SIMON BROWN: I’m chatting with Nico Muller, CEO of Impala Platinum, or Implats as it’s colloquially known. The results for six months ending December are just staggering numbers. The one I’m going to pick on is the dividend of R10. The last time we saw a dividend at this level was the 2008 final dividend, which came in at R11.75. The stock was trading around R15 in August 2018.
Nico, I really appreciate your time today. If my memory serves, you joined Impala Platinum in early 2017. It’s been, with respect, a fairly crazy ride, certainly in terms of share price. I imagine in terms of operations as well.
NICO MULLER: I think we have been really fortunate. You know, the industry has been in a low-price environment since the global economic crisis in 2008. I am eternally thankful that I joined in 2017.
The first thing that we had to do is we had to pay attention to our operational challenges at Rustenburg, which I think we did in a very different way. We committed to the restructuring, and the appointment of Mark Munroe made an immense difference. So I think that we have seen operational traction across a number of our operations, including Marula, and in particular Rustenburg.
And then we were blessed in the latter part of the calendar year of 2018 with a weakening of the rand, which was followed by an increase in the palladium price, which was followed by the rhodium price. So I think the company has been very fortunate in that it’s been able to deliver operational performance improvements into a rising price environment. And of course the combination of the two has resulted in fantastic cash flows. It was R20.1 billion that enabled a return to shelves shareholders, which we think is well deserved following the long wait.
SIMON BROWN: It has been a wait and certainly I think shareholders have been rewarded. You mentioned rhodium at eye-watering prices, palladium holding above that $2 000/oz for a while now. Even platinum’s finally on the move, back at levels last seen five or so years ago. And, by all accounts, there’s still a tightness in that platinum market.
If I look at your basket of PGMs, you are predominantly pulling platinum out of the ground. What sort of percentages are there between platinum, palladium and rhodium?
NICO MULLER: We do have a split between the various metals that differs, depending on which ore body you mine. So, for instance, on the UG2 reef you’ll find a higher rhodium content. We mine UG2 in the eastern limb predominantly. The Merensky reef that we mine in the Western Bushveld is predominantly platinum. And so, when you look at the group on average, we have a 50% contribution from platinum, a 35% contribution from palladium and 7% from rhodium.
Of course the acquisition of North American Palladium at the end of 2019 is associated with a very high contribution from palladium, specifically. And that was done as a consequence of our confidence in the palladium market. Both rhodium and palladium are in structural … for deficits, and its forecast remains so for a number of years. So we forecasted a relatively short payback period.
We are currently delighted by the increase in investment demand for platinum, which of course is starting to track the increased narrative of the PGM-friendly hydrogen economy that is developing. So we think that there is a very strong market for our metals for the next decade.
SIMON BROWN: And certainly the price of platinum for forever and a day was below that $1 000/oz. It finally got above it in and moving. You’re looking to add about another 360 000 ounces of production. Some people have commentators out there saying that there’s concern around you and other platinum or PGM miners bringing on that production to market, perhaps actually tilting that tightness of supply into an oversupply.
In the case of Implats, that’s relatively modest. It’s what, about 5% a year. Are you concerned around creating too much supply into the market, or do you think the demand is still strong and can accelerate and take more supply coming in?
NICO MULLER: The reality is, if you look at the supply position of the industry, it has declined significantly over the last number of years. I do understand the concerns associated with industry discipline, but we are very comfortable with the 360 000 ounces of 60 metals that we … we in fact think that there is the … to grow indefinitely, because that will scare the current consumers, the users of our metals, into other technologies.
So I don’t believe that the announcement of our projects or that of the other peer group is a threat to the market at all.
SIMON BROWN: I take your point there. If the prices are too high it sort of compels industry to find others. I like that phrase “industry discipline”.
We’ll leave that there. That’s Nico Muller, CEO at Implats. Results to the period ending December. Dividend R10 – as I said, the highest dividend we have seen since the 2008 final dividend. Nico, I really appreciate your time today.