Implats FY2026 Earnings Call - Record Cash Flow and 82% Shareholder Return

Johan, Moderator/Chairman, Implats: Good morning. A hearty welcome to everybody in the room. It is always a pleasure to see you in the room. Also, a very hearty welcome to everybody joining us on the webcast. There will also be an opportunity on the webcast and on chorus call to engage with the team directly after our short presentation in a Q&A session. As usual, we will take questions in the room first, and then we will pivot to chorus call and the web. There are no emergency drills planned for today, so rest assured, if we hear an alarm, it will be a genuine alarm. The normal exit is as you come in, and there are people ready to steer and provide and look after us. Very welcome. I am going to hand straight over to the team. There will be a short presentation, after which we will pivot into Q&A. Nico?

Nico, CEO, Implats: Thank you, Johan. Good morning, everyone from my side. Also, welcome all the Impala people, media, analysts, investment community, and thank you to all the people that made today possible and the team for supporting the delivery of, I think, an absolutely stellar set of results. Before we do that, though, as is our practice, the cautionary statement. You will make investment decisions on your own. This is a wonderful time for us to come to the market. Obviously, we have got a very supportive price environment. We see very exciting activities in the industry, in the market. We have not been participating at this point, so it involves a number of other parties. Nevertheless, it is very exciting for us to be in an industry that is supported with a constructive price environment. Personally, this is a point that we as a company have worked many years to get to.

When I look at the last financial year, I have to thank our operational teams for the absolutely stunning operational performance that they were able to achieve. The most noteworthy thing for me is not the ounces that was delivered. I mean, that in part is really important. That provides us with our license, but it is the fact that we were able to, on top of all of that, increase our mineral reserves by 9%. It is the fact that Tim and his team in Impala Canada extended the life of Impala Canada by another year. When I look at the work at what they are doing, it appears like some of the rest of the portfolio that we have the ability under the current price environment to provide this continuous extension of life.

I am very happy that there is a very strong team that is now very settled, that are able to deliver very strong results. A big part of the company is focused on the future and on developing future strength and competitive positioning in the company. Supporting the 4% increase in ounce sales was a 63% increase in the ZAR basket price and a 51% in ZAR price that resulted in a material increase in headline earnings, therefore cash flow, which resulted in a very robust allocation of capital from the team, from the board, which saw 82% of our free cash flow being allocated to shareholders. That was totally appropriate in the absence of capital-intensive growth projects that are currently not on the table. We have got a pipeline of opportunities, which I will just touch on. The balance sheet is very strong.

We’ve got no debt, and we’ve got ZAR 37 billion worth of headroom liquidity. It’s just absolutely appropriate that in line with our undertakings that we gave before, we had a very strong allocation to shareholders. Looking forward, it is our contention, and Emma’s going to speak a little bit about the market, that the current supportive environment is going to continue for the medium term. We don’t believe that the macros are about to change and all the signals from a demand side is positive and equally on the supply side, we have not seen major steps from producers to bring new supply to the market other than new entrants in specifically two projects.

From the major producers, we are seeing a constrained supply base going forward, which combined with the increase in industrial demand, the increased relevance of hybrid vehicles, we see very strong market fundamentals for the next few years. If you take all of that into consideration and you look at what our company will be focusing on, first, as I said earlier, our current performance is always critical. The excellence that was displayed this year will be the first priority for the next year and beyond. After that, our focus is on creating competitive strength in the company. Specifically, we are looking at life extension projects. I must say, we are blessed to have a quality set of assets with significant resources and reserves with a multitude of opportunities to provide longevity to most of our assets.

That’ll be the first part of the business. Secondly, we do have a study program that will look at growth options. We have got Portal 10 at Implats, which is another relatively shallow mechanized possibility for the future, which will add tremendous value in future decades in the company, as is Styldrift II, which is probably the world’s best quality untapped Merensky ore body that’s left for us to explore. On top of that, there is always the opportunity for us to explore partnerships with our joint venture partners and to, in addition to that, to look at potential M&A opportunities to the extent that that is value accretive. That’s all from my side. I just wanted to provide the context where our focus is going to be. I will now hand over to Emma, who will just briefly touch on the market.

Emma, Market Analysis Executive, Implats: Won’t you just move it forward one for me because I just need one. Morning, everyone. I’m very conscious that we are the third major South African producer to report this week. I’m not going to give you a rehash of geopolitics. From a market perspective at Implats, we think about things in the short, the medium, and the longer term, and the extent to which those trends and developments influence and shape our competitive landscape and how also we can respond to them and make sure that our business is the best positioned for those. I think one of the things that has changed positively over the last year and a half is absolutely this focus on critical minerals, the security and surety of supply. I think that’s been combined with a broader debasement trade.

From a kind of big demand energy and impetus perspective, obviously you have AI. If I look a little bit at demand in terms of some of the positive changes and some of the developments that have shaped that outlook, I think underpin a more positive stance from us in terms of business positioning and future focus. I think there is an increased focus on just how important and sticky the industrial demand is. Particularly, I think many of you have had the benefit and the privilege of going to Shanghai Platinum Week and getting exposure to the huge diversity of industrial applications and the kind of energy and impetus behind the development of those markets there.

