Release Date: February 29, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Operational leaders achieved a 2% increase in ounces produced, excluding Impala Rustenburg.
- Impala Bafokeng managed a 1% reduction in cash cost despite production challenges.
- Refined ounces sold increased by 12%, indicating strong operational performance.
- Operating cost increased by only 3%, showcasing stringent cost control.
- Capital investment aligned with the capital program, increasing to ZAR 6.8 billion.
Negative Points
- Revenue declined by 32% due to a significant drop in PGM prices, particularly palladium and rhodium.
- The company experienced a negative cash flow of ZAR 4.8 billion.
- Impala Bafokeng and Zimplats reported significant negative cash flows.
- The tragic incident at 11 Shaft resulted in the loss of 16 lives, impacting morale and operations.
- The company faces potential restructuring and job cuts due to the challenging market environment.
Q & A Highlights
Q: Nico, you say you need a strong strategic response, right, which I think is needed. But if I look at your guidance, we're not really seeing that. So the question is, when are we going to see material movements in your production number? Because I think that's really what's needed and we're not seeing that coming through. You're taking off answers on the margin, postponing some growth. But don't you think we need a larger and more swift response? And please don't understand me wrong, I know at the end of all of this, there's people and communities that do get impacted. But yes, looking at this, I'm not seeing that strong response yet, or is it a case of you are working through this and watch the space, you're going to come back with material changes to that number? Because in my mind, I think that is what is needed industry wide. Yes. That's the first question.
A: Thank you, Arnold. So the question of industry discipline, of course, is a long dated conversation. It's taken us the best part of 2 years to acquire RBPlat when we were hunting for Impala Canada, it took us what, like, I don't know, a year or 1.5 years. So if you look at the investment decision. So the nature of our industry is very particular. It's a long lead time, capital intensive decision. So the notion of switching on and off based on these variations is decisions with very significant consequences. If we could very quickly decide to put something on care and maintenance or to switch it off and not worry about the long-term implications, it would be a very simple game. So that's the one part. We have to be very specific. So our position is that we will not support loss making ounces. But we have to make sure that there is no foreseeable opportunity for that to occur. So if there is a possibility of returning to profitability in the event of a short period of incurring losses. And I'll take my ruler as an example. My ruler was operating from 2008 to 2019, probably in a cash negative position, and when it turned into profit, it probably paid itself back 10 times over in a period of 3 years. So we take those decisions with great care and of course, in a country dominated by employment concerns, we are equally concerned about the social impact on our employees as well as communities. Having said that, what I can assure to you is we will not continue for another 10 years in a winter cycle and take no action. But we do want to make sure that we do so carefully, deliberately, and in a measured way. So I understand the concern, but that's my response. In terms of the renewable energy investment and the comments that we've made about either stopping or telling it or deferring it. So first of all, peer groups going off the grid, I'm not sure that's entirely possible for 2 reasons. One, we are an industrial consumer of such demand that to go off the grid is not entirely possible just from a peer demand. You also need to look at the demand profile through 24 hours. So I'm not convinced that any peer can entirely go off the market because in addition to the generation, you also have to be able to store the power. Our perspective, it is critical from a number of perspectives, one is to reduce our dependence on Eskom, but also to reduce our carbon footprint to pursue but there are different ways to get to the endpoint. One is to invest capital in building your own infrastructure, and the other one is to partner with entities through offtake agreements. And so I think what we are going to have to do is we are going to have to change our tactics, because as much as we would like to continue developing Phase 2 and Zim or Marula or 180 kilowatts ourselves in a period where you don't have the cash to do that, it just becomes impossible. So it's far better for us and we are sitting with a landlord who has got aspirations of becoming a renewable energy player. And for us, strategically, I think it's far more attractive financially to agree with them, for them to develop renewable energy, and for us to become a long-term off-taker of that. So we are not abandoning our aspiration of increasing the consumption of renewable energy, but the way in which we do it may have to change.
Q: Nico, you mentioned earlier that the current metal prices are not a fair reflection of the market balances. What are the sort of catalysts that you are looking out for and that we could look out for that would correct that, so that they start reflecting the market fundamentals? That's my first question. The second one is, you've done really well in cutting costs at Impala Canada, but it does seem like the goalpost keeps moving. So you've come down to sort of [1050], and now you're going to try and cut down to [950], all in sustaining costs. How do you weigh up the optionality of keeping that operation open and chasing kind of free cash flow neutral versus the benefits of your Zimbabwean and South African operations from higher metal prices if you were to take those answers out of the market? And also maybe in the context of some of the jobs that are now at risk in South Africa, because you're keeping Impala Canada open for the sake of optionality. If you could please talk us through that.
A: So I will let you on or market contemplate, market figures, when there are some of our team members in the audience. But just in terms of your second question. Firstly, I'm not convinced that Impala Canada has got a major bearing on the palladium price in the greater scheme of things. I mean, I think even if you cut right now, given the surface stock, given the threat of switching between palladium and platinum, which I suppose has diminished now with the narrowing of the price, given the supply of discounted Russian material, I'm not convinced that stopping Impala Canada will have a major bearing on the sustainability of South African, Zimbabwean operations, just to start off with. When we look at Impala Canada, it represents multiple things to us. One is potential source of revenue, but also from a strategic point of view, it is geographic distribution. They are entirely based on renewable energy. It is a footprint in North America. So there's a number of other strategic considerations that are of value to the company. And so I'm not sure that in my own mind, keeping Impala Canada open compromises South African and Zimbabwean operations. I think that there are strategic value for the company in making sure that it is represented in all the jurisdictions in which it operates, but to the extent, that we are sure that we can do so without having to burn cash in that jurisdiction. So in terms of the market and any potential triggers that we should look out for, anyone would like to volunteer?
Q: Could we talk about Impala Bafokeng, few kind of questions here. So I think you've obviously rightly identified it's been a significant source of cash burn in the period. And actually by quantum it actually looks more than Impala Canada. You talk in the release to strategic
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
