Impala Platinum Profit Drops as Much as 55% on Writedown

Impala Platinum Holdings Ltd. (IMP) said full-year profit dropped as much as 55 percent because costs rose and after the world’s second-largest producer wrote down assets by 2.3 billion rand ($230 million).

Headline earnings per share, which exclude one-time items, will be from 3.08 rand to 3.43 rand for the year ended June, compared with 6.85 rand a year earlier, the Johannesburg-based company said in a statement today. That compares with a median estimate for profit of 3.28 rand, according to 18 analysts in a Bloomberg survey.

Impala operates the Rustenburg mine in South Africa, which is the world’s largest platinum operation. Producers in the country, which has the world’s biggest reserves of the metal, are struggling with higher costs as strikes led to above-inflation wage gains while demand waned. The company is reviewing its mines, some of which are either marginal or loss-making, it said on May 2.

“Impairments of 1.3 billion rand of long-term receivables” cut earnings, Impala said in the statement. A “writedown of approximately 1 billion rand of goodwill resulting from the African Platinum Plc acquisition concluded in the 2007 financial year” also affected profit, it said.

African Platinum

Impala bought 29.9 percent of African Platinum in 2006 and purchased the rest a year later, recording a net cash outflow of 3.9 billion rand for the transaction, it said in August 2007. Afplats’ flagship asset was the Leeuwkop project, which has been designed to produce 145,000 ounces of platinum annually, with first output planned for 2021.

The total capital needed for the project is 9.8 billion rand after taking inflation into account, Impala said on Aug. 23 last year.

“I’m surprised it was that significant,” Percy Takunda, a mining analyst at Johannesburg-based Imara SP Reid Pty Ltd., said by phone, referring to the impairment. “I expected Impala to do better because they’ve got the largest profitable operations.”

Impala rose as much as 6.5 percent after the announcement and traded 6 percent higher at 112.62 rand by 1:35 p.m. in Johannesburg, the highest intraday level in more than three months. The stock was the best performer in the six-member FTSE/JSE Africa Platinum Mining Index today.

To contact the reporter on this story: Andre Janse van Vuuren in Johannesburg at ajansevanvuu@bloomberg.net

To contact the editors responsible for this story: Amanda Jordan at ajordan11@bloomberg.net; John Viljoen at jviljoen@bloomberg.net

Bloomberg reserves the right to edit or remove comments but is under no obligation to do so, or to explain individual moderation decisions.

Please enable JavaScript to view the comments powered by Disqus.