Impala Falls on $300 Million Share-Sale as Profit Slumps

  • South African platinum producer declines most since 2008
  • Seeks to raise cash to continue Rustenburg mine expansion

Impala Platinum Holdings Ltd. dropped in Johannesburg trading after saying it plans to raise 4 billion rand ($295 million) by selling shares as a slump in metal prices cut full-year profit by 58 percent.

The shares in the world’s second-biggest platinum producer fell as much as 15 percent before rebounding in afternoon trading, while yields on the company’s dollar bonds reached a record. Impala is seeking to raise the cash to complete two new shafts at its Rustenburg operation, the world’s largest platinum mine, it said in a statement on Thursday.

The Johannesburg-based miner preferred selling shares after considering other options, Chief Financial Officer Brenda Berlin told reporters on a conference call. South African platinum producers have cut jobs, closed shafts and delayed spending as prices dropped about 40 percent since 2011 to the lowest in six years. Impala’s earnings have also been hit by the cost of returning to normal production after a strike during the first half of 2014.

The company would’ve “survived for another two years without raising any capital but then they could have found themselves with their back against the wall,” Hurbey Geldenhuys, a mining analyst at Vunani Securities Pty Ltd. in Johannesburg, said by phone. “This is mining, you can’t stop investing in a down cycle because you’ll miss out when prices turn.”

New Shafts

Impala will continue to invest in new shafts because it sees long-term demand for platinum-group metals remaining strong, it said.

The shares dropped the most since November 2008 to the lowest since 2001, and were down 2.8 percent at 45.25 rand by close of trading in Johannesburg. Yields on the company’s dollar bonds maturing in February 2018 rose 11 basis points to 9.54 percent, the highest on record.

The miner has already secured fundraising support from about half of its shareholders including Coronation Fund Managers Ltd., Royal Bafokeng Holding Pty Ltd. and Public Investment Corp., South Africa’s largest money manager, it said. The share sale is being underwritten by UBS Group AG.

“We just don’t want to be overgeared in the current environment and stretch our balance sheet,” CFO Berlin said. Net debt totaled 4.1 billion rand by June 30, the company said.

Cost Cuts

Impala plans to save 1.6 billion rand in costs while reducing capital expenditure for the 2016 fiscal year to 4.2 billion rand from 4.5 billion rand, Chief Executive Officer Terence Goodlace said. The company may close one shaft and sections of another operation at Rustenburg, resulting in possible job losses, he said.

Earnings excluding one-time items in the 12 months ended June 30 fell 58 percent from a year earlier to 221 million rand, or 36 cents a share. Gross refined platinum output gained 8.3 percent to 1.28 million ounces while the Rustenburg mine achieved its target of 575,000 ounces.

Performance “was severely impacted by the ramp-up of the Rustenburg operations” following the five-month strike, the company said. The temporary closing of its Bimha mine in Zimbabwe and power shortages in South Africa also disrupted operations, it said.

(An earlier version of this story corrected an earnings figure.)

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