Impala Reports Improved March Quarter Results; Cuts 2020 Guidance Over COVID-19 Suspensions

Highlights

PRODUCTION
Quarter ended 31 March 2020
Group tonnes milled (excluding JV operations) improved by 18% to 5.36 million tonnes during the quarter, compared to 4.53 million tonnes in the prior comparable period. An improved mining performance at Marula and Zimplats compensated for lower volumes from Impala Rustenburg, with absolute volume gains driven by the inclusion of Impala Canada and its contribution of 865 000 tonnes. Reported mill grade declined by 4% to 3.64g/t (6E), benefitting from a strong performance at Marula but impacted by the inclusion of lower-grade volumes from Impala Canada.

Mine-to-market 6E concentrate production was stable on a like-for-like basis with stronger volumes from Marula and Zimplats offsetting weaker production from Impala Rustenburg and Two Rivers. Together with production from the recently acquired Impala Canada operation,
concentrate volumes increased by 8% to 667 000 ounces from the prior comparable period.

IRS 6E in concentrate receipts from third-party and toll customers increased by 3% to 85 000 ounces. Gross concentrate production and receipts improved by 7% to 751 000 ounces.
Refined and saleable 6E production, which includes saleable ounces from Impala Canada, increased by a more material 23% to 862 000 ounces.

UNAUDITED FINANCIAL POSITION
Net cash, excluding finance leases, amounted to R3.2 billion at 31 March 2020, an improvement of R2.1 billion from closing levels at 30 June 2019 of R1.1 billion, after the payment of R978 million (FY2019: nil) in dividends to Implats shareholders during March 2020. The balance sheet remains strong with an unutilised revolving credit facility of R4.0 billion available until 7 June 2021. The Group had liquidity headroom of R12.9 billion at 31 March 2020 compared to the R12.2 billion available at the end of June 2019.

In addition, the Group has embarked on various cash preservation measures to improve liquidity during the next 12 to18 months. These include a material reduction of non-essential operational and capital expenditure and the extension of the maturity of the Standard Bank term loan associated with the Marula BEE ownership of R865 million from 30 June 2020 to 30 September 2020.

OUTLOOK AND GUIDANCE
The Group was well on-track to meet the guidance parameters on production, unit costs and capex provided with the release of its half year results ended 31 December 2019. However, Implats is now faced with a period of unprecedented uncertainty due to the COVID-19 pandemic and the implementation of nationwide lockdowns and legislated limitations on production capacity at the Group’s South African operations.

Operational activities during the lockdown period 26 March – 30 April 2020
While milled volumes from Zimbabwean operations were largely unaffected by the Zimbabwean national lockdown, underground production from Impala Rustenburg, Marula and the Two Rivers joint venture were heavily impacted during the initial period of the South African national lockdown. Minimal underground production was secured during April 2020 as the focus remained on the safety and health of employees and ensuring the orderly screening, testing and training of returning employees ahead of the gradual resumption of drilling and blasting.

At Impala Canada, following a positive case of COVID-19, further employees have tested positive and the mine was placed on care and maintenance and the workforce quarantined for a two-week period from 13 April 2020. Regrettably, an employee with comorbidities passed away on 23 April 2020. The Board and management team have extended their sincere condolences to his family, friends and colleagues and wish all affected employees at the operation a speedy recovery. Discussions for a planned resumption of operating activities are ongoing with the relevant health authorities in Ontario.

While mining production was stopped in South Africa during April 2020, the Group took a phased approach to processing activities, in line with regulations which recognised smelters and refineries as ‘essential services’ during the lockdown period. This has allowed a systematic ramp-up of operations and continued, albeit reduced, production of refined volumes during the lockdown period. This development has allowed for a reduction of excess in-process inventory at the Group and, as such, refined volumes are likely to exceed concentrate production in the FY2020 period.

Implats’ revised production guidance considers the production losses suffered in March and April 2020 and assumes average production rates of between 30% and 40% of previous plans in May and June 2020 for South African operations. In Zimbabwe, the Group’s mines have operated successfully to date but remain vulnerable to potential unforeseen interruptions during the remainder of the forecast period. In Canada, the guidance assumes operations will resume in May 2020 but at a lower production rate.

The Group is pleased that its cost performance in the nine months to March 2020 was within guidance despite the impact of a weaker-than-expected rand on the translated cost base of both Zimplats and Impala Canada. The operating environment is now highly uncertain and the combination of variable production parameters, staffing levels and currency volatility creates exceptional forecast risk at this point in time. As a result, Implats is withdrawing its unit cost guidance for FY2020.

Capex spend has been impacted by the wider effects of the South African national lockdown, together with rand weakness on spend in Zimbabwe and Canada. Revised capex guidance reflects rand weakness, offset by savings and deferment where necessary.
The revised Group guidance is illustrated in the table below. Implats cautions as to the fluidity of the current operating environment and the downside risks presented by the potential for further lockdowns or variations in operating parameters. It is the Group’s intention to issue a
further market update ahead of the year-end on 30 June 2020.

Impala Revised Guidance.
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