc

Zimplatsin matte

Mimosain conc

Impalarefined

IRS +Impalarefined

GroupRefined

R/6

E o

un

ce

REVENUE AND COST OF PRODUCTION

Cash cost Stay-in-business capitalReplacement capital Expansion capitalRevenue

DescriptionH1

FY2020H1

FY2019Var (%)

6E ounces produced (refined) koz 1 317 1 589 (17)

6E ounces sold koz 1 328 1 573 (16)

Revenue per 6E ounce sold R/oz 20 888 14 804 41

Revenue Rm 28 019 23 521 19

Cost of sales Rm 21 853 20 289 (8)

Gross profit Rm 6 166 3 232 91

Free cash flow Rm 4 989 4 647 7

Gross cash Rm 5 996 6 355 (6)

Head room Rm 7 996 10 355 (4)

Net cash/(debt) Rm (1 943) (976) (99)

Group business overview

9


Optimise balance sheet and capital allocation

LIQUIDITY and CAPITAL STRUCTURE

Converted the US$ bond

Paid residual debt at Zimplats ($42.5m)

Funded Impala Canada acquisition with mixture of cash and debt (R10.9bn)

R8.0bn liquidity

R1.9bn net debt

CAPITAL ALLOCATION

Invested R1.9bn in Capex

Repaid debt

Concluded value accretive M&A

Resumed dividend payments

SHAREHOLDER RETURNS

Resumed dividend payments based on payment of 30% FCF (pre-growth capital)

Declared R1.25 per share interim dividend

Group performance against strategic objectives

Enhance the competitiveness of the portfolio

Completed Impala Canada acquisition

Pro-forma mechanised mine-to-market attributable volumes increase to 57%

Improved commodity mix to more closely match anticipated future PGM demand

Continued investment in maintenance and sustainability of processing assets(short term impact on unit costs)

Enhancing operating resilience with additions to milling capacity planned at Zimplats, Mimosa and

Two Rivers

Sustained market development and supported targeted industry initiatives to grow PGM

demand in jewellery, auto and industrial spheres

Protect and strengthen license to operate

Concluded a 3 year wage agreement without third party intervention and/or industrial action

Increased spend on social projects by 16% in South Africa

Released independent third party assessment of all Tailings Storage Facilities in the Group

(increasing capacity at Marula and Two Rivers)

An A rating from CPD for our management of water risk and a B rating for our efforts on

climate change and disclosures

Included In the Bloomberg 2020 Gender Equality Index

Ongoing constructive dialogue with stakeholders and government in Zimbabwe and South Africa

10

Reposition Implats to the lower half of the cost curve

SAFETY PERFORMANCE

LTIFR improved by 8.9%

TIFR improved by 6.3%

Impala Canada zero LTIs in CY2019

OPERATIONAL PERFORMANCE

Sustained mine-to-market productionPGMs -2% to 1.34Moz

Increased third party receiptsPGMs +4% to 190koz

Refined production impacted by stock build-upPGMs -17% to 1.32Moz

COST PERFORMANCE

Group cash cost inflation of 11%

Cash & SIB cost at IMPALA 12 & 14 shafts flat over two years with volumes up 13% pa

Turnaround sustained at MARULAPGMs +6% to 124koz


Delivering a profitable Impala Rustenburg with 12 and 14 Shafts

11*in FY2018 termsOther include E&F, 6, 10 and 11 Shaft

Free cash flow generative

6operational shafts

producing

~520koz Pt

Opex + capex*

<R24 500/Pt oz

Capital

R1 400m(real FY2018)

Labour

~27 000

Previous guidanceLong-term

Unprofitable operation

10operational shafts

ramping up to

750koz Pt

Opex + capex*

R29 006/Pt oz

Capital

R2 472m(nominal)

Labour

42 253

StatusFY2017

Free cash flow generative

8operational

shaftsproducing

~700koz Pt~1.35moz 6E

Opex + capex*

<R24 500/Pt oz<R13 000/6E oz

Capital

R1 800m(real FY2018)

Labour

~36 000

New guidanceLong-term

0

50 000

100 000

150 000

200 000

250 000

1H FY2018 2H FY2018 1H FY2019 2H FY2019 1H FY2020

PGM production (6E ounces)

Other

12# & 14#16# & 20#

1# & 9#

12 000

13 000

14 000

15 000

16 000

17 000

18 000

19 000

20 000

1H FY2018 2H FY2018 1H FY2019 2H FY2019 1H FY2020

Nominal Opex + SIB vs Revenue (R/6E ounce)

Other12# & 14#

16# & 20#

1# & 9#

Revenue

OPERATIONAL REVIEWMark Munroe, CE: Rustenburg operations


Impala

DescriptionH1

FY2020H1

FY2019Var(%) Remarks

Tonnes milled kt 5 739 5 969 (4)• Reduced output 1 & 9 shafts as planned• Reduced production flexibility 6 & 10 shafts

