Implats Chief Executive Terence Goodlace joined Alec Hogg in the Biznews studios today to discuss the company’s results as released today, on-site fatalities and the importance of stakeholder relationships.
Terence, it’s been a tough six months to the end of December. These are results that you’re presenting to the market today. It’s almost a perfect storm, if you were to look at it from a profitability perspective.
Yes, it is. With the Impala operation not having operated for six months and being in build-up post the strike, as well as the depressed PGM prices, it has been very tight.
Is the build-up over now? In your numbers, you say that in November, you hit a steady state. Does that mean that things are going to be very different in the future?
Yes, we have normalised the situation at the mine. Overall, I expected four million tons from the mine in the first half of the year and they actually did achieve that. We would probably have produced more if it weren’t for the stoppages we had because of a spate of fatalities, which happened in August and September. Ultimately, that’s past us and we are at normalised production from an Impala perspective.
The fatalities: was it people horsing around or could it have been avoided?
We do a lot of investigation with all fatalities. Some of the sense was that it might have been an overhang from the strike and people’s mindsets, even though we did a lot of retraining and assessments of working places. Often, in these instances, you have errors and you have violations. Most of them were different. Some of them could definitely have been avoided and from my perspective, some of it comes from a lack of concentration in the working environment.
How do you address that?
We’ve adopted a huge program in terms of our safety plans, which is the cultural transformation framework. This culminated in a huge safety summit that we had at Impala in December with 600 safety reps. We’ve identified what we call critical safety behaviours and ensuring that different people in the organisations focus on their critical safe behaviours. The practice is rather widespread around the world and we’ve enhanced our safety program with that.
It’s interesting how South African miners are moving, very much, to best practices around the world from perhaps, an unfortunate past. Looking at Impala itself and the future, one would anticipate that you’ve bottomed out in these six months and hopefully, things are much stronger in the time to come.
Yes. At least, we have a plan for Impala. We have a plan for the group. We have a plan for the balance sheet. We have a plan for Zimplats, so we’re restoring production at the two biggest entities. We’re also maintaining that flexibility through the balance sheet by ensuring that we have a balance sheet that can sustain us in the short term and ultimately, still deliver our big new shafts, which are essential in transitioning Impala into a newer mine with all of the old infrastructure being closed down in the next five years.
There’s speculation that you might need to go to the market to raise some capital. Is that off the mark?
We’ll always look at financing options. Right now, if you look at our balance sheet, we had the convertible bond, which we raised in 2013. We still have R2.7bn in cash. We’re making R2.2bn in reducing cash outflows through the capital program. We’re also looking to sell Marula, so perhaps there’s an opportunity there and we are restoring all the mines to profitability. All of that holds us in good stead. We can’t second-guess what’s going to happen in the market although we are sensing that it should be lower for longer but ultimately, it should return to better levels.
That’s what people look at when they invest in Platinum. It’s not a one to two-year time horizon, but into the longer term. Mining is a long-term business anyway and many people are excited about the platinum price in the longer term. Are you doing that in your strategic plan? Are you taking a five or ten-year view of the company?
Yes, we are. As you say, it’s a long-term game. Shafts take more than ten years to put down. We have to take a long-term view. If we look at the situation with aboveground stocks and the fundamental deficits that we’re seeing right now, eventually those aboveground stocks will go. If you look at vehicle demand, emission standards, and the growth in the rest of the world and especially into China around vehicle growth, it has to be very positive. The PGM’s have to come somewhere unless someone finds a substitute. Bear in mind that the value of PGM’s and their characteristics (being unable to be poisoned, the thermal stability of the metals, and the fact that they can be recycled) hasn’t been found yet. Ultimately, we need to contribute to a cleaner world.
With financial results, one has trading updates so these won’t be a surprise to the market. Will you be telling the people anything today that in fact, will make the analysts feel more positive (or perhaps less positive)?
