Implats warns of a huge earnings drop

Published: 20 August 2013

Zimbabwe Platinum Mines Limited (Zimplats)' major shareholder Impala Platinum (Implats) has warned of a huge drop in its annual earnings due out end of August.

The group - holding an 87 percent stake in Zimplats - said its headline earnings per share, which strip out exceptional items, would be between 308 cents and 343c for the financial year to end-June 2013 compared with 685c a year earlier.

Basic earnings per share would be 74 percent and 79 percent lower than before, coming in between 145c and 179c.

"This is due to operational performance at Impala Rustenburg, above-inflation cost increases and impairments of R1,3bn of long-term receivables," the world's second-largest platinum miner said.

Basic earnings were also negatively affected by a R1 billion write down of goodwill stemming from the purchase of African Platinum in 2007.

The results are due to be released on August 29.

This comes as Zimplats recorded a 66 percent slump in operating profit to $22,5 million in the quarter ended June 30, 2013 due to lower sales volumes and depressed metal prices.

The platinum group metals producer (PGMs), led by chief executive Alex Mhembere, said revenue declined by 26 percent to $126 million during the period under review.

The miner, which registered a $65,3 million operating profit in prior comparable period, said operating costs remained unchanged at $103 million.

This comes as most resources firms operating in Zimbabwe, such as Toronto Stock Exchange-listed gold miner New Dawn Mining Corporation and Bindura Nickel Corporation have had to employ cost-cutting measures due to declining international metal prices.

In the quarter to June, the platinum price was 10 percent lower than in the previous quarter while palladium and rhodium prices were four percent and two percent down respectively.

Operationally, the period under review was good for Zimplats, with mined ore and milled tonnage rising.

Early this year, Implats signed an indigenisation agreement with Zimbabwe, ceding a 51 percent stake worth $971 million to locals.

Under the indigenisation deal, 31 percent was issued to the National Indigenisation and Economic Empowerment Board (NIEEB)'s fund, 10 percent to employees while the other 10 percent was given to a community share ownership trust.

The transaction, expected to be complete by June 30 this year, will be financed through a loan to the indigenous entities at a 10 percent annual interest rate.

"This term sheet spells out in detail the purchase of the 51 percent shares by indigenous entities, as part of the laws of this country. This is undoubtedly the country's biggest empowerment deal," Terence Goodlace, Implats chief executive said, adding that "We hope the involvement of the locals will add an impetus to the company's output and broaden profit margins."

A slew of platinum companies have reported their results in recent weeks.

Anglo American Platinum, the world's biggest platinum miner, showed improved earnings on the back of a weaker rand, which meant it earned more for the metal it sold, offsetting lower dollar metal prices and higher costs.

However, at an operational level, the company was bleeding cash and its net debt in the six months to end-June ballooned by R2,7 billion to R13,2 billion.
- With BusinessDay