Impala Platinum - Q1 2013


Company Overview

Impala Platinum is principally engaged in the mining and refining of platinum group metals (PGM), but is also involved in the extraction of nickel, copper and cobalt. It is the second largest producer of platinum and palladium in South Africa, but also has operations in Zimbabwe, through its 87%-owned subsidiary Zimplats, which is the focus of growth plans. Impala Platinum has begun preliminary exploration in Canada to remove the company's focus away from southern Africa. Zimplats is the largest platinum producer in Zimbabwe with output in 2011 around 180koz. The company has ceded 51% of its operations to indigenous Zimbabweans to comply with local law.

SWOT Analysis

Strengths

• Impala has several expansion plans, most notably in Zimbabwe, which should ensure the company remains one the world's largest producers of platinum.

• Expansion into Canada will reduce exposure to political risk in South Africa and Zimbabwe.

Weaknesses

• Almost all of Impala's revenues are derived from PGM production, and so the company is dependent on a continued elevation in the price of platinum and palladium in particular.

• We expect strikes and wage increases to continue in South Africa's platinum and gold sectors which will further squeeze Impala's margins.

Opportunities

• Impala is set for steady growth, mostly on the back of the Great Dyke mine in Zimbabwe, which is one of the largest deposits of platinum outside South Africa.

• The company will benefit from our forecast that gold prices will remain elevated in 2013 averaging US$1,675/oz. Indeed, with platinum prices remaining low relatively, Impala could mine the ores with higher gold content in order to benefit from higher relative prices.

Threats

• The company's profits have been hit by a sustained appreciation in the South African rand.

• Impala's Great Dyke mine in Zimbabwe could come under threat by the government's interest on nationalising mining assets.

• Reliance on South Africa for the bulk of its revenues means the company will continue to be exposed to rising wage and energy costs. In addition, while we see nationalisation in the country as an unlikely event, we expect the government to raise royalties and taxes on mining companies.

Strategy

We are moderately optimistic regarding Impala Platinum as the company appears to be very stable, with few threats to operations. Impala will continue to benefit from elevated platinum prices, in addition to rising platinum and palladium output. We expect the company's expansion plans at operations in Zimbabwe and South Africa will reach 2.1mozpa (mn ounces per annum) in 2014, up from 1.7mozpa in 2011. However, there are downside risks to this forecast due to political risk in Zimbabwe, where much of this growth in output is due to occur.

Contact Details

  • 2 Fricker Road
    Illovo 2196
    Sandton
    South Africa
  • Tel: +27 11 731-9000
  • Fax: +27 11 731-9254
  • www.implats.co.za
Table: Impala Platinum - Key Financial Data


2006 2007 2008 2009 2010 2011
Revenue (US$bn)2.74.45.22.93.44.7
 - % chg y-o-y35.060.218.3-43.414.541.1
EBITDA (US$bn)116420372417110010711653
 - % chg y-o-y597519-55-354
Net Income (US$mn)67910062422676622949
 - % chg y-o-y-2048141-72-853
Profit Margin (%)24.823.046.823.018.520.0
Debt to EBITDA0.00.00.10.20.30.2
P/E Ratio22.016.515.017.022.916.5
Source: BMI, Bloomberg
This article is tagged to:
Sector: Mining
Geography: South Africa, South Africa, Zimbabwe, South Africa, South Africa