- Nine dead at mines in six incidents since July including fire
- Platinum inventories will make up for shortfall in production
A spate of mining deaths and safety failures are preventing Impala Platinum Holdings Ltd. from achieving its output targets at a time when the second-biggest producer of the metal is under pressure from falling prices.
Impala revised production targets for the fiscal year ending June 2016 after nine workers died at mines in South Africa and Zimbabwe in six different accidents, including a fire at a shaft in Rustenburg in January that left a section of the mine unusable until July 2017.
The deaths occurred even as Impala spent more than 1 billion rand ($64 million) on safety programs in the past three years, the Johannesburg-based company said in a statement on Thursday. “Safety remains a significant challenge for the group,” it said.
Production holdups are exacerbating the effect of a 50 percent plunge in platinum prices in the past five years that’s squeezed the margins of the biggest miners including Anglo American Platinum Ltd. and Lonmin Plc. While deaths at South African mines dropped to a record low of 77 people last year, the country’s mining industry remains among the world’s most dangerous because of deep shafts and vast number of employees.
Impala lowered guidance for Rustenburg, the world’s largest platinum mine, to 630,000 ounces to 650,000 ounces for the current fiscal year and at least 700,000 ounces in 2017, it said. The company’s mines produced 692,100 platinum ounces during the six months through December, an increase of 9.8 percent from the previous year, it said.
“Rustenburg is an incredible asset and should do a lot better,” Hurbey Geldenhuys, a mining analyst at Vunani Securities Ltd. in Johannesburg, said by phone. “There often seems to be something that isn’t right.”
Impala’s earnings excluding one-time items were 347 million rand, or 53 cents a share, in the six months ended Dec. 31, compared with 400 million rand, or 66 cents, a year earlier, the company said. The average price of platinum declined 29 percent to $950.68 an ounce from the same period in 2014, according to data compiled by Bloomberg.
Impala rose 2.2 percent to 33.94 rand by 10:46 a.m. in Johannesburg.
“Near-term metal prices continue to be impacted by an uncertain global economic outlook and negative sentiment on resources in general,” the company said. While the market was in a deficit of about 700,000 ounces last year, “above-ground stocks will continue to address market fundamental deficits for the next 12 months, possibly longer. Hence the ‘lower-for-longer’ view of prices,” it said.