• Refined platinum production of 721,000 ounces
  • Refined PGM production of 1.5 million ounces
  • Contribution of 18% to group headline profit
  • Sales volumes up by 18.4% to 527,100 ounces of platinum

Introduction

Impala Refining Services (IRS) houses Implats’ toll refining activities by capitalising on the capacity within the group, specifically processing and refining capacity and the group’s marketing expertise. In addition to its toll refining activities, IRS also purchases concentrate from independent companies.

Operational review

Refined platinum production by IRS in FY2006 amounted to 721,000 ounces, a decline of 1.7% on the 733,300 ounces refined the previous year. Refined PGM production totalled 1.487 million ounces. The decline in production was due largely to movements in pipeline stock which resulted in an increase in inventories for the year.

Refined production was underpinned by increased volumes from long-standing partner A-1 Specialised Services and Supplies Inc. Increased metal deliveries were received from Zimplats, Mimosa and Marula, and from Barplats’ operation, Crocodile River. Higher-than-expected volumes were received from Everest, which began deliveries of concentrate ahead of schedule.

The off-take contract with Messina came to an end in FY2006 while Kroondal’s off-take contract with IRS will come to end in FY2008.

IRS - contribution to group platinum production
(%)

IRS - contribution to group platinum production

IRS key statistics
      FY2006   FY2005   % change  
Sales (Rm)   6,221.6   4,072.3   52.8  
   Platinum     3,319.6   2,285.5   45.2  
   Palladium     556.5   426.0   30.6  
   Rhodium     1,350.0   468.1   188.4  
   Nickel     578.8   536.5   7.9  
   Other     416.7   356.2   17.0  
Cost of sales (Rm)   (5,336.5)   (3,460.5)   (54.2)  
   Metals purchased     (6,137.7)   (3,635.6)   (68.8)  
   Smelting and refining                
   costs     (238.6)   (188.8)   (26.4)  
   Increase in inventories     1,039.8   363.9   185.7  
Gross profit     885.1   611.8   44.7  
                 
   Gross margin (%)   14.2   15.0   (5.3)  
                 
   Other operating costs (Rm)   (13.1)   (29.2)   55.1  
Sales (Rm)   6,221.6   4,072.3   52.8  
   Direct sales to customers     384.7   261.5   47.1  
   Sales to Impala     5,662.5   3,630.7   56.0  
   Toll income     174.4   180.1   (3.2)  
Total sales volume                
   Platinum (000 oz)   527.1   445.2   18.4  
   Palladium (000 oz)   335.7   313.3   7.1  
   Rhodium (000 oz)   71.2   61.0   16.7  
   Nickel (000 t)   6.1   5.9   3.4  
Prices achieved                
   Platinum ($/oz)   987   828   19.2  
   Palladium ($/oz)   260   219   18.7  
   Rhodium ($/oz)   2,975   1,240   139.9  
   Nickel ($/t)   14,986   14,540   3.1  
Exchange rate achieved (R/$)   6.37   6.20   2.7  
Refined production                
   Platinum (000 oz)   721.0   733.3   (1.7)  
   Palladium (000 oz)   496.5   513.9   (3.4)  
   Rhodium (000 oz)   113.2   103.8   9.1  
   Nickel (000 t)   7.7   8.1   (4.9)  
   Total PGM (000 oz)   1,487.1   1,486.8   0.0  
Metal returned                
   Platinum (000 oz)   246.3   246.2   (0.0)  
   Palladium (000 oz)   189.9   159.5   19.1  
   Rhodium (000 oz)   41.5   53.8   (22.9)  
   Nickel (000 t)   2.2   1.9   15.8  

IRS – headline profit and contribution to group
          % contribution  
  Profit (Rm)       to group  
2002 416       9.0  
2003 151       4.4  
2004 394       13.4  
2005 466       16.3  
2006 715       18.1  
             
Refined platinum production (000 oz)
  FY2006   FY2005 % change  
Zimplats 89.0   82.4 8.0  
Marula 37.0   30.9 19.7  
Mimosa 66.4   60.8 9.2  
Aquarius Platinum SA 214.9   215.5 (0.3)  
Lonplats (excluding Messina) 22.2   32.5 (31.7)  
Other 291.5   311.2 (6.3)  
Total 721.0   733.3 (1.7)  

Financial review

IRS’ gross profit increased by 45% to R885 million in FY2006 from R612 million in FY2005. This increase was largely a result of the substantial increase in PGM prices, and in particular the prices of platinum and rhodium during the latter half of the year. Operating margins declined to 14.2% from 15% in the previous year owing to reduced tolling volumes. While the rand maintained its strength for most of the year, the decline in its value in June, when it fell by 10% against the dollar, resulted in the realisation of translation gains.

Outlook

The outlook for FY2007 is encouraging and a substantial increase in refined ounces is forecast. Increased metal deliveries are expected from A-1, Marula Platinum, Mimosa, Two Rivers and Aquarius Platinum’s Everest mine. In addition, in the longer term, there will be increased metal deliveries from Zimplats, Blue Ridge mine, with which a life-of-mine off-take agreement has recently been concluded, and other potential entrants into the sector. This forecast is in line with the group strategy of increasing refined platinum production to 2.3 million ounces by 2010.

Impala Platinum Holdings Limited - Annual Report 2006