The period under review has been one of the most difficult in the company’s history. Not only did it have to deal with the trying economic conditions, but also the impacts of both the tragedy at 14 Shaft and industrial action. However, despite this, significant progress was made in addressing the development issues at Rustenburg, the expansion at Zimplats was successfully commissioned and throughput at IRS grew significantly. As 2009 drew to a close the first signs of economic recovery had started to become apparent.

The global financial crisis that started midway through 2008 continued during 2009, as one after another the world’s major economies went into recession. It was also the year that the world’s economic power took a dramatic shift east as China, and to a lesser extent India, prevented a catastrophic move towards depression. Western world car sales slumped to multi year lows, having an enormous impact on PGM demand, but this was offset by a more than doubling of Chinese platinum jewellery consumption and a 50% leap in investment demand. Supply declined as a result of reduced secondary deliveries, leaving the market with a small deficit for the year.

Platinum prices reached a low of $915 in January 2009 and slowly increased throughout the year as Chinese buying and investor purchases via the European based Exchange Traded Funds gathered pace. Prices peaked during December 2009 at $1 500, supported in part by a belief that the worst of the recession was now over, and that industrial production would recover.

Palladium automotive demand was less severely impacted than platinum due to a robust Chinese market and a move to smaller gasoline engines, from diesel, in Europe. This market remained close to balance despite a
1 million ounce Russian shipment at the beginning of the year. With investors also showing an appetite for the metal and a lack of any meaningful destocking by the Russians at year end – something which has plagued this market for years – prices put in a more spectacular performance, starting the year at $175 and increasing by some 130% over the twelve months to close above $400.

Rhodium performed similarly to palladium starting the year at $1 050 and ending the year 160% stronger at
$2 800. It seems forward buying by automotive companies at lower prices and renewed speculative interest were the main drivers, as the metal experienced no shortage of liquidity, as evidenced by a market which moved into surplus.

A safety conscious workforce that adheres to the company’s rigorous safety standards and embraces the concept of zero tolerance to non-compliance is a key objective for the group. The challenge the group continue to face is changing the safety behaviour of our employees to one where safety and health is their first priority. While the group has achieved world-class performances in some areas there remains significant work to be done to realise the ultimate vision of zero harm. The group continue to work closely with the Department of Minerals and Resources, the unions and various external safety consultants focusing on inculcating a safety culture within the organisation in order to achieve this vision.

Implats’ safety performance was poor in the half year to December 2009 with fourteen fatalities during this period at Impala Rustenburg. Nine of these occurred in the single tragic incident at Impala Rustenburg’s 14 Shaft though the number of incidents is no higher than in previous reporting periods. The board and management extend their sincere condolences to the family and friends of our late colleagues.

Platinum production increased by 2% to 895 000 ounces in the first half of the financial year despite the loss of some 83 000 ounces at Impala Platinum. This was due to higher throughput at the other operating units, which is processed through IRS. The lower volumes at the flagship operation, Impala Platinum, negatively impacted on group costs which rose by 14% to R9 889 per platinum ounce excluding share based payments.

IMPALA PLATINUM

The total number of fatalities during the period was fourteen. In order to significantly reduce the operational risk of another fall-of-ground event all mechanised sections have been reconfigured to six metre mining bords. The Lost Time Injury Frequency Rate (LTIFR) deteriorated from 3.47 in FY09 to 4.38 per million man hours with the main issue continuing to be behavioural non-compliance with safety related standards and procedures.

The impact of the 14 Shaft incident, coupled with the two week industrial action resulted in tonnes milled declining by 16% to 6.8 million. Consequently refined platinum production fell to 432 400 ounces. The lower volumes impacted directly on unit costs which rose 21% to R9 755 per platinum ounce excluding share based payments. On a normalised basis (excluding the strike and the 14 shaft incident) unit costs would have risen 4% to R8 376.

The focus at the operation remains on on-reef development at the major Merensky shafts where rates have improved by 16% on a normalised basis and are in line with plans communicated at the Annual Results. This process will take another 18 months to complete and will restore mining flexibility at Impala Rustenburg.

Capital expenditure amounted to R1.6 billion during the period, the majority of which was spent on the new generation deeper level shafts 20, 16 and 17. In conjunction with improved development rates on existing shafts the build-up of these shafts is critical to maintaining 1 million ounces of platinum in the longer term.

