IMPALA Platinum Holdings (Implats) has raised concern over the negative effects of the country’s controlled exchange rate regime on its local operations.
holds an undisputed 86,9% stake in Zimbabwe Platinum Mines (Zimplats) which it bolstered during the course of the year after the rationalisation of its Zimplats operations and Makwiro Platinum, while an additional 1% of the project was acquired on the open market.
Implats chief executive officer, Keith Rumble, in his year-end results raised concern over the impact of the managed exchange rate and galloping inflation in the country, which he attributed to increased costs in local production by 9,7%.
“In Zimbabwe, however, local inflation and the managed exchange rate had a disproportionate effect on the group unit cost of R4 548 per refined platinum ounce, 9,7% higher year-on-year,” Rumble said.
He said further devaluation of the local currency against major currencies would relieve inflationary pressures on its operations going forward.
“In Zimbabwe, the managed exchange rate will be a critical factor for cost-performance going forward,” said Rumble.
“The move to underground mining at Zimplats should alleviate the current operation-driven cost pressures, which should be further ameliorated by the recent substantial devaluations of the Zimbabwean currency against the US dollar, but will be dependent on further devaluations to reflect the underlying inflationary pressures,” Rumble said.
The South African-based platinum producer in the period under review recorded an increase in net profit of 78% to close the financial year at R5,2 billion while its headline platinum production increased by 5% to close at 1 115 million ounces of platinum.
Increases in Implats profits were bolstered by profits from the sale of Lonplats during the course of the year adding R3,2 billion, while it recorded an impairment of R850 million from its Marula Mine.
“Impala contributes 60% of production and has achieved a record production of 1 115 million ounces of platinum, while holding unit cost increases to just 5,3%,” said Rumble.
He said despite the continued strength of the rand against other major currencies during the period under review, the company’s earnings in the second half of the year recorded an increase of 15% compared to the previous year’s figure.
The rand gained an average of 10% against the United States dollar to maintain levels of R6,20/US dollars while revenue per platinum ounce was 3,3% higher.
“A particularly pleasing part of our performance has been a steady increase in earnings despite the continued pressure of the rand. Earnings in the second half of the financial year were 15% higher than the second half of 2004; but earnings in the second half of 2005 were 70% higher than the first half of 2005, providing some insight into the strength of the underlying business fundamentals,” Rumble said.
He said the company anticipated an increase in production contributions from its operations in the long-term while its collective mine to market operations increased by 2,5%.
“Increasing production from Impala continued to underpin Implats’ mine-to-market growth strategy during the year, although we anticipate a steady increase from the other operations in the years ahead,” said Rumble.
“Collectively, Implats’ mine-to-market operations grew production of platinum by 2,5%, and contributed 77% of headline profit, with a margin of 38%,” Rumble said.
Implats has declared a final dividend payment of R18 per share resulting in the company’s total dividend payment closing at a total of R23. – Staff Writer/Reuter.