6E head grade g/t 3.91 3.98 (2)• Increased on-reef development to increase

flexibility, Lower stoping to development ratios

6E in concentrate koz 652 673 (3)• Effect of tonnes and grade, offset by improved

recoveries

Refined 6E (stock-adjusted)

Refined 6E

koz

koz

645

761

682

744

(5)

2

• Lower tonnes and grade, offset by improved recoveries

• Inventory reallocation

Cash cost Rm 9 358 8 495 (10)• 1# Restructuring, Additional development,

Critical processing maintenance

Cost per 6E ounce (stock adjusted)

Cost per 6E ounce

R/oz

R/oz

14 515

12 305

12 461

11 426

(16)

(8)

• 10% increase in cash cost combined with lower 6E ounces produced

• Reallocation of inventory between Impala & IRS

Capital expenditure Rm 998 1 017 2 • Lower spend on 20 Shaft

Free cash flow Rm 7 083 2 228 >100• Improved rand basket price; forward sale• Inventory/sales reallocation

• Tonnes delivered from 11, 12 ,14, 16 and 20 increased, while the older shafts (especially 1 Shaft) declined• Reduced head grade due to geological challenges (10 Shaft) and continued ore pass refurbishment at 16 and 20 Shaft• Disappointing cost performance due to inefficiencies during the restructuring process at 1 Shaft• Improved financial performance on the back of higher revenue basket and inventory reallocation• Restructuring plan adjusted to benefit from increased price basket

13

540 587

744647

761

706 557

682 617 645

H1 H2 H1 H2 H1

FY2018 FY2019 FY2020

PRODUCTION

Refined 6E production Stock adjusted 6E production

15 013 12 877 11 426 13 208 12 305

11 48013 562 12 461

13 868 14 515

H1 H2 H1 H2 H1

FY2018 FY2019 FY2020

R/o

z P

GM

COSTS

Cost per 6E refined Cost per 6E Stock adjusted

-3 711-2 815

2 228

-352

7 083

H1 H2 H1 H2 H1

FY2018 FY2019 FY2020

Rm

FREE CASH FLOW


682

645

18

6

6 33

2 1 46

12

37

14

600

620

640

660

680

700

720

FY2019 16 14 Re-mining 12 20 11 EF 9 6 10 1 Other FY2020

Sto

ck-a

dju

sted

6E

oz

(00

0)

Impala movement in 6E contribution (stock adjusted)

14

Ra

mp

-up

Ra

mp

-up

Co

nstr

ain

ed

min

ea

ble

fa

ce le

ng

th

Ste

ad

y p

erf

orm

ance

De

ple

ted

re

serv

es

De

clin

ing

re

serv

es

Ra

mp

ing

dow

n

Sta

ble

perf

orm

ance

Sta

ble

perf

orm

ance

6E koz 101 115 6 66 68 100 20 28 29 63 35 15

Revenue/6E oz 19 916 19 878 18 717 20 140 19 765 19 948 20 170 20 170 20 172 20 079 20 016

Cost + SIB Capital/6E oz 17 012 15 673 18 369 14 330 18 569 16 168 12 398 13 015 13 308 16 036 18 965

Cash Profit / (Loss) Rm2 149 472 1 375 10 341 154 196 169 249 33

Go

od

perf

orm

ance

H1H1


Key projects progress

15

16 Shaft

Description H1 FY2020 H1 FY2019

Project completion % 94.3 91.8

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 7 484 7 257

Estimated steady-state achievement date Jun 22 Jun 22

Design production (6E at steady state) koz per annum 330 330

6E production koz 101 83

Mineable face length (31 December) m 3 879 3 055

Stoping teams (31 December) teams 120 87

Panel Ratio (31 December)* panels/team 1.45 1.4

Average Productivity (half year)* ca/team/month 260 268

Unit cost (excl Project capital) R/6E oz 17 012 16 139

• Key focus is on increasing mineable face length. Significant progress achieved with face length increasing by 824m or 27% during FY2020 H1

• Project completion date brought forward due to rescheduling of ore pass rehabilitation activities.

• Project expenditure 93.7% complete (within budget).

• 6E production improved 22% HY on HY (60% of steady state)

* Based on producing stoping teams and 25 m panel



16

20 Shaft

Description H1 FY2020 H1 FY2019

Project completion % 100 99.3

Actual completion date date Mar 19 Jun 19

Approved capital Rm 7 930 7 930

Estimate at completion Rm 7 885 7 930

Expenditure to date Rm 7 885 7 873

Estimated steady-state achievement date Jun 22 Jun 22

Design production (6E at steady state) koz per annum 227 227

6E production koz 68 65

Mineable face length (31 December) m 2 400 1 446

Stoping teams (31 December) teams 59 54

Panel Ratio (31 December)* panels/team 1.60 0.8

Average Productivity (half year)* ca/team/month 270 233

Unit cost (excl Project capital) R/6E oz 18 569 15 975

• Project completed on schedule in March 2019 and within budget.

