Operational Review

 

Impala

 

Business summary

  • A 14 shaft mining complex
  • Mineral processes, incorporating concentrating and smelting plants
  • Refineries, housing the base and precious metals refineries
  • Reserves: 21.6 million attributable ounces of platinum
  • Resources (including reserves): 69.9 million attributable ounces of platinum
  • Production: 941 200 ounces of refined platinum
  • Employees and contractors: 46 653
  • Key sustainability issues: Safety, HIV, SO2 emissions and project delivery

 

 

Material sustainability review

SAFETY

Safety and health remain fundamental issues that have impacted the Rustenburg operation. Regrettably the operation experienced seven fatalities during the year under review. The lost-time injury frequency rate was unsatisfactory at 5.41, showing a 6% deterioration from the previous year (FY2010: 5.09 per million man-hours worked).

The operation remains committed to achieving a ‘zero harm’ workplace and has placed emphasis on behavioural and cultural change and visible-felt leadership. The target for safety going forward is a 20% year-on-year improvement from the previous year’s performance and a stretch target of 40%.

HEALTH

The high prevalence of HIV-related TB and the onset of AIDS influenced productivity negatively as a result of lost shifts due to illness and recruitment of new employees who require training.

As a result the operation has placed a greater emphasis on voluntary counselling and testing (VCT), early diagnosis and treatment through a holistic approach of testing all chronic illnesses and the early induction of individuals into the wellness programme. Through proactive campaigns there has been a steady increase in holistic testing with 12 647 individuals tested at the Rustenburg operation, a 103% increase from the previous year (FY2010: 6 236) and a total of 4 451 on the wellness programme at the end of the financial year (FY2010: 3 569).

A key objective is to increase both VCT and the number of individuals on wellness programmes by 10% in 2012. Holistic counselling and testing will therefore continue to be a key strategic driver to manage and maintain employee health.

ENVIRONMENT

Sulphur dioxide emission remains a key environmental concern with total direct SO2 emissions rising by 74% from the previous financial year (2010: 3 638 tonnes). Total SO2 emissions are calculated monthly through a sulphur mass balance approach.

Emissions during FY2011 increased to the equivalent of 17.3 tonnes of SO2 per day (FY2010: 10.4 tonnes SO2 per day), indicating a deterioration in sulphur dioxide emissions at the operation. The cause of this deterioration in air quality at the smelter has been investigated and the findings indicate that high sulphur content in the Merensky ore and the inefficiencies in the abatement system were the causes. The operation is currently in the process of restoring the SO2 level to below 16 tonnes of SO2 a day.

AIR QUALITY

Air quality management, particularly sulphur emission will be an area of focus in the coming year. The objective will be to refine the sulphur mass balance for the operation, by incorporating continuous data monitoring results. Water consumption, energy efficiency, carbon emissions and compliance will also be areas of focus going forward.


Operational review

Operationally the year under review can be termed one of recovery with tonnes milled increasing by 4% to 14.1 million. During FY2010 mining was affected by a two-week industrial action and the fall of ground incident at 14 Shaft. The latter resulted in the closure of the mechanised sections of 12 and 14 Shafts and the implementation of a revised trackless mining layout based on six-meter bords.

Mining flexibility remains a key issue due to a combination of the later than expected delivery of the new shafts in conjunction with lower than planned development in prior years. Total development (including capital) increased year-on-year by 8% to 132 kilometres. This will continue to place greater reliance on the older shafts and result in reduced efficiencies and an ongoing high level of white area mining which accounted for 34% of production during the year under review.

The ratio of Merensky to UG2 ore mined improved from 40% to 42%. This resulted in a 3% improvement in the overall platinum yield. In addition some 11 000 ounces of platinum were produced from low grade surface sources. Refining recoveries, which are world class, were further improved during the year by 0.4%, 0.3% and 0.2% for platinum, palladium and rhodium respectively. Refined platinum production increased by 8% to 941 200 ounces.