I think that has proved a really useful counter to the demand story, which has been very much about kind of waning at production over the last couple of years. I think Johan and Patrick were there 6 weeks ago and visited one of the major fabricators where there were 300 engineers working in R&D and not in catalysis. We have also had some support in terms of policy developments on BEV penetration expectations, so you will all be aware of the kind of easing of CO2 in Europe. We have got to bless Trump for his repealing of EV incentives. We do still have changing emissions legislation which is supporting demand.

I think linked to that China story, but I think more broadly just in terms of South African supply and the structure of the market, we are absolutely seeing a growing relevance in terms of minor PGMs. I think that is a trend that you have seen in PGM markets over time. There is no doubt that the next 10 to 15 years are going to be far more focused on the full basket and particularly iridium and ruthenium and we are a very significant producer of both. So we are close to 30% of primary refined iridium production and around 28% of refined ruthenium production. Sifiso and Ash are the people to get hold of in terms of long-term security.

I think also what we have seen, which has been great over the last year and a half, is renewed emphasis in terms of collaboration across market development initiatives. I think the extent to which that has been done with fabricators is also important. We are part of a global ecosystem, and the people who we sell metal to are also facing shifts in terms of market outlooks. If you were traditionally an autocatalyst maker, how do you look to secure long-term longevity for your business? I think that aligning of interests and I think the collaboration between producers has definitely shifted the tone and the focus on market development and I think that is also incredibly positive in terms of long-term planning. Just a few more words on supply because I know I was meant to be short. We have seen minimal changes in our supply outlook.

We tend to look for offtake agreements and funding certainty before we count it in. We do still see a limited greenfields project pipeline. I think most importantly, we are always assured by the people who we speak to and who we sell our metal to about how important a strong and sustainable primary supply base remains. I think we know that we produce special and critical minerals, and I think the world recognizes that South Africa is the absolute anchor of sustainable production and future market evolution over time.

Patrick, Chief Operating Officer, Implats: Thank you, Emma. Good morning, everyone. I’ll be getting to the engine room, starting with safety. It’s very key to upfront state that safe production for us as Implats remains our apex priority and remains non-negotiable. If you look at FY 2026, it marked six years of consecutive improvement in our LTIFR, but also other rates for the year have significantly improved. What is also more appealing is that we have seen an increase in our what we call white flag days. Those are the days that for a 24-hour period, more than 55,000 of our employees come to work and go home unharmed. It is actually a proof that zero harm is possible. It’s not just a pipe dream.

The more we increase these days, I think we’re getting much more closer to, first of all, eliminating fatalities, and secondly, to reach our zero harm goal. For FY 2026, we spent a lot of time maturing our safety system, defining clear controls, and really embedding them. That’s what actually have led to some of this improvement that you see. Despite all this thing, unfortunately, we had four losses of life. Really, we need to appreciate that the journey to elimination of fatalities is not a linear one. There are setbacks along the way. What is more important is that we are resolute and determined to carry on implementing our safety strategy, because the results will come through resilience, and I think that’s what the team has prepared themselves for. For the new year, FY 2027, our focus really can be summarized in two.

There will be an enhanced leadership visibility underground in our process plans to verify and track clear controls. We’ve defined them, we’ve embedded them. Now is the question of verifying that they work. Secondly, while doing that is to create an environment where every employee will feel safe to stop unsafe work without fear of any consequences. That’s what our safety journey is all about. Two takeaways from safety. Safe reduction remains non-negotiable. Secondly, the recent lapse or deterioration in our safety performance does not discourage us. We are more determined than ever to make sure that we send each and every men and women home unharmed on a daily basis. All right, then moving over to production itself. As Nico said, we’ve had a very strong operational performance coming both from our mining assets and processing assets.

I do know that you have the numbers, but allow me to show some standout performance, starting with Impala Rustenburg. Rustenburg remains our key asset. For the year, we have seen a five-year high coming from the old lease area. Also, if you look at the whole Impala Rustenburg now with the consolidation of RBPlat, you will see that our growth shaft are the one which are driving this improvement in production, 16 shaft, 20 shaft, and Styldrift. Combined, all those three shaft gave us 80,000 ounces more, and we still expect Styldrift in the new year to continue to march towards a full name capacity of 230,000 tons a month.

Zimplats also, on the back of improving fiscal policy in the country and the work we have done in restoring trackless field reliability, we have seen Zimplats bouncing back from last year. They produced about 660,000 ounces in concentrate. What you see, 606 only met because we ended up with a stock of about 24,000 ounces because of furnace maintenance that we have to do. I think the star player, really, it is a processing division. The work we have been doing on our furnaces is starting to pay dividends for the first time in 20 years. Rustenburg furnaces ran without any incident. If you look at the work we have done to increase our capacity at BMR, we have seen record milling also at our base metal refineries.

As a result, that is the reason why we were able to release 120,000 ounces from excess inventory as promised earlier in the year. Briefly touching on unit cost, the strong ZAR combined with strong volume delivery has helped us to maintain our unit cost increase in line with guidance of 8%. This is even after spending about 3% more on maintenance, because as a company, we have always decided that when there is tailwinds, let us take advantage of them and really create a strong operating platform. That is what we have done by pulling some maintenance in front, ahead in Zimplats and also in Rustenburg. When you look at the engine room, I believe that we have got strong assets, as Nico said. They are well geared, well capitalized to be able to deliver into this high price environment. Now, moving over to capital guidance.