• Primary focus on increasing mineable face length. Material progress achieved with face length increasing by 66% or 954m during the past year.

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

OPERATIONAL REVIEWGerhard Potgieter, Chief Operating Officer


Marula

• Sustained operational turnaround with no disruptions experienced during H1 FY2020

• Rand basket price benefited from higher palladium and rhodium content (Pt 38%; Pd 39%; Rh 8%)

• Increased capital for new tailings dam and new fleet

• Significant free cash flow generated

18

18

DescriptionH1

FY2020H1

FY2019 Var (%) Remarks

Tonnes milled kt 970 955 2 • Improved operational performance

6E head grade g/t 4.60 4.37 5 • Reduced stoping width

6E in concentrate koz 124 118 6 • Improved mining volumes and recoveries

Cash cost Rm 1 276 1 152 (11)• Bonus payments (higher productivity)• Inflation

Cost per 6E ounce R/oz 10 265 9 779 (5)• Higher costs offset partially by higher

production

Capital expenditure Rm 204 33 (>100)• Tailings dam (R117m)• TMM’s (R52m)

Free cash flow Rm 431 162 >100• Higher rand basket• Benefit from high Pd and Rh content

113 110 118 99

124

H1 H2 H1 H2 H1

FY2018 FY2019 FY2020

PRODUCTION

00

0 o

z 6

E in

co

nc

9 515 9 428 9 779 11 493

10 265

H1 H2 H1 H2 H1

FY2018 FY2019 FY2020

R/o

z 6

E

COSTS

-223-76

162 218

431

H1 H2 H1 H2 H1

FY2018 FY2019 FY2020

Rm

FREE CASH FLOW


Two Rivers

• Split-reef mining impacted mill grade and plant recoveries were low due to changed mineralogy

• New reagents introduced in an effort to improve recoveries

• Tender process has been initiated for the concentrator expansion project

• Cost optimization initiatives identified to reduce cost overruns

19

DescriptionH1

FY2020H1


Tonnes milled kt 1 646 1 667 (1)• The milling of harder material slowed down the

milling process

6E head grade g/t 3.45 3.53 (2) • Split-reef and additional development

6E in concentrate koz 138 161 (14)• Reduced plant recoveries due to mineralogical

challenges and lower grade

Cash cost Rm 1 329 1 244 (7) • In line with inflation

Cost per 6E ounce R/oz 9 616 7 727 (24) • Lower production and mining inflation

Capital expenditure Rm 391 247 (58)

• Deepening of the main decline (+R17m)• Main decline development fleet (+25m)• Groundworks for TSF (+R43m)

Free cash flow Rm 154 64 >100 • Higher rand basket

179 170 161 152 138

H1 H2 H1 H2 H1

FY2018 FY2019 FY2020

PRODUCTION

00

0 o

z 6

E in

co

nc

6 855 6 685 7 727

8 568 9 616

H1 H2 H1 H2 H1

FY2018 FY2019 FY2020

R/o

z 6

E

COSTS

71

313

64

381

154

H1 H2 H1 H2 H1

FY2018 FY2019 FY2020

Rm

FREE CASH FLOW

Concentrator recoveries

Q1 Q2 H1 Plan

67.1 80.4 73.8 84.6


Zimplats

• Sustained exceptional operational performance with safety challenges during the year

• Mupani first ore production

• Ongoing monetary policy changes – no material impact for the half year

20

DescriptionH1

FY2020H1


Tonnes milled kt 3 375 3 312 2 • Operating at steady-state levels

6E head grade g/t 3.48 3.48 0 • Sustained

6E in concentrate6E in matte

kozkoz

299267

293289

2(7)

• Furnace rebuild – stock release in H2

Cash cost US$m 181 175 (3) • Higher mining volumes

Cost per 6E ounce US$/oz 675 606 (12)• Reduction in matte ounces• Exchange rate fluctuations

Capital expenditure US$m 47 46 (1)• Largely on furnace reline, Bimha redevelopment

and Mupani

Free cash flow US$m 37 65 (45) • Impacted by furnace rebuild and higher taxes

290 288 289 291 267

H1 H2 H1 H2 H1

FY2018 FY2019 FY2020

PRODUCTION

00

0 o

z 6

E in

mat

te/c

on

c

627 603 606 594 675

H1 H2 H1 H2 H1

FY2018 FY2019 FY2020US$

/oz

6E

in m

atte

/co

nc

COSTS

61

12

65 62

37

H1 H2 H1 H2 H1

FY2018 FY2019 FY2020

US$

m

FREE CASH FLOW



21

Mupani

DescriptionH1 FY2020

ActualH1 FY2019

Actual

Project completion % 39 22

Estimated completion date date Jul 24 Jun 24

Approved capital $m 264 264

Estimate at completion $m 258 264

Expenditure to date $m 80 51

Design production (Pt at steady state) koz per annum 90 90

Estimated steady-state achievement date Jul 24 Jul 30

Actual Platinum production (in ore) koz 6 0

• Started producing ore in June 2019• Sustained above-plan development rates• Steady state production date brought

forward by 12 months


Mimosa

• Sustained steady state production from underground

• Primary mill failure when a feed end trunnion snapped - impacted tonnes milled and ounces produced in Q1 - Q2 tonnage improved with production 4% above plan