My sense is that it will be more positive – the fact that we are positioning ourselves for something that’s going to be tough and the fact that we deferred some of the capital spend. We’ve actually stopped the Afplats sinking project, so that will be capital saving as well. We deferred that for four years now and we’ll ultimately back-end that to deliver beyond 2025 now rather than coming in earlier than that. That should be positive for the market.
I guess it’s difficult when you’re in such a cyclical industry. We’ve seen this before. In fact, we’ve seen these movies a few times in the platinum sector. Is there anything you can do to stabilise it? I.e. not make big capital plans when times are good and not have to cut them when times aren’t as good.
We don’t have all of that flexibility. The current suite of shafts that we have now are probably all late. They all started late and that’s where, in a cyclical market, it becomes tough to make decisions to continue with big shaft systems. In fact, you do have to do that. If you’re not developing the ore bodies, you’re ultimately not going to deliver anything. It’s when times are tough that you actually, have to invest. You have to invest through the cycle and ultimately, that’s going to prove you right or wrong into the future.
The bristling part about these results is labour, which is a think in South Africa as well. We have had conversations about AMCU in the past. You’ve always looked at it in an optimistic sense. Are you making progress with Joseph Mathunjwa in maybe bringing him to a closer position than the one that saw ahead of the strike?
Yes, certainly. In October, post the strike, he and I had a very good session about ‘this cannot happen again’, the state of the company, and where we are.
How did you do that? Did you have a cup of tea – just the two of you?
Yes. We understood what was happening from an industry perspective as well as personally. These things impact me as well as him and the fact that he had all those people on strike, put enormous pressure on him as an individual. It was the same with me. It culminated in a process where we actually got everybody together at Impala – all of those new branch committee members. Joseph and I addressed them. We are seeing eye-to-eye. Joseph has actually been overseas. He has a sense of what the market expects. We gave that message and we have the approval to cascade that down into the organisation. From my perspective, it is much better. We have a very open relationship.
You can pick up the phone. Does he have your cell number?
Yes.
It sounds a bit like what Steve Kearney was doing all those years ago, at Impala, which separated you from the pack.
I can’t talk about the relationship that he had, although I did know Steve Kearney at the time. That is the only way you’re going to solve things – by having relationships with your key stakeholders.
In South Africa, there’s a breakdown of trust. I guess it has to be rebuilt one company at a time, between business and labour. From what you’ve just said now, this might very well be a move in the right direction.
It is. Much of the shaft stewards that we have, are very concerned about the business as well. The fact that we’ve gotten them involved in something that we call the team mobilisation process, where we’re really addressing teams of between 10 and 15 people for five days, around how they work, how they work better, what the state of the nation is (basically, the state of the company), and what they produce. One of the things I’ve picked up is that many of our people actually, don’t even know what we produce and why we’re in the game. We’re (with middle management) are spending that time, trying to build that trust again because once they go out of that process, they actually form a pact. We see that you’re getting better safety and productivity numbers out of that. It’s about keeping those energy levels up. I liken it to 550 football teams going down every day and they need to perform every day, from a safety and production perspective. Once we have that energy going, it has to be positive. I’ve said this to Mr Mathunjwa. If we have another strike like this, it would probably close the industry. People need to realise that we need to get productivity right. We need to get efficiency right. We can’t manage a business with all of this disruption – from DMR stoppages to industrial action stoppages, to tardiness at work where we’re not getting a full day’s work out of people
It won’t be helpful that the initial interpretation of the strategic review is that Impala’s moving towards mechanised mining.
No. I’m sorry that that’s actually, come out. We do have a new technology team and we look at all the new shafts as being modern mines. The bottom line is that we haven’t found a mining method to deal with narrow reef mining at a dip yet. We haven’t found a mechanised method yet. We’re modernising everything we do in terms of development, by taking people away from the sharp end of the business, and we do have mechanised operations just about everywhere else, but it’s not a full-scale move to mechanisation.
Terence Goodlace is the Chief Executive of Impala.