You all recall that around 2020, we announced a capital project program of about ZAR 50 billion. It peaked somewhere around 2024. For the last two years, it has been winding down. We are now entering a new phase, where we plan that for the next five years, we will spend about ZAR 60 billion to do two things. To, again, make sure that our production is sustainable going into the future. Secondly, to create a strategic optionality by further increasing our processing capacity at the base metal refineries with about 20%. What are we going to be doing in the next five years? We will be advancing Life of Mine extensions. Some are already approved, 20 shaft and 14 shaft, but we will be advancing the likes of Marula deepening.

We’ll be advancing the likes of Bafokeng Rasimone Platinum Mine North and studies at Pothole 10, as Nico said earlier, and also the work we are doing with our partners at Mimosa and also at Two Rivers. We’ll also be increasing our orders of development. As I said, we’ve got tailwinds, so it’s important that we create that pit room. That’s what you’ve seen in Impala Rustenburg, that the work we’ve just done during the good times, we’re able to carry us through the tough times, and that’s why Impala Rustenburg continued to improve also on production. We’ll also be strengthening our operating platform by making sure that we continue with our wind upgrades and also implementing our furnace new designs, the furnace of the future, as we’ve been communicating all along. Lastly is to advance or accelerate our ESG commitment for 2030.

If you look at the graph, you will see that SRB for the first two years is peaking at about ZAR 9 billion. It’s really about taking advantage of the tailwind to fix our wind upgrades and also implementing furnace of the future. From there, it will come back to normal levels of between ZAR 7.5 billion and about ZAR 8 billion. If you look only at FY 2027, we’re guiding between ZAR 9 billion and ZAR 11 billion, and from there, as the replacement project and growth projects come into the party, it will then be about between ZAR 10 billion and ZAR 13 billion. Looking at the Life of Mine profile, we answer the question, what are we getting for this capital? You will see that Taiko has been the brownfield project we just spoke about. When we execute all of them, we should be able to maintain the current production for another 10 years.

Then, there are three greenfields that they are under study of two, Waterberg and also Zimplats Portal Ten. When we bring them along, that’s another five years additional. So we have the Life of Mine profile that can be maintained through good asset for the next 15 years. The capital I spoke about is just really to get us there. A robust operating platform, extending Life of Mine, and making sure that through the BMR, 20% capacity increase, we have optionality to look at third parties and also all those type of things. Then moving over to guidance, let me take one step back. We enter FY 2027 with a strong operating platform because of the work we’ve done. Because of that, we even had a confidence to do a safety reset in Impala Rustenburg for four days.

We said we’ll come back to you in terms of what is the effect of that for the stoppage. The numbers I’m going to talk about is already factored in, plus or minus 60,000 ounces were lost because of that safety reset. So I’m not going to try to go through all the numbers. I’m going to go through what I’ve highlighted. Group production remains pretty much in line with what we have achieved this year. So we’re guiding between 3.3 and 2.5. Moving over to unit cost, we’re guiding between the lower end, 4% increase, and the top end being 8%. The midpoint is about 6%. I’ve already touched on capital expenditure, that for the year, FY 2027, we’re looking at about between ZAR 9 billion and ZAR 11 billion.

My parting shot is that we have done a lot of work to strengthen our business, and that is what we enter in the new year with. We will work hard on safety. We have got plans in place to make sure that we send every employee home unharmed, but the machine is actually healthy to keep on delivering into this high-price environment. Thank you very much.

Meroonisha, Chief Financial Officer, Implats: Sorry. It is a bit tight. Good morning, everyone, and thank you, Patrick. I will very briefly take you through the financial performance, a quick look at our balance sheet and liquidity position, and then end with what we have done with capital allocation this year. Let me first start off with, from a financial perspective, FY 2026 was an exceptional year. With the improved pricing in both on precious and base metal and the good operational delivery that you saw, we were basically able to capitalize on the full benefit of the improved pricing, with the result that revenue increased by 58% to ZAR 135.1 billion. This was driven by the 51% increase in the revenue per ounce sold to ZAR 38,116, but also because of the increase in volumes by 4% to 3.51 million ounces.

These additional volumes really came from the planned de-stocking of the excess inventory that we had actually guided. The step-up in revenue increased our EBITDA from ZAR 9.9 billion to ZAR 43.6 billion, expanding the EBITDA margin from 12% to 32%. Headline earnings at ZAR 22.9 billion, and headline earnings per share ZAR 25.48 per share. The improved PGM pricing, the consolidation of Impala Bafokeng into Impala Rustenburg, as well as the approval of the two key Life of Mine extension projects at Rustenburg, basically supported the ZAR 8.1 billion after tax reversal of previously recognized impairment losses at our Impala Rustenburg operations. As a result, our basic earnings for the year were ZAR 31 billion. I think what is probably most important for me is that we were able to convert these earnings into cash. Our free cash flow increased to ZAR 22 billion.