• The lower ounces impacted the cost per ounce

• Ongoing monetary policy changes – no material impact for the half year

22

DescriptionH1

FY2020H1


Tonnes milled kt 1 306 1 408 (7) • Mill breakdown during Q1

6E head grade g/t 3.84 3.83 0 • Sustained

6E in concentrate koz 120 132 (9)• Concentrator plant outage• Lower recoveries during plant startup

Cash cost US$m 100 98 (2) • Bad ground conditions

Cost per 6E ounce US$/oz 830 741 (12) • Lower ounces

Capital expenditure US$m 25 25 0 • In line with previous year

Free cash flow US$m 9 (5) >100 • Increased prices

134 132 132 129 120

H1 H2 H1 H2 H1

FY2018 FY2019 FY2020

PRODUCTION

00

0 o

z 6

E in

co

nc

697 735 741 802 830

H1 H2 H1 H2 H1

FY2018 FY2019 FY2020

US$

/oz

6E

in c

on

c

COSTS

6

10

-5

0

9

H1 H2 H1 H2 H1

FY2018 FY2019 FY2020

US$

m

FREE CASH FLOW


Impala Canada

117130

117

0

20

40

60

80

100

120

140

FY2018 FY2019 FY2020

Pd

oz

in c

on

c(0

00

)

PRODUCTION

733773

912

FY2018 FY2019 FY2020

C$

/oz

COSTS

20

32

86

FY2018 FY2019 FY2020

C$

m

FREE CASH FLOW

• Impala Canada acquisition included R1.4b take-on cash reserves.

23

DescriptionH1

FY2020H1

FY2019 Var (%) Remarks

Tonnes milled kt 1 953 - -

• Impala Canada included in Implats results from effective date of transaction which occurred on 13 Dec 2019.

• 18 days operating results were consolidated into H1 FY2020

6E head grade g/t 2.69 - -

6E in concentrate koz 135 - -

Total costs C$m 137 - -

Cost per 6E ounce (normalized)

C$/oz 912 - -

Cost per 6E ounce C$/oz 1 016 - -

Capital expenditure C$m 43.4 - -

Free cash flow C$m 86 - -


IRS

• Receipts were impacted by metallurgical issues at Mimosa and Two Rivers and the furnace rebuild at Zimplats

• Significant inventory build-up compounded by the re-allocation of stock

24

DescriptionH1

FY2020H1


Receipts 000 oz 822 879 (7)

Mine-to-market 000 oz 631 696 (9) • Lower Two Rivers, Mimosa, Zimplats receipts

3rd Party receipts 000 oz 190 184 3 • Higher 6E tailings from chrome operators

Refined output 000 oz 549 846 (35) • Build-up in inventory / stock re-allocation

Refined metal returned 000 oz 1 2 (74)

Free cash flow Rm (3 381) 743 <(100) • Build-up in inventory / stock re-allocation

703 689 696 657 631

H1 H2 H1 H2 H1

FY2018 FY2019 FY2020

MINE TO MARKET RECEIPTS

00

0 o

z6

E

369

130 184 175 190

H1 H2 H1 H2 H1

FY2018 FY2019 FY2020

00

0 o

z 6

E

THIRD-PARTY RECEIPTS

462 766 7432 572

-3 381

H1 H2 H1 H2 H1

FY2018 FY2019 FY2020

Rm

FREE CASH FLOW


Stock levels – PGM 6E ounces

25

215

350

225 225

135 125

FY19 closing 1H20 build 1H20 closing 2H20 release (est) FY20 closing (est)

PG

M 6

E o

z (0

00

)

Excess PGM 6E inventory forecast

103

157

92 92

54 65

FY19 closing 1H20 build 1H20 closing 2H20 release (est) FY20 closing (est)

Pt

oz

(00

0)

Excess platinum inventory forecast▪ At end December 2019 had 350 000 6E ounces of excess in process inventory

▪ Higher build up than expected of 135 000 6E ounces excess in process inventory in H1 FY2020 due to:

▪ Increased volumes of low-grade concentrates

▪ Higher matte fall while treating Zimplats concentrate during Zimplats furnace rebuild

