Impala bonds shield finances amid strikes
Impala Platinum Holdings Ltd’s bond sale last year is shielding the world’s second-largest producer of the metal from a pay strike that’s crippling mining operations for the 11th straight week.
The company, which accounts for a quarter of world platinum output, sold US$200 million and 2.67 billion rand (US$251 million) of February 2018 notes last year and accumulated two months’ worth of metal stockpiles before the strike began. While the dollar notes are little changed in 2014, underperforming a JPMorgan Chase & Co. metals and mining index, Impala’s stock has dropped 2.6 per cent.
The company can withstand a strike and resulting revenue losses for three months or more before it may have to raise further funds, said Rashaad Tayob at Abax Investments (Pty) Ltd. More than 70,000 miners at the world’s three biggest producers have stopped work since Jan. 23 as they demand a doubling of monthly pay within three years. Impala, along with Lonmin Plc and Anglo American Platinum Ltd., said such a raise would be unaffordable, offering as much as 9 per cent.
“They could survive for that length of time but it’s in no one’s interest to keep the strike going on that long,” Tayob, who helps manage the equivalent of US$760 million including Impala bonds, said by phone from Cape Town on April 3. “The money they raised last year helped to bolster the balance sheet.”
Talks between the Association of Mineworkers and Construction Union and the producers have yet to resume after South Africa’s state mediator said on March 5 the parties remained apart.
“We are not willing to negotiate on 9 per cent,” AMCU President Joseph Mathunjwa said at a rally held at Lonmin’s Johannesburg offices on April 3.
Impala said last week met all customer deliveries until the end of March even as it’s losing 2,800 ounces of platinum production daily at the strike-hit Rustenburg Lease mines. These operations accounted for 58 per cent of mined metal in the six months ended Dec. 31. Its Zimbabwean unit and smaller South African mines aren’t affected by the stoppage.
The losses mean forfeited revenue of about 2.2 billion rand in the first 10 weeks using the current platinum price of US$1,441 an ounce, according to Bloomberg calculations based on Impala figures. The metal, which has risen 5.2 per cent since the start of 2014, may average US$1,499 an ounce this year and US$1,625 in 2015, according to the median of 24 analysts’ estimates in a Bloomberg survey.
“The outlook for the metal is good and the yield is reasonable,” Esther Krukowski, an analyst at BlueBay Asset Management LLP, which oversees US$60 billion and holds the bonds, said by phone from London on April 4.
“Impala is stronger than some of the other producers and would be able to borrow from banks if it wishes.”