JOHANNESBURG – Cash-flush Impala Platinum (Implats) yesterday announced plans to embark on a $250million (R3.48billion) debt-to-equity swop to bolster its balance sheet while making the most of the reprieve of surging metal prices and the weak exchange rate.
Chief executive Nico Muller said the group was looking to redeem its convertible bond due in 2022 and ultimately introduce a dividend that was last paid in 2014.
“The optimisation of Implats’ balance sheet through a reduction and restructuring of existing debt is a key pillar of Implats’ strategy to reposition it as a profitable, sustainable and competitive business with clear capital allocation priorities and ultimately, a return to a dividend paying position,” Muller said. The group said the move was expected to provide reduced market volatility, resulting in a saving of R114m a year if all bondholders take up the offer.
Implats has been the best-performing share on the JSE, jumping 104percent in the year to date on the back of record rhodium and palladium prices.
“The increase in the rand platinum group metals basket price has been a welcome tailwind to Implats’ profitability and free cash flow generation,” Muller said.
Rhodium and palladium prices have shot up in dollar terms, while the rand has weakened against the US dollar, helping platinum producers post profits for the first time in years.
Implats cut its net debt from R4.4bn to R976m in the six months between June and December 2018 thanks to strong metal prices.
Johann Biermann, an independent analyst, said the debt-to-equity swop would reduce the group’s future interest burden, as holders would be entitled to interest coupons. “It will also reduce their average borrowing cost,” said Biermann.
Impala’s shares declined 5.83percent to close at R70.10 on the JSE yesterday. “The share price is under pressure today (Wednesday) due to the possible dilution effect this will have. If successful, I would view this as a positive for the company as it reduces the debt burden,” said Biermann.
Implats, in tandem with the platinum industry, was in intensive care owing to the prolonged platinum price weakness. In the year to the end of June 2018, Implats reported a deepening full-year loss on the back of a R13bn impairment.
In September, it announced a major restructuring to close five of its 11 mines near Rustenburg and cut up to 13000 jobs over the next few years.
However, changes in metal prices have helped to transform the platinum industry’s fortunes.