Impala Platinum (IMPUY, Financial) is the ultimate ugly stock. It's on a continent that can be unfriendly toward business. Mining platinum is super dangerous. The company's costs to mine are above the price of the metal, which has done horribly. Having said that, the stock has done well recently with the spike in the price of platinum. Higher precious metal prices have caused a rise in other South African firms as well.
There are 723.78 million shares outstanding and the market cap is R31.283 billion ($2 billion). It takes 15.6 rand to buy one dollar. Platinum is $939 an ounce. Just a few weeks ago, it fell to $821. The company earned R31¢ for the six months ending 2015 versus the same time in 2014 at R41¢.
Platinum had several detractions last year. One was the Volkswagen scandal. Platinum metal groups metals are used in catalytic converters. The second issue is that global auto sales were up but it did not help platinum prices. Low platinum prices caused a 10% drop in scrapping. Low PMG prices also led to 2,300 ounces of platinum being sold out of ETFs and 450,000 in palladium. Implats estimates that there will be a 700,000 ounce deficit. We'll see.
Looking at Dec. 31, 2015 numbers versus 2014, it's a disaster. Platinum fell from $1,320 an ounce to $963. Palladium fell from $823 to $632. Rhodium from $1,227 to $803. Nickel fell from $17,314 to $10,598. The rand versus the dollar fell from 13.45 to 11.01. The cost to mine is a horrible $2,097 an ounce in 2014, but fell to $1,667 in 2015. Platinum is actually rarer than gold (GLD), though the price does not reflect this fact.
There was a secondary offering of R4 billion to fund two shafts in Impala Rustenburg. Four employees died in a fire in 2016. I can't tell you how dangerous precious metal mining is in South Africa. The refining group is the only reason Implats showed a positive earnings.
The balance sheet shows R8.9 billion ($570 million) in inventories and R3.6 billion ($231 million) in accounts receivable. The liability side shows R9.255 billion ($593 million) in deferred taxes, R8.9 billion ($571 million), and R5.78 billion ($371 million) in accounts payable. Not bad.
The company had a positive R976 million ($62 million) in cash flow from operations. However, it spent R1.902 billion ($122 million) in capex.
There is considerable risk mining in Africa. Zimbabwe has threatened to nationalize the Zimplats mine. The mine accounts for half of the country's platinum production. I'm not going to get way into metal grade, reserves, and all of that stuff. It doesn't really matter as the stock will do what it's going to do.
It's not a long term hold. We bought a few shares for clients this morning at around $3.04. Should it fall, we'll bail, but hope it makes a little profit.
