South African miner Impala Platinum (Implats) expects to face increasing challenges to its medical preparedness and operational resilience as the Covid-19 pandemic progresses in the coming months.

According to CEO Nico Muller, the benefit of experience gained by the team over the past few months, together with the geographical diversification of Implats’ operational footprint and strong financial position, will “prove vital to successfully navigating the expected variability in the near-term operating environment”.

Over the course of the past few months, Muller explains, several innovative solutions have been developed by the Implats management teams, including different cycles of work and staggered shift systems to enable the best possible precautionary measures against the spread of Covid-19 among Implats’ employees.

Through collaboration and cooperation, union structures and management, Muller says Implats has created safer workplaces and a better-than-expected production performance across the group operations in the final quarter of its 2020 financial year.

Logistical constraints have also eased and, despite the impact of the pandemic on global economic activity, demand for metal from Implats’ customers has remained robust, which Muller notes allows the miner to capitalise on a reduction in excess inventory in a period of robust rand platinum-group metals (PGMs) pricing.

OUTLOOK AND GUIDANCE

The nationwide lockdown in South Africa, which started on March 26, imposed legislated limits on staffing levels at Impala Rustenburg, Marula and the joint venture at Two Rivers, but made allowances for continued operations at the group’s processing operations.

From June 1, restrictions on staffing levels were lifted, but the need for a prudent and phased approach to intra-provincial travel by employees, particularly those identified as returning from ‘hot spots’, continued to limit attendance levels at operations in Limpopo and the North West.

Implats therefore made use of mandatory quarantine and isolation protocols for returning workers from 'hot spot' areas to minimise the risk of transmission to its workforce and host communities.

In addition, South Africa’s national borders remain closed and about 5% of group employees remain in their home countries.

Despite these limitations on staffing, Muller says the ramp-up in production has surpassed initial expectations, with revised operating protocols proving effective in mitigating the impact of potential virus-related interruptions at the group’s South African mines, which had returned to about 85% of capacity by mid-June.

Infection rates are expected to peak in South Africa in the coming months, and the challenges associated with screening and identifying Covid-19 cases will be further complicated by the prevalence of seasonal influenza.

Owing to this, Muller warns that it remains Implats’ view that much of the 2021 financial year “will be characterised by a ‘business unusual’ operating environment”.

Force majeure notices instituted on Impala Refining Services (IRS) from March 26, meanwhile, were lifted in a phased approach in May and June.

Excess concentrate and matte inventory accumulated by customers (including group operations) during the force majeure period are expected to be received in full by the first quarter of the 2021 financial year.

Smelters and refineries were identified as essential services during the initial five-week "hard" national lockdown in South Africa and the systematic ramp-up of operations and continued, albeit reduced, production of refined volumes has resulted in the group being able to fully refine the previously identified excess in-process PGMs inventory.

As a result, refined sales volumes will exceed concentrate production in 2020.

However, given production rates relative to plan in the 2020 financial year, a decision was made to bring forward the yearly acid plant maintenance scheduled for July. This is expected to result in greater-than-usual alignment of processing and mining capacity in the first quarter of 2021 but will have a small impact on the 2020 financial year-end processing inventory.

Implats declared force majeure on its contractual deliveries of final metal to its customers when the national lockdown in South Africa was announced on March 23. The force majeure was lifted on June 22.

Prior to this, discussions for customer deliveries were conducted monthly, and to date, an overwhelming majority of Implats’ customers have elected to receive their metal rather than exercise their right under force majeure to cancel deliveries, Muller says.

Logistical constraints have eased with the resumption of international flights, such that these no longer pose a risk to Implats’ ability to deliver metal.

In Zimbabwe, both Zimplats and the JV at Mimosa have operated uninterrupted and well within pre-Covid-19 2020 guidance.

Despite the indefinite extension of the national lockdown, permission to continue mining operations remains in place and, to date, potential risks to output associated with virus-related employee attendance and supply chain and logistical challenges have not materialised.

According to Muller, residual concentrate and matte inventory accumulated in-country during the IRS force majeure period are expected to be delivered to the Rustenburg processing facilities in full by the first quarter of the 2021 financial year.

At Impala Canada, an outbreak of Covid-19 at the operation in mid-April, necessitated the temporary cessation of mining operations.

The progress of the pandemic in Canada and the fly-in, fly-out staffing model also required an appropriately cautious approach to restaffing and restarting operations at Lac des Iles, with the mine expected to return to full production in the first quarter of the 2021 financial year.

Further, Implats’ capital allocation framework highlights the importance of appropriate levels of capital investment to support operational resilience and environmental compliance.

According to Muller, interruptions to operational activity across the group as a result of national lockdowns have impacted the ability to spend to plan in 2020 and a lower guidance therefore “reflects the impact of business interruption rather than a deliberate reduction of investment spend”.

Implats expects to release its financial results for the 2020 financial year on September 3.