The Board of Directors of Implats has approved the next phase of the implementation of Impala Rustenburg’s strategic transformation. This follows the recent completion of a strategic review aimed at restoring the Impala Rustenburg operation to long‐term sustainability and profitability.

The Implats Group says it “is committed to a value‐focused strategy across all operations to sustainably improve its competitive position, profitability and financial returns. This will result in the Group reducing its exposure to higher‐cost, less flexible, labour‐intensive operations to improve flexibility and capacity, as well as sustainably generate attractive returns in a changing market and operating environment. This strategic orientation has been informed by a significant decline in the US$ platinum price and sustained high mining cost inflation. Cost pressure is particularly acute in older, deeper, labour‐intensive conventional PGM mines located on the Western Limb of the Bushveld Complex.”

Over the past few years, Impala Rustenburg has initiated various measures to return the operation to profitability. While there have been many improvements, these optimisation measures alone have not been sufficient to secure the economic viability of the operation in the prevailing low platinum price environment.

The Impala Rustenburg strategic review considered a range of measures to optimise and reposition the business. Taking account of the current operating environment and macroeconomic realities, the review found that a fundamental business restructuring was the only viable option to secure a long‐term future for the operation.

In a phased approach, operations will therefore cease at Impala Rustenburg’s end‐of‐life and uneconomic shafts, with future mining activity focused on profitable, lower‐cost, high‐value, and longer‐life assets. The strategic transformation will be implemented over a two‐year period and key components of the change program include:

• Impala Rustenburg’s mining ‘footprint’ reducing from 11 to six operating shafts as operations conclude at end‐of‐life and uneconomical shafts
• The Platinum Group Elements (PGE) mill grade is expected to increase through this transition phase from 4.09 g/t in FY2018 to 4.25 g/t in FY2021 and the Merensky:UG2 ratio will increase from 42% to 50%
• Impala Rustenburg’s production is planned to reduce from the current 750 000 to 520 000 oz/y platinum, removing non‐profitable platinum production from an oversupplied market
• The total labour complement (employees and contractors) will reduce from a team of around 42 000 in FY2017 to 27 000 people
• Real operating costs will reduce from R25,100/oz platinum in the 2017 financial year to less than R22,000/oz in the 2021 financial year (2018 terms)
• Real stay‐in‐business (SIB) capital expenditure to reduce from R2,800/oz platinum in FY2017 to less than R2,000/oz platinum (2018 terms) in FY2021, due to infrastructure efficiency improvements
• Replacement capital to reduce from R820 million per annum in the current 2018 financial year to R120 million in the 2021 financial year, and thereafter to zero in the 2023 financial year, which is in line with the completion of the 16 and 20 Shafts replacement projects
• There is a once‐off restructuring cost of approximately R2.7 billion planned for this transition program, which will be incurred during the 2019 and 2020 financial years
• The restructuring plan will be funded from internal facilities and the monetisation of some inventory stocks.

Implats CEO, Nico Muller, said: “The only option for conventional producers today is to fundamentally restructure loss‐making operations to address cash‐burn and create lower‐cost, profitable businesses that are able to sustain operations and employment in a lower metal price environment.

“While employee rationalisation is inevitable in a restructuring process of this nature, due care will be taken to ensure that job losses are minimised as far as possible through a range of job loss avoidance measures. This major transformation will be phased over a two year period to ensure that we are able to mitigate the various implementation risks and socio‐economic impacts. Our Board and management team is committed to ensuring that this transition is implemented in a socially responsible manner and will explore commercial options to dispose of shafts that do not fit the long‐term portfolio. Where job losses are unavoidable, Impala Rustenburg is committed to implementing the required changes in consultation with all its social partners.”