ZIMBABWE Platinum Holdings (Zimplats) major shareholder, Impala Platinum Holdings (Implats) yesterday said it had cut its capital expenditure plans to a third and is trimming operation on an ongoing basis to ensure each ounce produced is profitable in the current reporting season.
Implats, the world’s second largest platinum producer which holds about 86% in Zimplats, said it was cautious about the global outlook this year despite having posted a 13% rise in net profit for the six months to the end of December as a weaker rand to the dollar offset sharp falls in platinum group metals prices.
Zimplats, which mines platinum group metals on South Africa’s Bushveld Complex and Zimbabwe’s Great Dyke, said gross platinum production for the six months was almost 15% lower at 878 000 ounces.
“With world economies and their financial systems still on life support, it is increasingly difficult to forecast the outcome for 2009.
Suffice to say we do not expect any major recovery in automotive demand,” said Implats.
Implats said it has decided to continue with the three shafts as well as the Phase 1 expansion project at Zimplats.
Last year the price of platinum hit a record high, only to fall rapidly to five-year lows as demand from the key automotive industry slumped amid the global economic crisis.
The fall in the price of the metal undermined Implats’ plans to acquire South Africa’s Northam Platinum and Xstrata PLC’s bid for Lonmin PLC.
Implats said it will defer long-lead projects, which will result in a lower outlay of about R10 billion (US$983 million) versus previous plans to spend R30 billion over five years.
Net profit rose to R5,29 billion in the six months ending December 31, from R4,66 billion the previous year, Implats said.
Revenue for the period, however, declined to R16,24 billion from R16,32 billion due to a drop in sales volumes.
Dollar revenue per platinum ounce was 8,2% lower at US$2 408 an ounce, with overall prices 5,8% down for the period.
Last November businessdigest reported that Implats had stopped its share repurchase programme, having at that point already spent R723,8 million.
It also said it would review capital expenditure, all its projects and opportunities for additional cost savings.
Capital expenditure for the first half of the mining giant’s fiscal year was R3,9 billion, up from R2,4 billion the previous year, with the bulk said to have been spent on the development of 16, 17 and 20 shafts at the Impala Platinum operation in South Africa.
According to the Johannesburg stock exchange Implat’s shares closed on Wednesday at 137,49, down almost 56% on a year earlier.
Shares in Anglo Platinum Ltd — the world’s biggest platinum producer — fell about 63% during the same period.
Going forward international mineral prices are expected to take a cue from developments in the wider international economy and global financial crisis.
The future of the mining sector in Zimbabwe remains bleak. Should the current electricity shortage continue, production is likely to remain low.
The country’s mines are however said to be quality assets but the real benefit will only be seen when the operating environment improves.
According to Neill Young, a fund manager at Coronation Fund Managers, Impala’s Zimbabwe platinum operations have a lot going for them.
Cash margins are high, the minerals are shallow and easy to mine, and the resource is big at about 40% of Impala’s total.
“So there clearly is significant potential to scale up beyond the current expansion plans,” he was quoted as saying.
“But this would clearly require political stability and a far more conducive investment environment,” he said.
Zimplats is listed in Australia and has a market capitalisation of about US$1billion.
BY PAUL NYAKAZEYA