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Implats reports loss after deal write-down, warns of lay-offs

Impairment stems from royalty paid for black empowerment deal.

South Africa’s Impala Platinum (Implats) reported a 2017 loss after writing off part of the value of a deal a decade ago that helped the miner meet a target for black ownership, the company said on Thursday.

Implats, the world’s second biggest platinum producer, also warned that it would have to consider restructuring that would involve lay-offs and the possible closure of one mine because of production disruptions due to violent community protests nearby.

The company posted a headline loss per share for the year to June 30 of 137 cents, in line with the figure previously flagged to the market, compared to headline earnings per share of 12 cents in 2016.

The firm wrote off R10.2 billion ($775 million) related to a 2007 deal to fund a stake in Implats’ shares by black-owned Royal Bafokeng Platinum.

South African mining companies are required to meet a target of having 26% of their ownership held by black citizens, part of a drive to rectify the racial disparities of apartheid.

“In 2007, Impala prepaid the estimated contractual Royal Bafokeng royalty and the Royal Bafokeng used this prepayment to subscribe for shares in Implats,” Implats said, referring to a deal that helped Implats meet the black ownership target.

The royalty was prepaid to the Bafokeng tribe because the platinum is on their territory but the platinum price performance since then meant the firm now considers it overpaid.

Implats said in its view the royalty payment’s value had “changed materially since 2007 given unexpected, persistently low metal prices and depressed levels of production.”

Implats also faced losses at its Marula mine, where output has been disrupted by protests from residents angry over the way their 50% stake in a nearby chrome project has been managed, underlining the social risks of operating on South Africa’s restive platinum belt.

It said Marula produced 67 900 ounces of platinum concentrate in the year to June, compared with 77 700 tonnes a year earlier.

“If Marula does not meet the stated objective of being cash neutral at group level for whatever reason, there will be no other option but to suspend operations,” the company said.

Chief executive Nico Muller told reporters the company was evaluating “options to return to profitability … Labour reduction forms part of that and that’s what we will be discussing in our management teams and with our employees.”

The company has not yet entered into legally-required talks with the government and unions about possible lay-offs, a sensitive issue in South Africa where the unemployment rate is around 27% and income disparities are glaring.

The mining industry has shed close to 70 000 jobs, about 13% of the labour force, since 2012 in the face of volatile or depressed prices, soaring costs, labour and social strife, and policy uncertainty.

($1 = R13.12) 

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