To put that in context, we funded capital of just under ZAR 7 billion. We allocated an additional ZAR 3 billion to our operations to fund the engineering and maintenance that Patrick had talked about. We funded taxes and royalties of just over ZAR 10 billion, and in addition to all of that, we also funded up the buildup in working capital of ZAR 7 billion. All in all, I think we were strongly free cash flow generative this year. I think what is also important to remember is our first half was only ZAR 7 billion. In the second half of the year, we generated double what we generated in the first half.

That was primarily because of a 30% increase in the revenue that we received, but also the bulk of the inventory that we released, as we had guided, happened in the second half of the year. I now talked about the financial performance. It is useful to say, well, what does the balance sheet and the cash position look like after that? Clearly, the strong cash generation significantly bolstered the balance sheet. We ended up with cash of ZAR 23 billion, and we exclude restricted cash from that number. Also, we repaid debt. Our gross debt, and from debt we exclude finance leases and the Public Investment Corporation loan, actually declined from ZAR 1.8 billion to just under half a billion ZAR. That largely is the impact of Zimplats using the improved cash flow to repay the debt that it had previously raised to fund its new furnace.

The definition that we use for adjusted net debt really aligns with the covenants that we have got in the calculation. We have explained how we do it. On that basis, we had net cash increase to ZAR 22 billion for the period. I think what is also very helpful is to look at that cash flow bridge. On that cash flow bridge, the operating cash flows from the business after paying taxes and interest was ZAR 26.7 billion. Here you can see the huge leverage that we have to price and really the strong cash generation from all of our operations. The biggest allocations of that cash so far for the dividends have gone to capital. The ZAR 6.9 billion worth of capital. We repurchased some shares for the share scheme. Also we made provisions for environmental rehabilitation obligations, which I will talk about just now.

I think what is probably very important and talks to balance sheet flexibility, we ended the period with liquidity headroom of ZAR 37 billion, which is really our cash plus our undrawn facilities. I guess from all of this, the next question is, well, how did we allocate cash? What considerations we took. Firstly, to reiterate, our capital allocation policy is anchored on three things: making sure the balance sheet is strong and resilient through the cycle, making sure we reward our shareholders attractively, and thirdly, making sure that we invest in value-accretive growth. If we take first on the balance sheet, so we repaid the debt, which I talked about. We funded our rehabilitation obligations of ZAR 1.6 billion, and we retained cash so that we have enough cash to manage our ongoing liquidity.

I think it is worth mentioning here, we have consistently said that to the extent that our Impala Canada operations generate free cash flow, we will be responsible about allocating that cash. As you can see this year, Impala Canada generated ZAR 2.1 billion worth of free cash flow, and we allocated a large portion of that to basically fund their closure liabilities as well as their severance obligations upon closure. The next bucket really is the shareholder returns. Some of you might have noted, we have revised our dividend framework. We believe that it gives a little bit more transparency and predictability. The base dividend has been set at the 30% of adjusted free cash flow pre-growth. As with the previous policy, there is always the ability to declare additional dividends, provided that the balance sheet remains strong and we have taken due consideration of any future growth opportunities.

The final dividend for this year of ZAR 14.45 a share or ZAR 13.1 billion, really, I believe, reflects our disciplined capital allocation. We have returned surplus cash of approximately 90% of our second half’s free cash flow to our shareholders, in line with our commitment to providing attractive returns. I think the additional point that I want to make is that we’ve always been clear about what we would like to retain on the balance sheet. The number that we’ve used is the ZAR 10 billion. After the payment of this dividend, we would have retained ZAR 10 billion in line with the guidance that we had provided. The last bucket is growth, and as you can see, the growth and expansion capital looks very muted. Our focus this year was actually on ore reserve development, but also on progressing our Life of Mine extension projects.

That capital is reported under replacement capital, and we see that as non-discretionary because that talks to the sustainability of the business. I think here I want to highlight the benefit of having a strong balance sheet is that we have the funding flexibility to really take advantage of the portfolio of assets that we have and to fund projects that we believe are going to enhance the sustainability, the cost competitiveness, and drive long-term value. If I had to summarize FY 2026’s capital allocation, we have done all of the three things that we have mentioned. We have kept the balance sheet strong and resilient. We have provided shareholders with very attractive returns. Lastly, we are continuing to invest in our portfolio of assets to drive long-term value for all of our stakeholders. Thank you. I’d like to hand over to you, Johan.

Johannes, Head of Mineral Resource Management (MRM), Implats: That was uncomfortable.

Johan, Moderator/Chairman, Implats: Easier for me to squeeze out there, ja. Thanks, Meroonisha. Well, this brings me to you, the audience. As usual, I think it just makes sense to start in the room. If I can just again ask, as the microphones move around, people can’t really see you on the webcast, so if you could just introduce yourself before asking the question. Got a big team here in front of you, but we also have people online and in the room, so please feel free to ask anything that’s of importance to you. The whole team is here to assist you in that regard. After the room, there will also be an opportunity for people who are watching online through quarters call, and the operator will take you through that procedure, so we’ll pivot there.

And then to the extent that you want to type, there is also an option of typing some questions. If we have time, I will pose that to the team as well. That gives us about half an hour or so to do Q&A. Let us start in the room. Can we start here by moving the microphones around, please?