▪ Forecast release of 100 000 to 150 000 6E ounces in H2 FY2020


Agreement to roll ownership option

Approvals required to start the project

Offtake agreement

DFS and option to increase ownership

Waterberg project progress

26

▪ DFS Document, schedules and models delivered to the JV partners during September 2019

▪ Implats has until mid April 2020 to exercise the option to increase ownership to 50.01%

▪ This will trigger an estimated R8,3bn capital exposure to breakeven:

- R0.5bn equity purchase from JOGMEG

- R2bn first project capital earn in

- R5,8bn project shared (@ 50%) of capital to breakeven

▪ IRS provided terms in November 2019

▪ JV partners to consider (may seek better terms)

▪ IRS has option to match

▪ Implats proposed to extend the option trigger date until:- Mining Right is received- Implats gives notice of its decision on the ownership option

▪ Implats will use this time to firm up on feasibility assumptions and de-risk implementation programme

▪ Implats to cover project expenditure, until option decision is made

▪ SLP – submitted August 2018 – outstanding

▪ WUL – commenced August 2019 – outstanding

▪ Mining Right – submitted August 2018 - outstanding

FINANCIAL REVIEWMeroonisha Kerber, CFO


Income statement

28

• Revenue up 19% to R28.0 billion

− Rand revenue basket 41% higher year-on-year

− Partially offset by lower sales volumes and build in inventory

• Cost of sales increased 8%

− Higher cost of metals purchased by IRS

− Cost inflation

− Partially offset by build-up in inventory

• Stock-adjusted Group unit cost increased by 15% to R13 157 per 6E ounce

• Other expenses increased significantly

− R509 million premium paid on incentivized early conversion of the US$ bond

− Revaluation of derivative financial instruments

• Headline earnings up 41% to 436 cents per share

• Acquisition of NAP (now Impala Canada) effective 13 December 2019

− 18 days included in the half year results

R million H1 FY2020 H1 FY2019 Variance (%)

Sales 28 019 23 521 19

Cost of sales (21 853) (20 289) (8)

Gross profit 6 166 3 232 91

Net finance costs (346) (417) 17

Net foreign exchange losses (222) (165) (35)

Other net (expenses)/income (1 066) 500 >100

Share of associates income 247 203 22

Profit before tax 4 779 3 353 43

Tax (1 312) (895) (47)

Profit after tax 3 467 2 458 41

GP margin (%) 22.0 13.7 61

EBITDA 7 568 5 793 31

Headline earnings 3 378 2 228 52

Group unit cost (stock adjusted) (R/6E oz)

13 157 11 413 (15)


Revenue

• Revenue up by R4.5 billion

− Higher dollar metal prices contributed R6.7 billion

- US$ basket increased by 36% to US$1 420 per PGM 6E ounce (H1 FY2019: US$1 044)

− Weaker exchange rate

- 4% weaker at R14.71 (H1 FY2019: R14.18)

− Lower sales volumes impacted by R3.3 billion

- 6E ounces sold down 16% from 1 573koz to 1 328koz

• Rand revenue per 6E ounce sold up 41% to

R20 888 per PGM 6E oz (H1 FY2019: R14 804)

29

23 521

28 019 6 741 1 010

3 253

H1

FY2

019

Met

al p

rice

s

Exch

ange

rate

Vo

lum

es

H1

FY2

020

(Rm

)

REVENUE


Cost of sales

• Cost of sales increased by 8% year on year

• Cash costs increased by R1.4 billion year on year

− inflation of c. 6.3%

− inclusion of Impala Canada costs for 18 days

− cost anomalies

• Higher depreciation following a Zimplats change in estimate

• Cost of metals purchased rose on the back of higher rand metal prices

• Movement in metal inventories resulted in a credit of R3.6 billion following a substantial increase in pipeline stocks due to constrained smelting capacity

• Stock-adjusted 6E unit cost rose by 15% to R13 157 per ounce

30

20 289

21 853 1 417

271 183 207

2 965

68 3 411

15 000

16 000

17 000

18 000

19 000

20 000

21 000

22 000

23 000

24 000

25 000

H1

FY2

01

9

Cas

h c

ost

Shar

e b

ased

pay

me

nts

Ro

yalt

ies

Ch

rom

eo

per

atio

ns

Dep

reci

atio

n

Met

als

pu

rch

ase

d

Ch

ange

inst

ock

H1

FY2

02

0

(Rm

)

COST OF SALES


Stock adjusted unit costs

• xxx

12 461

8 5889 779

11 413

14 515

9 925 10 265

13 157

Impala refinedstock-adjusted

Zimplats in matte Marula in conc Group refinedstock-adjusted

R/o

z 6

E

UNIT COST BY OPERATION

H1 FY19 H1 FY20

• Stock adjusted unit cost up 15% at R13 157 per 6E ounce

• Mining inflation at South African operation of 6.8%

• Weaker rand impacted on the conversion of the Zimplats US$ cost

• Additional development costs at Impala Rustenburg

• Concentrators treated 700 000 tonnes of tailings re-mining material at a low grade

