Impala Platinum Holdings Ltd., the second-largest producer of the metal, is selling as much as $500 million of convertible bonds to fund projects at its biggest operation, where a strike cut output and profit.
The company is offering debt denominated in rand and dollars to qualifying institutional investors, it said in a statement today. Net income declined 78 percent for the six months through December, missing analysts’ expectations, because of the work stoppage at Rustenburg, where production fell 25 percent and costs per refined ounce surged 52 percent, Johannesburg-based Impala said in a separate statement.
The company mines mostly in South Africa, which has the largest reserves of platinum. Upheaval has plagued producers since last August, when thousands of workers staged a series of illegal strikes, winning pay increases of as much as 22 percent. Labor disputes and above-inflation cost gains prompted companies to shut nine platinum shafts in the country last year, the mineral resources ministry said. The nation’s mines lost more than 600,000 ounces of output, Impala said.
The bonds’ proceeds are for “general corporate purposes with a primary focus on funding strategic projects in the Rustenburg Lease Area,” the company said. The transactions form part of Impala’s plan to secure funding “given the current global economic and operating environment in the mining sector in South Africa,” it said.
Impala will offer 1.78 billion rand ($200 million) of bonds maturing in 2018, with an expected rate of 5 percent to 5.5 percent annually, it said. The mining company will also sell $200 million of debt due in the same year at 1 percent to 1.5 percent. The securities will be convertible into Impala shares. The company has the option of increasing the sale by as much as $100 million, it said.
UBS AG and Standard Bank Group Ltd. will arrange the sales.
Impala’s profit excluding one-time items decreased to 776 million rand, or 1.28 a share, in the six months ended Dec. 31, from 3.47 billion rand, or 5.73 rand a share, a year earlier, the Johannesburg-based company said in a statement today. The median estimate of five analysts surveyed by Bloomberg was for adjusted earnings of 2.28 rand a share.
So-called mine-to-market output slipped 16 percent to 621,000 ounces largely because of the stoppage at the Rustenburg mine, while unit costs across the company’s operations climbed 42 percent to 15,983 rand per platinum ounce.
“Cost pressures will remain high as a result of proposed power increases and potential wage demands, which could be mitigated to some extent by a recovery at Impala Rustenburg,” the company said.
Profit was curbed by a 500 million-rand impairment for the potential non-recovery of outstanding funds from a recycling toll-refining customer and a one-time charge of 129.3 million rand for a tax adjustment for Zimplats, the company’s unit in Zimbabwe, it said.
Impala accounts for about a quarter of the world’s platinum output, ranking it behind only Anglo American Platinum Ltd. The company signed terms last month to sell a controlling stake in Zimplats under a law to hand ownership to black citizens. The average price of platinum in the six months through December fell 6.4 percent to $1,547 an ounce compared with a year earlier.
Impala will pay a dividend of 35 cents a share compared with 1.35 rand a year earlier. The stock declined 3.1 percent to 161 rand by the close in Johannesburg. More than 8 million shares changed hands, more than triple the three-month average.