Gerhard Engelbrecht, Analyst, Absa CIB: Thank you. Gerhard Engelbrecht, Absa CIB. I see there has been quite large changes in your reserves in Impala Rustenburg. You have upgraded your reserves in the south by, it looks like, about more than 70%, but you downgraded reserves in the north. Can you maybe give us some color on what the thinking was there? How does this change your Life of Mine profiles? Maybe some color on that. My second question is around Zimplats. You talk about some structural labor cost changes that you made. If you can maybe just talk around that and what that means for the future. Then lastly, maybe just remind us when you are going to labor negotiations.

Johan, Moderator/Chairman, Implats: Thanks, Gerhard. I am going to do something unusual. Johannes, I did see Johannes in the audience.

Johannes, Head of Mineral Resource Management (MRM), Implats: Ja.

Johan, Moderator/Chairman, Implats: Johannes.

Johannes, Head of Mineral Resource Management (MRM), Implats: Ja.

Johan, Moderator/Chairman, Implats: You can deal with the Impala Rustenburg resources reserves. Le-Anne, if you do not mind responding to the two labor-related questions, the wage negotiations as well as the Zim cost issues. Thank you. For those who do not know, Johannes heads up our MRM team, and they are also releasing the MRM report today. For the guys in the room, hopefully there are some copies available here. If there is not, it is available on the website.

Johannes, Head of Mineral Resource Management (MRM), Implats: Thank you, Johan. Thank you, Gerhard, for the question. At Impala Rustenburg, first of all, we’ve got the benefit of the combined Impala Bafokeng into the Impala Rustenburg, and that obviously had a fixed cost benefit that we obviously saw through the reserve increase. The metal price outlook also in terms of the tails of our mining profiles also had the benefit of bringing some of that back into the reserves. The north section that you referred to, obviously we look at how we can optimize our ore body through the different mining infrastructure we have at 20 Shaft and the Styldrift, and then also the BRPM section. As was mentioned earlier, we’ve got the brownfield project also at the BRPM UG2 decline.

That is under study at the moment, and obviously that will come through as well later, but it’s not in the reserve at the moment. I think there is optionality for us at Impala Rustenburg to optimize our extraction of our resources and converting to the reserves. Then obviously, the 20 Shaft and the 14 Shaft extension projects, that significantly improve our reserve that you’ve seen at Impala Rustenburg.

Gerhard Engelbrecht, Analyst, Absa CIB: If I can just follow up on that. Does the downgrade in the north in any way affect your view on Styldrift, or is there a change on the view of Styldrift II?

Johannes, Head of Mineral Resource Management (MRM), Implats: The change that we see there is obviously optimization between 20 Shaft and Styldrift. One could see that with the 20 Shaft extension project, that the life extension and the increase in number of years of life is sort of balanced between 20 Shaft and Styldrift. I think what you’ve noted with the decrease in the north is mainly because of a balanced view that we took between the various infrastructure opportunities that we’ve got between BRPM, Styldrift, and 20 Shaft.

Johan, Moderator/Chairman, Implats: Le-Anne, you want to respond to the labor question? Thanks, Johannes.

Le-Anne, Human Resources/Remuneration Executive, Implats: Thanks. Thanks for the question. In 2023, when we went through the low price environment at Zimplats, what they decided to do, which has been done previously as well, as part of the austerity measures that they had put in place, all employees, including the executive and the board, took a 10% cut in their salaries. That was a 10% drop in the fixed salary bill. What we had communicated to the market in the remuneration report is that when prices improve, we will reinstate the 10% cuts that was implemented in 2023. That was restated last year, which now has created the structural adjustment. Then with regard to the wage negotiations, it’s 30th of June 2027, when the current five-year agreement comes to an end.

We normally get the demands around February, March of the year in question, and it always flows through after implementation date, which is 1 July. That’s just some of the union’s tactics because then we get to backdate it to the 1st of July and employees receive backdated salaries. We are confident that we will get another five-year deal, and it will be more or less in line with what our last deal in terms of structure entails. We will start negotiations around April, May of next year, and it normally takes us between three to four months. Thank you.

Johan, Moderator/Chairman, Implats: Thanks, Le-Anne. Let’s go to Brian.

Brian Morgan, Analyst, RMB Morgan Stanley: Thanks very much. It’s Brian Morgan here, RMB Morgan Stanley. Just that chart that you put up there about the Life of Mine and that green wedge, those growth projects, and I think you called out Styldrift II and 10 Shaft and the Waterberg. That wedge starts quite soon in 2032, but these are quite big projects. Does that mean that you’re going to be pulling the trigger on them quite soon? Or are there other projects in that green wedge which we don’t know about, which you can bring to market a bit sooner? That’s number one. Number two is just minutia. There’s ZAR 13 billion of tax expense that went through P&L. There’s, I think, ZAR 7 billion went through the cash flow statement, so ZAR 6 billion roughly deferred tax. Why? And what’s the outlook in the next year or two?

Will there be a catch-up or will cash tax percentage be quite depressed going forward?

Johan, Moderator/Chairman, Implats: You want to start with the tax?

