Integrated Annual Report 2017
Annual Integrated Report 2017
Implats is a leading producer of platinum and associated platinum group metals (PGMs). Implats is structured around five mining operations and IRS, a toll refining business. Our operations are located on the Bushveld Complex in South Africa and the Great Dyke in Zimbabwe, the two most significant PGM-bearing ore bodies in the world.
Key features for the year
- Overall PGM demand stable, while supply remains constrained
- Current platinum price disconnected to market fundamentals.
Mineral Resources and Mineral Reserves
- No material change in Mineral Resources totalling 191.6 million platinum ounces and Mineral Reserves of 22.4 million platinum ounces.
/ How we react to this / CEO’s outlook – Nico Muller
It is a tremendous honour for me to join Implats as its CEO. Implats has been a Group that I have admired and it’s certainly a career highlight for me to be given the opportunity to work alongside the existing team.
Nico Muller, CEO
I fully understand the importance of a turnaround at Impala Rustenburg. We are focusing on right-sizing and optimising this operation’s operating model. Strengthening and realigning the management team to ensure effective and confident leadership is imperative to drive an improved performance orientation and increased accountability to enhance safe production volumes and overall efficiencies and productivities. The importance of the expected delivery of production and cost from the two growth shafts – 20 Shaft and 16 Shaft – is recognised and plans have been re-focused to ensure their ramp ups are prioritised and achieved timeously.
I have also started working with our team to ensure a more decisive strategy for the Marula operation. It is critical that we address operational disruptions and improve productivity. While this situation stems largely from community unrest and external interferences, I have made it clear that the operation must become cash generative within the immediate short term, or we will have no option but to suspend operations.
To ensure shareholder returns and the delivery of cost effective ounces we need to increase organisational effectiveness. Senior leadership changes have, and will continue, to be made across the Group, and we will improve role clarity and accountability. I have found that inter-divisional relationships and collaboration require improvement, and systems are being introduced to make these more effective and value-adding. Implats’ wellknown and regarded lean operating structure has led to an inadequate human resources function at the centre. We are in the process of securing the services of a human resources professional who will be tasked with driving organisational change and effectiveness, and ensuring the prioritisation of this function throughout the organisation.
One of the core pillars of our strategy has been
to strengthen the balance sheet and this has
necessitated an enhanced focus on capital
allocation and cash management. The finance
team, led by Brenda Berlin, has done an
exceptional job ensuring that Implats has one of the
best-in-sector balance sheets and this focus will be
maintained. This strength is, and will be, a critical
element of our ambition to develop strategic agility,
and will be equally important as we re-examine the
Impala Rustenburg investment case, and continue
to drive the enforcement of strict capital allocation.
The flexibility that will be required can’t be
overemphasised as it will become the catalyst
to enable us to prioritise profitability.
One of the core pillars of our strategy has been to strengthen the balance sheet and this has necessitated an enhanced focus on capital allocation and cash management. The finance team, led by Brenda Berlin, has done an exceptional job ensuring that Implats has one of the best-in-sector balance sheets and this focus will be maintained. This strength is, and will be, a critical element of our ambition to develop strategic agility, Turnaround Impala Rustenburg Decisive Marula strategy Increase organisational effectiveness Capital allocation and cash management and will be equally important as we re-examine the Impala Rustenburg investment case, and continue to drive the enforcement of strict capital allocation. The flexibility that will be required can’t be overemphasised as it will become the catalyst to enable us to prioritise profitability.
It is imperative we develop the Group’s strategic agility. To initiate this, we are re-examining market dynamics, specifically our long-term price forecasts. We need to rebalance our portfolio of assets and are currently completing an assessment aimed at enhancing our strategic optionality within and beyond the current portfolio. The assessment is reviewing all operations and will result in the elimination of loss-making production, while questioning the future dependence on high-cost deep, conventional mining operations.
Companies can no longer be successful without earning a social licence to operate. A tremendous amount of excellent work has been done to facilitate acceptance within our host communities and to secure our relationship with government and other authorities. This will remain a key focus area as commitments to responsible environmental stewardship and the well-being of employees are unwavering. Cost management necessitated that we hold back on appointing an experienced stakeholder relations executive, after the previous incumbent departed. The need to enhance and expand this area, however, has become a key requirement and we are in the process of securing this necessary skill for our executive team.
Nico Muller, CEO
"Implats' strategic response plan is well under way and major progress has been made over the last two years to ensure cost savings and optimisations throughout the Group, while advancing our social licence to operate commitments continue to benefit our wide-ranging group of stakeholders."
One of my first tasks since joining was to engage with many of our key stakeholders. I have gained a significantly better understanding through these deliberations and I am very appreciative of the time unselfishly given by many people who shared their various views and experiences.
lmplats has always been revered and respected as a leading mining company. Historically, it outperformed the industry and its peer group in many key metrics and was highly profitable. Many of our current leaders and staff were here at that time and know and understand exactly what it takes to excel.