• Smelting and refining costs impacted by 17% reduction in refined ounces

31

Rand per 6E Oz H1 FY2020 H1 FY2019 Variance (%)

On-mine 9 250 8 207 (13)

Concentrating 2 025 1 745 (16)

Smelting 705 556 (27)

Refining 661 503 (31)

Head office 516 402 (28)

Group costs per PGM 6E ounce 13 157 11 413 (15)


5 793

7 568

4 498

3 411

178 1 417 203 183

2 965

57

1 487

H1FY2019

Revenue Cash cost Sharebased

payments& other

Royalties Metalspurchased

Change instock

FX gains /losses

Share ofprofit in

associates

Other H1FY2020

EBITDA

2 228

3 378

2 934

44 7188

1 487 57

443

H1 FY2019 Gross profit Other FX gains /losses

Associates Net finance Taxation Minorities H1 FY2020

HEADLINE EARNINGS

EBITDA and headline earnings

• EBITDA improved by R1.8 billion to R7.6 billion

• Revaluation of foreign currency balances resulted in a loss of R222 million (H1 FY2019: R165 million)

− Largely due to FX losses on cash partially offset by a R73 million FX gain on the US$ bond

• Other relates to:

− Losses on the mark to market of the conversion option on the US$ bond of R203 million and R74 million on cancellation of CCIRS

− A non-cash expense of R109 million relating to the zero cost collar derivative revaluation

− Impala Canada transaction costs of R147 million

− Receipt of insurance proceeds of R353 million (H1 FY2019: R90 million)

• Net finance costs include the interest on bridge funding in Impala Canada of R176 million

• The tax expense was higher due to improved profitability

• Headline earnings improved from a profit of R2.2 billion to profit R3.4 billion

32

(Rm

)

Tax effects of reconciling items included in taxation line

(Rm

)


2 228

3 378

2 934

44 7188

1 487 57443

H1 FY2019 Gross profit Other FX gains /losses

Associates Net finance Taxation Minorities H1 FY2020

HEADLINE EARNINGS

Headline earnings by company

• Headline earnings for most operations improved due to higher rand

metal pricing

• Impala headline profit of R2.6 billion for the 6 months

− benefitted from a metallurgical re-allocation of stock

• IRS headline profit of R261 million

− impacted by the build-up of stock as well re-allocation of stock to Impala

• Two Rivers and Mimosa benefitted from higher rand metal pricing

partially offset by lower production

• Impala Canada earnings impacted by bridge costs of R176 million

• Other includes

− The once off expense of R509 million on the incentivised early conversion

of the US$ bond

− Mark to market of conversion option on the US$ bond of R203 million and

loss of R74 million on settlement of CCIRS

− Impala Canada transaction costs of R147 million

33

2 637

3 378 956

385 261166 65

155

937

Impala Zimplats Marula IRS Two Rivers Mimosa Canada Other H1 FY2020

(Rm

)

HEADLINE EARNINGS

(Rm

)


Cash flow

• Cash generated at operations increased by R193 million as improved rand metal prices were offset by a build-up in inventory− Includes R2 billion proceeds from forward sale of excess inventory

• Capital expenditure was 6% more, resulting from additional spend on the Marula tailings dam

• Bridge funding of R5.1 billion raised for acquisition of Impala Canada

• Debt of R1.8 billion repaid

• Overall free cash flow improved by R342 million year on year to R5.0 billion

• Net cash and cash equivalents decreased by R2.3 billion

R million H1 FY2020 H1 FY2019 FY2019

Operating cash flow 7 990 5 586 11 445

Change in working capital

- Inventory (3 770) (264) (152)

- Receivables/payable 2 675 1 380 551

Cash generated from operations 6 895 6 702 11 844

Finance costs paid (460) (520) (963)

Income tax paid (450) (160) (223)

Net cash generated from operating activities 5 985 6 022 10 658

Purchase of property, plant and equipment (1 833) (1 727) (3 877)

Net acquisition of Impala Canada (9 431) - -

Other 509 341 885

Net cash used in investing activities (10 755) (1 386) (2 992)

Shares purchased (628) (101) (111)

Proceeds/(repayment) of borrowings 3 244 (1 855) (2 169)

Other (99) (135) (196)

Net cash generated from/(used in) financing activities 2 517 (2 091) (2 476)

Net (decrease)/increase in cash and cash equivalents (2 253) 2 545 5 190

Opening balance 8 242 3 705 3 705

Exchange rates - cash impact 7 105 (653)

Closing cash balance 5 996 6 355 8 242

34

R million H1 FY2020 H1 FY2019 FY2019

Net cash from operating activities 5 985 6 022 10 658

Capital (1 833) (1 727) (3 877)