Meroonisha, Chief Financial Officer, Implats: I’m going to try. I think on the tax, we did pay a lot of tax this year. Our deferred tax was a bit elevated for one reason, is we raised deferred tax on undistributed profits at Zimplats. So we raised the withholding tax. That depends on our outlook on dividends directly linked to profitability, directly linked to prices. To the extent that varies, and it has changed a lot over the year, you are going to get that additional charge. So there’s about ZAR 1 billion of that. Remember, the rest of the deferred tax is predominantly on the fact that we get to claim our capital allowances. And so at some point, it basically normalizes for depreciation and capital allowances. So there’s always going to be a level of deferred tax in.

I guess the other part is we have utilized all our unredeemed CapEx and assessed losses. I think Marula has got a little bit. But other than that, I probably would think that it will be largely the same if we continue to spend on CapEx, clearly. Yeah. Yeah.

Johan, Moderator/Chairman, Implats: The projects?

Yeah.

Brian, are you done?

Meroonisha, Chief Financial Officer, Implats: Oh, sorry. Eva just reminded me, which I forget, is the impairment release. That is obviously a once-off with the deferred tax. Yeah.

Le-Anne, Human Resources/Remuneration Executive, Implats: Yeah, Brian, you remember we’ve always said that the greenfields projects will always be dependent on long-term price forecasting, which is starting to improve. If you look at the three projects that are there, Styldrift II in particular, we are looking at early access, and that’s the way the study is actually focusing. Early access from 10 Shaft and Styldrift I itself. The long-term price forecast supports the project. I think you will be able to see early production coming through because we’re not waiting entirely for the vertical shaft to be sunk down when we start. I think similar to Portal 10, Portal 10 as things stand, once you complete the study, we forecasted to start the sinking around the fourth year from now. Waterberg BFS done, we are looking at optimizing it. You might probably have seen some news from PTM.

By November, it will come back to us. There is a trade-off. Do you go for a big chunk or a small chunk? Because of the mining methodology, again, you will be able to get early production start to trickle in. Ramp-up will take a bit long, but this project geared to start delivering some sort of production at an early stage.

Johan, Moderator/Chairman, Implats: Thanks, Pat. Arnold, let’s go there.

Arnold van Graan, Analyst, Nedbank: Yes. Hi, Arnold van Graan from Nedbank. Yeah, good results and thanks for the opportunity. Three quick ones from our side, two for Meroonisha. One is Zim cash lockup, any progress there in getting that resolved? The second one, just on your excess inventory, how much is left and over what period is that coming out? Any changes there, any acceleration, because it seems your plants are running well. Then one for Patrick, on Styldrift II, is that conventional or mechanized? Because I know there’s undulation issues in later Life of Mine, so what’s your approach to extracting that? Thank you.

Johan, Moderator/Chairman, Implats: Thanks, Arnold.

Meroonisha, Chief Financial Officer, Implats: Arnold, I am going to leave the stock lockup for Patrick to take the difficult one. On the Zim situation, it has actually improved significantly since we came to the market at interims. In about March, I think, we reached a tripartite agreement with the various government institutions in Zim. Reached an agreement to allow us basically to get 50% of our surrender proceeds in cash and the other 50% that will be utilized for setoffs. Since that agreement has been put in place, they have honored the terms of that, and we have been able to offset between taxes, royalties, and customs duties about $99 million of offsets. We have had access to $150 million of local currency. That really has made a significant difference because our local creditors are now all up to date, et cetera.

Going forward, we do expect Zimplats to be quite profitable, so we will continue to use the cash that has been offset. The only thing that we did do, which you will see in the results, and our cash flow would have been higher if we had not, is we moved out ZAR 1.3 billion out of cash into receivables. We believe that is an appropriate place to reflect it given that it will be utilized through the use of offsets.

Patrick, Chief Operating Officer, Implats: The study has just started, so I think it is early days to commit to a particular mining method. Yes, it is different reef faces. I need to remind you that we have made it very clear that we want to go to mechanized mines. Part of the study, we are going to be testing all mining methods, including low-profile hybrids. Because for us, conventional needs to be the last resort. I think it is too early to commit to a mining method, but I really need to leave you with this, that we want to move away from conventional as much as we can.

Johan, Moderator/Chairman, Implats: Can you just remind me?

Meroonisha, Chief Financial Officer, Implats: Stock release for next year.

Johan, Moderator/Chairman, Implats: Stock release for next year.

Meroonisha, Chief Financial Officer, Implats: Guidance.

Johan, Moderator/Chairman, Implats: Excuse me.

Meroonisha, Chief Financial Officer, Implats: Yeah.

Patrick, Chief Operating Officer, Implats: All right. I think, first of all, we’ve been able to prove that the stock exists. There was a lot of stories about that. We’ve now released 120. I think for this year, we had a 2 weeks stoppage at our furnaces in Rustenburg following the SO2 leak incident. Conservatively, I’ll put 50,000 on the table. We’re working very hard to see how do we catch up and still be able to deliver north of 100,000. I think we should be able to update with much more firm numbers when we come back in February. That’s where we are in terms of that, yeah. The stock exists, and we will try to release it.

Johan, Moderator/Chairman, Implats: Yeah, maybe just to add, there’s 2 components. The stock moves forward, but you will only see it if it’s in the vault and sold. That 120 is actually what was sold, but stock has moved forward, and even if it doesn’t get sold in the next 6 months, we’re still hoping to push that stock forward in the value chain.

