Morn'in fellow hamsters, squished and otherwise.
It appears, that as far as Implats is concerned, they have sold Messina to SUF. They have released a newsrelease(dated Aug 31,1999) stating this, and the Chairman has informed shareholders that Messina has been sold. For proof, and other interesting facts, read on. How does it feel to own a platinum, palladium, gold and other metal miner?
http://www.implats.co.za/
EXCITING GROWTH PROSPECTS FOR IMPLATS
Steve Kearney, Implats CEO, reported on exciting growth prospects for Implats during a presentation of the company's results for the year ended
30 June 1999.
"We aim to grow the output in Impala's branded products by up to 10% per annum using our core competencies and intellectual capital to achieve this. We will also look to maximise the utilisation of our surface assets, and particularly, to participate in new opportunities - including joint ventures - in the future."
Implats is also looking to grow its refining services. Having earned the company R90,2 million before tax, as well as having treated material from five continents and produced approximately 300 000 ounces of pgms and
9 000 tons of base metals, Impala Refining Services (IRS) looks set to expand its service base. The company managed to establish supply relationships with six new customers during the year.
Other growth prospects include the restart of the Crocodile River Mine and the results of feasibility study should be available by mid-2000. Implats' 12,8% strategic stake in Aquarius Platinum's 18 million-ton Marikana resource also provides future growth opportunities.
Exploration drilling and a pre-feasibility study are underway at Implats' Everest South and it is likely that Aquarius will join with Implats in this project.
The recent exchange with Amplats of the Moddergat mineral reserves for the mineral reserves adjoining the existing Impala lease area means that approximately 2,1 million additional ounces can be mined from 8 shaft and 12 shaft (the lowest cost vertical shaft system in the industry).
Implats has also acquired the rights to subscribe for up to 20% of the investment capital of any mining company that mines the Winnaarshoek and Buffelshoek properties.
The sale of a 54% stake in Messina Limited to SouthernEra Resources with effect from July 1999 has facilitated an entrance for the Canadian company into the business and has provided Implats with additional metals to smelt, refine and market.
Said Steve Kearney, "Another exciting new growth area for us has been the start of exploration outside South Africa. It is our intention to identify and support those mining juniors who have access to promising projects to which we can contribute materials, expertise and funds for a share in the resulting profits. A consultant has been appointed in Canada to act in Implats' interest in this regard.
"In the first of these new international projects, we have recently entered into an arrangement with Mustang Minerals Corporation, a Canadian junior based in Toronto. They hold 444 mining claims in the Sudbury Mining Division in Ontario, and we will, through the expenditure of C$6 million on exploration over the next five years acquire up to a 60% participation."
Implats has also entered into a joint venture agreement with Falconbridge, following the acquisition of a 45% interest in the Insizwa complex. Acquired for an amount of R1 million, Implats will contribute 45% toward future exploration costs. The focus of this project has changed to massive Cu/Ni targets in the footwall of the complex. Further evaluation of this and other geophysical targets will commence shortly.
"From a strong operational and financial base, Implats is well positioned to pursue growth. Our demonstrated technical and managerial competence uniquely positions us to capitalise on opportunities in the industry. But growth opportunities will be tested against our thorough understanding of the industry cost curve, technical and market risks and appropriate hurdle rates, to ensure that we are delivering added value to our shareholders."
Date : 31 August 1999
Issued by :
Charmane Russell
27 11 646 7906 (office)
27 82 372 581 (mobile)
MESSAGE FROM THE CHAIRMAN
Dear shareholder,
It is my pleasure to table this report on a truly remarkable year for the Implats Group.
This is a shorter and more general report than historically, reflecting a deliberate separation during the year of the roles of Chairman and Chief Executive. This is both a progressive development from a corporate governance standpoint, and a logical reflection of the ever?growing competence and confidence of the executive team in general, and of Steve Kearney in particular, who is now Chief Executive and Managing Director.
While the Corporate responsibility report dwells more fully on this subject I wish to record with regret, that no matter how much our safety statistics have improved, and no matter how much smaller this figure is than last year's, nevertheless seven of our number lost their lives in work related accidents. Mining is a difficult and dangerous business and we are all committed to making it less so. We have made significant progress this year, but there is little satisfaction while this number remains so high. Our deepest sympathies are extended to the bereaved.
In the eight highlighted points in our ?Year at a Glance" page, I see three principal contributing factors to this year's remarkable performance:
The settlement with the Royal Bafokeng Nation
A dull, but stable, platinum group metals (pgm) dollar market becoming a windfall rand market for South African producers, and
Our ability to reap the rand ?windfall", courtesy of another year of dynamic operational performance.
I reported last year ?Resolution of the Bafokeng dispute requires rational discourse. There is no evidence that such is yet possible..." During 1998 there was substantial movement by both parties from positions of principle towards pragmatism. Courtroom skirmishes during the year brought both parties face?to?face with the uncomfortable notion of failure, generating an opportunity for this ?rational discourse".