Other 514 352 904

Add: Impala Canada transaction costs 147 - -

Add: Bridge financing costs 176 - -

Free cash flow 4 989 4 647 7 685


Cash net of debt

• Net debt of R1.9 billion at 31 December 2019

(excluding finance leases)

− Impacted by the R9.8 billion net outflow on the

acquisition of Impala Canada

• The remainder of the Zimplats facility repaid in

December 2019

• Available Group headroom of R8.0 billion

comprising:

− R6 billion cash

− Committed RCF of R4 billion in place until June 2021,

undrawn at 31 December 2019

− R2 billion of the RCF available at 31 December 2019

following R2 billion forward sale

R million Dec 2019 Dec 2018 Jun 2019

Gross cash 5 996 6 355 8 242

Convertible bonds (2 838) (5 759) (5 831)

Derivative financial instrument - 213 151

Marula BEE debt (886) (887) (888)

Zimplats debt - (898) (599)

Bridge loan facility (4 215) - -

Debt (excluding leases) (7 939) (7 331) (7 167)

Net (debt)/cash (excluding leases) (1 943) (976) 1 075

Gearing ratio (%) 4.0 2.3 n/a

35


Disciplined capital allocation to create value for all stakeholders

36

▪ Dividends

▪ Share buybacks

▪ Special dividends

RETURNS TO SHAREHOLDERS

APPROVED PROJECTS

• Restructuring

• Operational excellence

• Committed projects

• ESG

STAY-IN-BUSINESS CAPEX

• Exploration

• Ore reserve

development

• Infrastructure

replacement

Operating free cash flow

GROWTH AND INVESTMENT

▪ Replacement projects

▪ New growth (organic) projects

▪ Value accretive M&A

▪ Optimal capital structure

▪ Appropriate leverage

− Gearing: 10%

− Net debt to EBITDA: <1.0x

▪ Appropriate liquidity through the cycle

BALANCE SHEET STRENGTH

▪ The board resolved to re-instate dividends with a pay-out ratio of at least 30% of free cash flow before growth capital

▪ The board declared an interim dividend of R1.25 per share

MARKET REVIEWSifiso Sibiya, Group Executive: Refining and Marketing


Metal price index (H1 FY2020 VS H1 FY2019)

• US$ basket price increased by 36% year-on-year

− Platinum + 7% (Robust investor activity, strong gold price)

− Palladium + 59% (Accelerating auto demand, low ETF sales)

− Rhodium + 88% (Accelerating auto-demand, constrained supply)

− Nickel + 10% (Improving growth outlook, impacted by supply)

• ZAR:US$ exchange rate weakened by 4% year-on-year

− Rand strength underpinned by relative yields

− Deteriorating domestic economic outlook

− Liquid currency vulnerable to global macro-economic sentiment flows

• ZAR basket price 41% higher than the previous financial year

− Basket benefitted from diverse ore mix generated by group assets with substantial palladium and rhodium production

38

1 000

1 200

1 400

1 600

1 800

2 000

2 200

15 000

17 000

19 000

21 000

23 000

25 000

27 000

29 000

31 000

Jul/19 Aug/19 Sep/19 Oct/19 Nov/19 Dec/19 Jan/20 Feb/20

US

$/o

z E

R/o

z 6

E

Impala revenue basket per 6E ounce

R/oz 6E $/oz 6E


24%

34%9%

12%

10%

11%

MIMOSA

Platinum Palladium Rhodium Nickel Other FV prices and Fx

Revenue of

R2.65 billion

33%

34%

23%

4%7%

IMPALA

Revenue of

R16.01 billion

28%

42%

19%

1%4%

5%

MARULA

Revenue of

R2.01 billion

29%

32%

29%

1%

2%8%

TWO RIVERS

Revenue of

R2.68 billion

30%

34%

21%

5%

10%

IRS

Revenue of

R11.7 billion

24%

38%

11%

7%

8%

11%

ZIMPLATS

Revenue of

R5.55 billion

39

PGM revenue baskets H1 2020

DescriptionH1

FY2020H1

FY2019Var(%)

Platinum (US$/oz) 888 829 7

Palladium (US$/oz) 1 647 1 035 59

Rhodium (US$/oz) 4 491 2 395 88

Nickel (US$/t) 14 772 13 399 10

Exchange rate (US$/oz) 14.71 14.18 4

Basket price index

(R/6E oz) 20 888 14 804 41

REVENUE CONTRIBUTION BY METAL


WORLD LIGHT-DUTY VEHICLE SALES BY REGION – 2019 FORECAST

2018

(millions)

2019

(millions)

2018growth

(%)