All right. Yes, please, go for it, Nkateko.

Nkateko Mathonsi, Analyst, Investec Bank: Yeah. Nkateko Mathonsi, Investec Bank. Congratulations on very good results and Meroonisha on the final dividend. My first question is for Patrick and around the group unit cost, which you are guiding to increase by 6%. At the midpoint of production guidance, it’s a 4.5% or 5% decline. Maybe if you can talk about some of the aspects that will anchor this very good cost guidance that you are guiding despite production that is likely going to be a bit lower. If you can also talk on Zimplats and the prospect of you being able to sustain the current production of 630 to 660 beyond 2028. My assumption is Mupani does not fully replace Bimha Portal. If you can talk to that. Also, Two Rivers, the guidance is the same as the previous year. What is happening as far as the Merensky project is concerned?

How should we actually factor that in? Last question is for Emma. On the minor metals, are you seeing any forward buying on the minor metals which would actually support the consensus bullish forecast for the minor metals? Thank you.

Patrick, Chief Operating Officer, Implats: Thank you. I think on unit cost, like we said earlier, there were some elective spend that we’ve taken advantage of the tailwind. Going forward, we don’t see us spending all that money because we’ve managed to now set our operating platform. It’s strong enough to be able to deliver. I believe that we’ve proven in the past that we have got good cost control management, and that’s what the team will be doing, really, is making sure that unnecessary costs are taken out of the system without compromising delivery of safe production.

In terms of Zimplats, for the next five years, should and will be able to deliver 660,000 ounces of met to South Africa. It’s only beyond the five years that Portal 10 comes in and should be able to plug that gap. Mupfuti Mine, Bimha, and the remaining pieces should be able to give us 660,000 ounces for the next five years. Two Rivers Merensky, good project. We are aligned with our partners. We’ve, six months ago, approved early capital, just over ZAR 100 million, to start the development. The focus really now is to fill the plant with UG2, and that’s where we spend more time in FY 2026. That’s why you saw Little Merensky be milled. The project where we are now, we’re optimizing it with our partners, so should be able to come to for final board approval somewhere in Q2, Q3 next year.

Moses, Water Security/Operations Executive, Implats: That’s where we are. Focus, fill the plant with UG2, optimize Merensky studies, and only next year get approval and then we’ll get going. It’s still a good project.

Emma, Market Analysis Executive, Implats: Just to clarify, are you talking about purchases in excess of requirements at the moment?

Nkateko Mathonsi, Analyst, Investec Bank: Yeah.

Some stockpiling. Okay, so we wouldn’t have seen that based on what we trade. I think the one thing to bear in mind on some of these demand drivers is I always think with industrial, is it linked to plants or capacity and new installation in terms of creating capacity, or is it consumed in the final production? And I think if you look at where the growth has been coming from in terms of iridium and ruthenium, it’s a mixture of both, but there is a capacity expansion element to it, which means some of that demand can be quite lumpy. But it’s not screen traded. We can’t look at forward positionings and all the rest. It’s not something I can comment on.

Emma, Market Analysis Executive, Implats: Anecdotally, there is a view in the market that suggests that there has been some buying in excess of requirements, whether that’s speculative or whether that’s just making sure they’ve got the metal in terms of plant. I think even if you look at, we get a couple of really good demand and supply pieces from our customers and market research. And even just the way in which different market commentators account for when metal goes into plant, you almost need to smooth some of those industrial numbers to get a better idea, because do you account for it when it was purchased? Do you account for it when the plant is built? Yep. Short answer is no.

Johan, Moderator/Chairman, Implats: Sifiso is in the room.

Emma, Market Analysis Executive, Implats: Yeah.

Johan, Moderator/Chairman, Implats: Can we get a mic to him?

Emma, Market Analysis Executive, Implats: Yeah.

Johan, Moderator/Chairman, Implats: Sifiso, ruthenium, iridium is very topical. There wasn’t a Chinese that didn’t stop me. They didn’t want to buy those two metals recently in China. Maybe just share some of the interactions with the buyers on those two particular metals.

Sifiso, Minor Metals/Market Executive, Implats: Thanks, Johan. When it comes to ruthenium and iridium, we haven’t seen any forward buying as Emma has mentioned. But on the ruthenium side, we’re actually seeing the opposite of demand, whereby a lot of customers are actually decreasing the use of ruthenium on the back of the higher prices that we are seeing. But the demand still remains very good and supportive, but there are developments within the environment. Thanks.

Johan, Moderator/Chairman, Implats: Thanks, Sifiso. Bruce?

Bruce Williamson, Analyst, Integral Asset Management: Hi, good day. Bruce Williamson, Integral Asset Management. Hi, team. Nico, to you and the team, really well done on stabilizing the underground operations. I think there’s a fantastic improvement there. Just a question, on your underground labor, can you give us an estimate of what the average age is? Just remind us of your hard retirement age. How many do you think are due to retire in the next 3, 4 years? Particularly in the Rustenburg area, could you talk about how secure the water supplies are?

Johan, Moderator/Chairman, Implats: Le-Anne, it looks like you’re going to be popular today.