MARULA

Although the safety performance from a fatality perspective was positive during the period, the LTIFR deteriorated to 11.62 from 5.21 per million man hours.

Tonnes milled rose by 4% to 816 000 resulting in a similar increase in platinum in concentrate production to
37 900 ounces. However, this continues to be less than planned due to limited face availability as a result of the slower ramp-up to conventional mining. Unit costs per platinum in concentrate ounce were well controlled rising by only 4% to R12 322 per ounce excluding share based payments.

During the period the mineral reserve agreement with neighbouring Modikwa was concluded extending the life of Driekop shaft and will improve mining flexibility.

ZIMPLATS

Zimplats delivered a world class safety performance with the LTIFR improving by 31% to 0.31 per million man hours. The Phase One Expansion has reached full production with the concentrator reaching nameplate capacity in September 2009. Consequently, tonnes milled increased by 82% to 1.97 million and platinum in matte rose by 74% to 81 600 ounces.

The higher volumes resulted in a 25% decline in unit costs to $1 009 per platinum ounce in matte. The technical evaluation for a second phase of expansion has been completed.

MIMOSA

Mimosa maintained its excellent safety performance with an LTIFR of 0.69 per million man hours. In line with the recently completed plant expansions, tonnes milled increased by 14% to 1.15 million and platinum production in concentrate by 16% to 51 100 ounces. The stronger rand dollar exchange rate coupled with the dollarisation of the economy resulted in costs rising by 16% to $1 106 per platinum ounce in concentrate.

TWO RIVERS

Plant optimisation has resulted in tonnage throughput improving by 12% to 1.48 million. In addition higher concentrator recoveries resulted in platinum production in concentrate increasing by 24% to 72 300 ounces. In line with the higher throughput, unit costs per platinum ounce in concentrate declined by 15% to R8 035.

IMPALA REFINING SERVICES

Volumes were up 27% to 462 500 ounces of platinum despite reduced deliveries from Aquarius due to the temporary closure of the Everest South mine.

MINERAL RESOURCES AND MINERAL RESERVES

There has been no material change to the technical information relating to the group’s mineral reserves and resources, or legal title to its mining and exploration activities, as disclosed in the annual report for the financial year ended 30 June 2009.

Revenue for the period reduced by 32% to R11.1 billion compared to December 2008. Lower rand metal prices resulted in a price variance of R5.6 billion, offset by a positive volume variance.

Cost of sales decreased 9% to R8.0 billion. The main contributor is the movement in the value of metals purchased and metal inventories primarily due to metal price movements.

As a result of the 19% increase in the Implats share price from 30 June 2009 to 31 December 2009, the share based payment charge (net of taxation) amounted to R560 million in the current period, compared to a credit in the prior period of R976 million.

The gross profit for the six months ending 30 June 2009 was R2.3 billion with a gross margin of 24%. In the period under review the gross profit improved to R3.1 billion with a gross margin of 28%.

The group unit cost per platinum ounce produced, excluding share based payment costs escalated by 14% to R9 889 per platinum ounce. Of this increase, 75% is attributable to volumes lost due to the strike and the 14 shaft incident.

Cash from operating activities for the interim period totalled R2.4 billion whilst capital expenditure amounted to R2.2 billion. Cash net of debt was R941 million as at 31 December 2009.

Despite the decrease in headline earnings per share of 76%, the Board agreed to maintain the dividend at the same level as the previous interim dividend of 120 cents per share.

As the first signs of a global economic recovery become apparent, the prospects for industrial demand looks promising coupled with the recent launch of a US platinum and palladium Exchange Traded Fund and another year of constrained supply will result in tight market conditions for both metals. Despite growing demand rhodium’s ample liquidity will keep prices in check.

Despite difficult conditions Implats has retained a strong balance sheet and maintained a continuous dividend flow to shareholders. This is a reflection of operational recovery and improved market fundamentals. In addition, the group’s cost performance which has been impacted by lower volumes at Impala Rustenburg, is still regarded as one of the best in the industry. The positive developments at this operation, an unchanged five year capital expenditure programme of R23 billion and a steady growth profile to 2.1 million ounces of platinum by 2014 place Implats in a strong position to take advantage of the improving economic environment.