In response to the current state of metal prices, Zimplats, the Zimbabwean unit of Impala Platinum Holdings, has decided to implement a voluntary retrenchment exercise for its employees as a cost-cutting measure.
Zimplats holds the title of being the top producer of platinum group metals (PGMs) in Zimbabwe.
In a staff circular dated March 18, the company's chief executive, Alex Mhembere, highlighted the challenging operating environment that the industry has been facing. According to his analysis, prices for PGMs are expected to remain weak for the next 12 to 18 months.
Zimplats, according to Mhembere, has implemented a voluntary retrenchment exercise to avoid the necessity of compulsory retrenchment.
In the six months leading up to December 2023, the company experienced a significant decline in revenue, with a drop of 32% to $372.8 million. Zimplats experienced a significant decline in pre-tax profit, dropping by a staggering 94% from $221.5 million to US$14.2 million. Additionally, the company incurred a post-tax loss of $8.8 million, marking a drastic 105% decrease in earnings compared to a profit of $159.6 million.
It comes as no shock that Zimplats had to implement voluntary redundancy packages, considering this is the first time in almost ten years that they have experienced a loss.
Implats, the parent company of Zimplats, experienced a significant decrease in revenue during the six months ending in December 2023. The revenue dropped by 25% to R43.4 billion ($2.6 billion) compared to the same period last year. This decline can be attributed mainly to lower dollar metal prices. However, the weaker rand exchange rate provided some offsetting effects, despite higher sales volumes.
The group stated that it had implemented various measures to optimise labour, such as delaying salary increases for management, freezing recruitment for non-essential roles, and providing a voluntary mutual separation package for non-bargaining unit employees.
“Should pricing not recover in the short to medium term, several further actions may be necessary to ensure business sustainability and group operations are interrogating their capital and labour budgets,” it said.
Implats anticipates that 2024 will present difficulties, with a prevailing sense of caution among consumers and investors in the precious metal industry due to ongoing economic and geopolitical uncertainties.
Bloodbath
Other companies are also experiencing the impact of low metal prices.
In early March, Mimosa Mine, Zimbabwe's oldest platinum company, decided to retrench 33 managers and halt a significant expansion project. Out of these, 24 employees were given the option of a voluntary separation package, while nine chose to retire early.
However, the company has stated that there are currently no plans for any additional reductions in the permanent staff.
According to reports, platinum prices have experienced a significant decline of 35% since April of the previous year, resulting in a negative impact on the company's cash flows and profits.
It is expected that prices will continue to stay low in the foreseeable future. Given the situation, Mimosa has implemented a number of measures to maintain the viability of its business in the challenging low-price metal environment.
The miner had previously announced its intention to invest up to $100 million in the development of a new mining area known as North Hill. There is a significant resource of 1.5 million ounces of platinum in this area. It would replace the South Hill area, which is experiencing a shortage.
According to results released earlier by Sibanye Stillwater, the South African miner that co-owns Mimosa with Impala Platinum, the company has been forced to abandon this plan.
Sibanye Stillwater recently reported a significant loss of $2 billion due to a substantial decline in prices, particularly affecting its American palladium mines.
It made a significant $1.2 billion profit in 2022 after achieving an impressive record profit in 2021. However, the platinum price drop in 2023 completely erased these profits.
Sibanye chief executive Neal Froneman expressed concerns about the impact of current metal prices on the company's earnings. He said that if these prices continue, there could be additional restructuring needed due to ongoing inflationary cost pressure.
Anglo-American Platinum announced a significant reduction in jobs in South Africa. This decision will impact approximately 15% of their workforce, which previously stood at 24,600 by the end of 2022.
South Africa is a major player in the global platinum output, accounting for about 70% of the world's production.
By the end of 2021, the company boasted an impressive workforce of 25,600 individuals.
Anglo-American Platinum attributed its decision to reduce its workforce to a combination of various factors. Notable factors contributing to the challenges include the decline in platinum prices globally, operational inefficiencies, and the constant concern of increasing operational expenses.
According to recent reports, the World Platinum Investment Council (WPIC) has projected a decline in global platinum mine supply for this year. The estimated decrease is expected to be around 3%, resulting in a total of 5.4 million ounces.
WPIC chief executive Trevor Raymond expressed concern over the impact of declining prices of palladium and rhodium on the economics of mine supply.
“The short-term downside impact on mine supply remains uncertain, but any reduction also … constrains any near-term supply response to demand growth or higher platinum prices,” he said.
According to data from WPIC, the global platinum market experienced a substantial deficit of 878,000 ounces in 2023.
Despite a 25% increase in total demand, which reached 8 million ounces, the total supply of 7.1 million ounces was the second-lowest level seen since 2013.
The demand for PGM in the automotive sector for 2023 saw a significant increase of 16%, reaching 3.2 million ounces. This boost can be attributed to the growing vehicle production and a higher market share of hybrid vehicles.
Optimistic
Amidst the challenges posed by weaker metal prices, there is a glimmer of hope for the South African and Zimbabwean PGM miners.
According to analysts quoted by Business Report, there is optimism for a brighter future, especially when it comes to palladium.
“Palladium continues to form what's known as an inverse head and shoulders pattern,” said an analyst who preferred to remain anonymous.
“This pattern looks a bit like a person's head and shoulders, but upside down (and) often indicates that prices might start going up after a downward trend. Eventually, the PGM miners will slow down supply.”
Mathew Nyaungwa, Editor in Chief of the African Bureau, Rough&Polished