North America 19.23 18.91 -1.6

Western Europe 16.15 16.28 0.8

China 27.75 25.45 -8.3

Japan 5.20 5.13 -1.4

Rest of the World 26.09 24.49 -6.1

Total 94.42 90.27 -4.4

• Automotive markets

− 2019: A weak year; sales down 4.4% (2018: -0.5%) Contraction driven by:

– 8.3% decline in China, weak consumer sentiment and trade uncertainty exacerbated inventory challenges ahead of China 6

– Slowing US growth after strong recovery post GFC

– Growth in Western Europe on weak 2018 base and pull-forward pre CO2

– Japan impacted by sales tax adjustment in October

− Global heavy-duty market down 3% to 3.1 million units on trade tensions and resultant economic uncertainty

− 2020 sales hinge on performance in China likely flat to lower

• Industrial markets

− Robust demand, easing due to slowing capacity expansions

− Platinum benefits from non-road demand, nascent fuel cell uptake

− Palladium benefitting from strong chemical demand, relief expected from uptick in electrical components sector

• Platinum jewellery markets

− Further contraction due to sustained weakness in key Chinese market and despite growth in India and broadly stable Japanese and North American demand

− Expect weak 1H 2020 Chinese data due to COVID-19 virus, with potential for strong recovery in 2H 2020 on strategic campaigns and manufacturer support

• Investment− Exceptional platinum ETF inflows in 2019 but softer bar and coin demand, gains in

speculative positioning underpinned price gains

− Step-change in palladium ETF disinvestment contributed to market tightness, while volatility in lease rates and physical tightness also dissuaded expansion in speculative length

Demand

40


Supply and demand balances

• 2020 platinum market in surplus ex-investment (+ 1.27Moz)

− Demand expected to fall due to lower investment

Automotive flat on China VI and Bharat VI introduction and despite weaker LDD and HDD production

Jewellery lower on a COVID-19 hit Chinese market, softer US and Japan

Industrial firm but easing from recent highs

Weaker underlying mine volumes, but some pipeline release and growth in secondary supply

• 2020 palladium market deficit to widen (-1.7Moz)

− Demand estimated to increase by 5%

Automotive growth on loadings rise – full year of China 6 loadings

Industrial marginally lower

Continued preference of gasoline systems over diesel

Supply slightly lower on Russian sales and despite strong growth in secondary supply

• 2020 rhodium market to see another deficit (-70koz)

Automotive growth on loadings rise – full year of China 6 loadings

Flat supply despite secondary supply growth

Including Investment / ETF Movements

41

-2 000

-1 500

-1 000

-500

-

500

1 000

1 500

2018 2019 2020F

Supply/Demand Balance

Platinum Palladium Rhodium


PGM market outlook

• Renewed optimism in 4Q 2019 has been tempered by the unexpected threat

from COVID-19

− Market fundamentals for palladium and rhodium remain robust and supply constraints likely to temper possibility of revisions to key customer requirements

− Palladium and rhodium well supported with average pricing to improve materially year on year

• We continue to highlight impediments to a rapid acceleration of primary

supply growth

− Expect rising capital expenditure aimed at extending life from producing assets

• Platinum is likely to return to surplus in the absence of investment demand

− Near-term switching potential adequately met from current supply

− Pricing is vulnerable to a change in investor sentiment

• We continue to support market development efforts in the auto, industrial,

jewellery and investment sphere

42

OUTLOOKNico Muller, CEO


Group outlook

Business area UnitFY2019 actual

Pt

Market GuidanceFY2020

Pt

GuidanceFY2020

Pt

GuidanceFY2020

6E

Refined production:Group

oz (refined) 1.53 million 1.45 – 1.55 million 1.45 – 1.50 million 3.00 – 3.10 million

Concentrate production:

Impala oz (in concentrate) 688 000 640 000 – 690 000 640 000 – 690 000 1.21 – 1.3 million

Zimplats oz (in concentrate) 269 000 265 000 – 280 000 265 000 – 280 000 565 000 – 600 000

Two Rivers oz (in concentrate) 147 000 140 000 – 160 000 140 000 – 160 000 300 000 – 340 000

Mimosa oz (in concentrate) 122 000 110 000 – 125 000 110 000 – 125 000 230 000 – 260 000

Marula oz (in concentrate) 83 000 80 000 – 95 000 80 000 – 95 000 210 000 – 250 000

IRS (third party) oz (in concentrate) 189 000 170 000 – 185 000 180 000 – 200 000 330 000 – 370 000

Impala Canada oz (in concentrate) na na 8 000 – 10 000 120 000 – 150 000

Group unit cost R/oz 23 942 25 500 – 26 500 27 500 – 28 500 12 500 – 13 500

Group capital expenditure Rbn 3.8 4.2 – 4.5 4.9 – 5.2 4.9 – 5.2

44

INTERIM RESULTS FY202027 February 2020

interim results fy2020implats-reports.co.za/results/interim-results-2020/pdf/presentation.pdf ·...

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