Le-Anne, Human Resources/Remuneration Executive, Implats: Is this on?

Johan, Moderator/Chairman, Implats: Yeah, it’s on.

Le-Anne, Human Resources/Remuneration Executive, Implats: Yeah, it’s on. Our average age at the underground operations is 45, and our retirement age for underground workers is 62 and a half years. That was industry practice over the years. People gearing up for retirement, I think it is about 5%-8% of our underground workforce over the next three to five years. Given that the employment targets have now changed, employment equity because of sectoral targets, we are looking at the talent pipeline to make sure that people nearing retirement, we do replace those skills. Lots of skills development taking place, and it’s in line with some of our other HR plans that needs to be considered for retirement.

Emma, Market Analysis Executive, Implats: Such a beautiful sound.

Johan, Moderator/Chairman, Implats: We do have Moses in the room to answer to water security in Rustenburg.

Moses, Water Security/Operations Executive, Implats: Thanks, Bruce. Moses. In Rustenburg, luckily we’ve got two water boards.

One from the north, one from the south. That gives us at least some flexibility. About a year ago, we started seeing issues on one of the water board with regards to the supply. Then as a mine, we started developing some contingency plan. At the moment, I can tell you that should we again have similar issues, we will be able to run the mine at least between 2 and 5 days on the south side, which is the water board that previously has shown us they are having some unreliable supply. The plans are in place to continuously year on year increase the storage so that we can at least at some point say we end up with a month. At the moment is 2 to 5 days, the contingency plan. Thank you.

Nico, CEO, Implats: Bruce, just in terms of water security, there are 2 elements to it. One is the overall supply, which is to date not proven to be a major risk, but the other one is the distribution infrastructure, and that is where we have picked up some issues. There is a gradual deterioration in the integrity of the distribution piping to get the available source to the operation, and that is the issues that he is referring to. What we have done is we have also collaborated with municipalities in terms of skill sharing to ensure a remediation of the infrastructure.

Johan, Moderator/Chairman, Implats: I am just conscious of time. There is 5 minutes left, but there will be an opportunity for people in the room to still ask questions after when we are having something to eat and drink. Let me go to chorus call and let us take 2 calls from chorus call, and then we will close at that point, and we will take further engagements in the back of the room at the end. If I can hand over to the chorus call operator.

Operator: Thank you. We have a question from Adrian Hammond of SBG. Please go ahead.

Adrian Hammond, Analyst, SBG: Thanks, operator. Good morning, Nico and team. I just want to ask a bit more about Styldrift II. It certainly represents a long-term view for your future. When do you expect to make a decision on Styldrift II, and does this represent, how serious are you about developing that asset? Because I just think that it is a long lead, time to make now. You need to make it soon if you plan to bring that into production in the next decade. Then secondly, you did allude to M&A. Do we think about M&A in PGM, or do you have other metals in mind? Thanks.

Nico, CEO, Implats: Thanks. Do you mind if I answer the questions? The first one, as far as Styldrift II is concerned, it is currently the subject of a concept study. Typically, if you think about the study program, a year for a concept study, two years for a pre-feasibility study, and two years for a bankable feasibility study. Styldrift II is nowhere near, but it is really important. I mean, it was part of the entire acquisition consideration, the high-quality Merensky Reef, the last of its kind untapped. I do not think it is short-term. I think the Waterbergs and the Portal 10s possibly is running a little bit early in terms of the study program. Having said that, it is really a good option long-term for us. Then in terms of our focus and the extent to which diversification is a current topic, it is not.

In my introduction, I spoke about the myriad of internal options that we have in terms of life extension, and our current focus is proudly as a PGM producer. As with all the other companies, we are exploring options in the current parts of the value chain in which we are operating and beyond. To the extent that there are value accretive opportunities, we will do so.

Johan, Moderator/Chairman, Implats: Thanks, Adrian. One more?

Adrian Hammond, Analyst, SBG: Thanks.

Operator: The next question we have comes from René Hochreiter of NOAH Capital. Please go ahead.

René Hochreiter, Analyst, NOAH Capital: Morning, chaps. Thanks very much for the dividend. Very welcome. Just a question on the Waterberg. I see it has been included in your greenfield study to keep your production going into the future at the current level. But as far as I remember, you only own 15% of Waterberg. What is the outlook there?

Nico, CEO, Implats: Waterberg has got a very likely future. The options that are being considered at the moment are looking far more attractive to us than the previous versions, which relied more on a large implementation. I think we are far more in favor of the current thinking and the way the study is progressing at the moment, where, as Patrick alluded to earlier, it is a phased approach to implementation over a period. And correctly, we currently own just less than 15%.

Johan, Moderator/Chairman, Implats: Yeah, but we have got the offtake as well.

Nico, CEO, Implats: Yes

Johan, Moderator/Chairman, Implats: we’re confident that to the extent that it comes to the market, it will come through our refineries. I think that takes us to the hour mark, so I just really have to thank everybody. There’ll be lots of opportunity now for people in the room and for others on the road and through various communication. We look really forward to further engage with you, not just on these results, but particularly on the outlook for the industry and for our business. So thank you for your attendance, and for the people in the room, please join us for some light refreshments. Thank you very much