The higher volumes positively influenced unit costs, which rose 8% to R10 801 per platinum ounce excluding share-based payments.

Capital expenditure increased by 23% to R4.2 billion. The bulk of this, approximately R3.2 billion, was spent on mining-related projects, in particular 20, 16 and 17 Shafts.

THE NEW SHAFTS

Impala Rustenburg is currently constructing three major shafts, namely 20, 16 and 17 Shaft. These shafts are designed as replacement shafts for the older infrastructure which is seeing declining resource availability.

These shafts are significant undertakings – multiple shaft sinking and major development over many years.

While these shafts will produce a significant portion of our future production at Impala Rustenburg there have been several delays over time. The delays are caused by a number of factors, the significant ones being:

  • During shaft sinking at 16 Shaft, severe water ingress was encountered. The water was extremely corrosive and metal ventilation infrastructure used during the sink needed to be replaced
  • Planning for all shafts was based on good practices. It has become evident that based on current performance we have not been able to attain the original planning parameters
  • Ground conditions encountered at these shafts have been significantly worse than we expected and resulted in the most significant of all the delays. This was due to the fact that our planning envisaged that we could perform our support function concurrently. As part of our safety first approach, a decision was taken that the support function up to the face took place after the mining activities and not at the same time, hence increasing the time needed to complete the full mining and support cycle
  • Underperformance at 20 Shaft with less than desired development rates of the incline/decline spines has meant later access to reef than originally planned
  • Encountering major delays in the completion of the shaft infrastructure, as we did not fully appreciate the complexities and congestion associated with development and waste rock removal in conjunction with project activities.

The 20 Shaft design is different from the other Impala shafts in that access to the production levels from the vertical shaft is through an incline and decline spine, rather than the conventional shaft system employed at other shafts. The reason for this was that the incline/decline spine layout enabled quicker access to reef than the conventional layout but has a caveat of slower build-up over time. The friability of the spine ends resulted in the position of these spines being moved from the reef horizon into the footwall and substantially more support required throughout than first envisaged. This resulted in a slower rate of progress since the start of this development. During the year, the infrastructure at the bottom of the shaft was completed and the incline and decline shafts accessed the first two production levels, albeit at a slower development rate.

First reef production commenced during the year but due to the historically slower development progress, it became apparent that this production would jeopardise the tight project development schedule and it was decided to delay the production ramp-up by 12 months. This will allow the project team to focus on development of the incline and decline spines during the next year, utilising the services of a specialist contractor. As a consequence 26 000 ounces of platinum production has been deferred from FY2012 to FY2013.

At 16 Shaft, sinking of the main shaft is nearing completion and the focus next year will be on equipping the shaft for hoisting. During the past year the first four levels were developed out of the ventilation shaft using track bound drill rigs and these levels have now reached the Merensky reef horizon. The completion of the main shaft infrastructure remains on the critical path to the commencement of production in 2014. In the previous report it was anticipated that production would commence in FY2013, but this is about six months behind schedule due to unplanned rope changes and time to complete sinking in the shaft bottom.

 

Sinking of the 17 Shaft complex went according to plan and at the same time attained a million fatality free shifts. The refrigeration shaft has reached its final depth, while the main and ventilation shaft will be sunk. During the coming year, development of the first two horizontal levels will commence from the refrigeration shaft. Expected first production from 17 Shaft remains FY2017.

Project performance in the two decline projects at 11 and 14 Shaft was in line with expectations and both these shafts now contribute tons from stoping activities.

Outlook

Currently 36% of production is derived from the older, first and second generation shafts namely 2, 2A, 4, 5, 6, 7, 7A, 8 and 9. These shafts were sunk in the 1970s and early 1980s, to replace the original declines. The balance of production comes from the third generation shafts, 1, 10, 11, 12 and 14.