In recent years, however, Implats has seen a steady decline in operational performance from the Impala Rustenburg. This, together with a persistently low metal price environment and challenging operating conditions, has impacted overall profitability. I am a firm believer that long-term sustainable success is best achieved through strong teams who share a common purpose and conduct their business through a collaborative approach. It is clear to me that Implats has an impressive repository of experienced employees, who as a team, largely have the capacity to propel us through this tough period.
The mining industry in both the jurisdictions in which we operate – South Africa and Zimbabwe – is characterised by rapidly increasing uncertainty. This is evidenced by the latest gazetting of the new Mining Charter in South Africa and the increased call for beneficiation as well as a potential 15% export levy on unbeneficiated platinum in Zimbabwe. In addition, community activism continues to escalate and poses a material risk to sustainable mining operations. These are areas that require considerable attention at executive level and to bolster our existing ability, I have advanced the work required to develop strength in, and across, our teams.
Implats’ strategic response plan is well under way and major progress has been made over the last two years to ensure cost savings and optimisations throughout the Group, while advancing our social licence to operate, commitments continue to benefit our wideranging group of stakeholders. While Impala produced 654 600 ounces of platinum for the year (as guided at the half year), it nonetheless incurred a headline loss after tax of R2.68 billion. This was largely a result of sustained low rand basket prices, a cost base that is structured for a higher level of production and persistently low operational efficiencies. It is clear that we cannot accept it being business as usual for Impala. A comprehensive strategic review of this operation is planned to ensure that it will operate at a cash neutral level in what is perceived to be the new normal pricing environment. The review will be focused on returning the mine to profitability by prioritising profitability and value, over volume.
/ Our Company, Implats/ Stakeholder review and engagement
Each stakeholder group is allocated an executive or champion responsible for managing their relationship with the organisation.
Stakeholders are defined as those people or groups who are interested and affected by our business, as well as those who have a material influence on our ability to create value.
We have undertaken an inclusive stakeholder review process with the primary objective of improving relationships by becoming proactive in our approach to building relationships.
This process is depicted as follows:
- Identifying all stakeholders
- Prioritising stakeholders according to our impacts on them and the nature of the relationship
- Determining their level of influence on the business
- Mapping each stakeholder against a designated champion or responsible executive
- Defining the method of engagement and identifying potential opportunities to grow and sustain the relationship
- Establishing a tool for monitoring and evaluating relations in order to take proactive measures to improve these where they are found lacking
/ How we react to this / Implats’ performance
Our strategy seeks to sustain optimal levels of safe production at the best possible cost thereby positioning Implats:
- In the lower end of the cost curve
- With strategic optionality
- To benefit from future stronger PGM prices
- To reward stakeholders
|Performance target for FY2017|
|Performance against strategy and KPIs|
|Relentlessly drive the safety of our people|
LTIFR: 20% improvement on FY2016
Regrettably, nine employee fatalities were recorded during the year. LTIFR improved 8.8% from the previous year to 5.92 per million man-hours worked (including contractors) (2016: 6.49).
Despite a keen focus on safe operational performance, safety remains a significant challenge.
Human behaviour has been identified as contributing to many safety incidents.
Our focus is on ensuring effective leadership and responsible behaviour and driving a culture of personal accountability and interdependence.
|Consistently deliver production targets|
>1.5 million platinum ounces
Refined platinum production of 1.53 million ounces.
Group platinum production reached the highest output achieved in several years. This pleasing production result was driven by excellent performances from most operations, despite suboptimal performances from Marula and the Impala Rustenburg, and supplemented by record tolling throughput at Impala Refinery Services (IRS).
|Improve efficiencies through operational excellence|
Cost per platinum ounce < R21 200
Unit costs contained at a 4.4% increase from the previous year to R22 691 per platinum ounce impacted by lower mine-to-market volumes.
Reduced operating costs has resulted in a savings of more than 1.0 billion over the last two years with further initiatives being pursued to keep costs below inflation.
|Capital < R4.4 billion|
Capital expenditure was maintained at similar levels to the previous year due to the deferment of ongoing capital in a low price environment and 17 Shaft remaining on low-cost care and maintenance.
R1.1 billion was spent on the two development shafts, 16 and 20 .
|Maintain our licence to operate|
Rustenburg SO2 at <16tpd
Build a further 300 employee houses in Rustenburg
Complete high school at Platinum Village
SO2 emissions at Rustenburg at 16.3tpd.
Direct SO2 emissions were within the conditions of the Air Emission Licence at Rustenburg. Built 321 employee houses in Rustenburg.
Completed both high and primary schools at Platinum Village in time for new 2017 school year.
Group social development expenditure amounted to R402m.
Much of our 2017 IAR has been designed and laid out in spreads. Below are options of downloading a pdf in spreads or when viewing the single page pdf please do so in two-page view in order to get the best possible picture.