Building on a personal relationship that endured throughout the legal dispute the Managing Director and the King of the Bafokeng, Lebone Molotlegi II, seized the moment and negotiated a settlement which was approved by all parties in February of this year, and which has:
provided a substantial (40%) uplift in future royalties
made the Bafokeng a major shareholder (one million shares)
removed the discounted cost of the dispute and of settlement from the share price, and, even more significantly
removed the ?unclean" label, which had discouraged interest in our company and prevented true assessment of its underlying strength.
Platinum and palladium are marching inexorably towards being a single market as the high price of palladium resuscitates the potential for more platinum usage in automotive exhaust catalyst applications. The dollar prices of both these metals are essentially in the hands of the Russians, and will be so for as long as they have surplus State stocks. The relative stability of both these markets during another round of political upheaval and financial instability in Russia speaks volumes for the competence of the officials involved. The robustness of the platinum market in its ability to absorb steady Russian sales, and significant sales in May and June from the United States defence stockpile and from other producers towards the end of their reporting period, is encouraging.
That said, the end result has been to the advantage of the palladium endowed Russians and the disadvantage of the platinum endowed South Africans, with a $70 an ounce rise in the average price of palladium and a $40 an ounce fall in the average price of platinum over our financial year.
A substantial increase in the average price of rhodium, from $420 to $742 over the year, balanced the equation to the point where Implats' total revenues per ounce of platinum changed little on a month?by?month basis and increased over the year by a modest 3,4% ? hence the description of our dollar market as dull but stable.
Last year I recorded that ?...the 20% deterioration in the rand/dollar exchange rate in July 1998 is an ill wind that, at least in the short term, will blow Implats some good." The process continued in August and beyond to the point where, year on year, our received exchange rate increased by 23%, with rand receipts on all metals per ounce of platinum increasing by nearly 27%.
Reaping this harvest as a dollar earning/rand cost company demands control of the rand costs. This is a simple enough concept, but as the recent history of South African mining companies shows, it is more easily said than done. It has been done by Implats, (again), with total rand costs per ounce of refined platinum only increasing by 4%, half the increase in inflation. This has been a disciplined and dynamic operational performance, which has positioned the company as the lowest cost South African producer (on the basis of rand costs per ounce net of revenues from all other metals).
The bulk of the increase in revenue has therefore reported as income. After tax group income has more than doubled even after the significant increase in royalties. A very welcome, (and long awaited), four?fold increase in the contribution from our 27% shareholding in Lonmin's Platinum Division (LonPlats) has boosted attributable earnings to 2.4 times last year's level at R1.2 billion. LonPlats' contribution is now more than the paper profits of the past eight years, with substantial dividends being received during the year.
There has been a small dilution to shareholders during the year as new shares were issued (or put in trust) to increase our holding in Barplats, as part of the Bafokeng settlement and in terms of the share incentive scheme ? such that headline earnings per share are 2.3 times those of last year, at 1 853 cps versus 803 cps. Your board's assessment is that it is reasonable and appropriate to increase the final dividend. At 880 cps the total for the year is almost 2.5 times that of last year.
The company now holds considerable cash reserves of R1.9 billion, and boasts a management team full of confidence and creative ideas as to the pursuit of further growth. This year alone has seen an increased stake in Barplats, the sale of our interest in Messina, increased involvement in third party mining arrangements with companies such as Aquarius Platinum Limited and our external refining business growing to the point of being separately incorporated as a new and more visible company. Shareholders are referred to the ?growth" section of the Chief Executive's review for more insight into this subject.
It is worth noting that the resurgent and low cost Implats no longer sees the merger with LonPlats as the centrepiece of its future strategy. The decision by the European Court of First Instance to uphold the 1996 ban by the European Commission on the merger of these two companies has therefore largely been shrugged off. There is a sense of what might have been, and indeed what could still be if Lonmin had the will to pursue alternative structures, but the notion that it was Implats' salvation is no longer valid (if it ever was). The uncertainty that this issue represented has been lifted, leaving Implats with a clear sense of purpose and a growth strategy independent of the aborted transaction. This strategy contains, as one component, the question of the best means of extracting value from the investment.
During the year the board welcomed as members John Smithies, our long serving Consulting Engineer Operations and a central part of the operational improvements, and David Brown, a recruit from outside the Group as financial director. Following from the Bafokeng settlement, and as a particularly welcome development, Kgosi Lebone Molotlegi II has also agreed to join the board.
Brian Gilbertson, former chairman of this company and of Gencor, resigned from the board in August last year to devote himself to his Billiton responsibilities. Vivienne Mennell, formerly financial director of Implats and now financial director of Gencor, has rejoined the board in a non?executive capacity.
It may have been a remarkable year, but I believe there is more to come. Subject only (and as always) to the vagaries of Russian impact on the markets, I expect more and better from the operations next year, an ever?increasing contribution from our various growth projects to give an even more dynamic year next year than this one.
I commend you to the full report that follows.
Michael McMahon
Chairman
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