Over the next five years, production from the older shafts is expected to decline to 10% of the total output with production from the third generation shafts not growing sufficiently to make up the difference. The key to this shortfall and the restoration of steady state production is to increase volumes from the third generation shafts and importantly, ramp up the new shafts.

As can be expected from new shaft projects of this magnitude and duration, they carry a degree of risk for timeous delivery into the production profile. Due to experience gained at 20 and 16 shafts, previously estimated contribution in the short to medium term has been scaled back. As a result production is expected to be maintained at the 915 000 to 920 000 ounce level for two years before building to 950 000 ounces of platinum from year three which is 5% lower than our previous target of one million ounces.

Beyond this period, the key to an increased and sustained production profile will be the systematic development of new shaft blocks. The first of these blocks, 17 Shaft, which has commenced sinking in FY2007 will start production in FY2017. Subsequent to this is 18 Shaft which is currently the subject of a feasibility study. This study will be presented to the Board in 2012 and, if approved, will result in first production early in the next decade.

Capital expenditure for the five-year planning period to FY2016 is estimated at R27 billion. Mining projects account for R19 billion of which R12 billion will be allocated for 20, 16 and 17 Shafts, and R4 billion for the yet unapproved, 18 Shaft. The balance will cater for upgrades at both Mineral Processes and Refineries.

Impala – key statistics 

      FY2011   FY2010  
REVENUE   (Rm)  18 441   14 025  
Platinum      11 618   8 833  
Palladium      2 483   1 410  
Rhodium      2 132   2 386  
Nickel      989   609  
Other      1 219   787  
COST OF SALES    (10 955)  (8 803) 
On-mine operations      (7 594)  (6 781) 
Processing operations      (1 673)  (1 457) 
Refining operations      (467)  (446) 
Depreciation      (923)  (742) 
Change in inventory     (298)  623  
GROSS PROFIT    7 486   5 222  
Other operating expenses      (367)  (378) 
Royalty expense      (606)  (420) 
PROFIT FROM OPERATIONS   6 513   4 424  
Profit from metal purchased transactions     25   146  
  Sales of metals purchased
  13 589   10 516  
  Cost of metals purchased
  (13 568)  (10 370) 
  Change in inventory 
  4   –  
PROFIT FROM OPERATIONS IN IMPLATS GROUP    6 538   4 570  
Gross margin ex-mine   (%)  40.6   37.2  
SALES VOLUMES EX-MINE      
Platinum   (000oz)  980.5   819.1  
Palladium     527.3   501.9  
Rhodium     133.5   147.9  
Nickel   (000t)  5.9   4.4  
SALES VOLUMES METALS PURCHASED FROM IRS       
Platinum   (000oz)  680.7   610.7  
Palladium      469.8   427.6  
Rhodium      85.5   77.3  
Nickel   (000t)  6.0   5.1  
PRICES ACHIEVED EX-MINE       
Platinum   ($/oz)  1 693   1 427  
Palladium      678   373  
Rhodium      2 272   2 144  
Nickel   ($/t)  23 951   18 286  
EXCHANGE RATE ACHIEVED EX-MINE (R/$)  6.99   7.56  
PRODUCTION EX-MINE       
Tonnes milled ex-mine#   (000t)  14 054   13 531  
% UG2 milled   (%)  57.5   60.2  
Headgrade (6E)#   (g/t)  4.60   4.60  
Total development metres (including capital)  (metres)  132 342   122 573  
Platinum refined   (000oz)  941.2   871.4  
Palladium refined     510.5   459.3  
Rhodium refined     126.8   121.7  
Nickel refined   (000t)  5.5   4.9  
PGM refined   (000oz)  1 854.2   1 714.7  
TOTAL COST (Rm)  10 101   9 062  
   ($m)  1 436   1 199  
Share-based compensation   (Rm)  (65)  345  
  per tonne milled*
(R/t)  723   644  
   ($/t)  103   85  
  – per PGM ounce refined*  
(R/oz)  5 483   5 084  
     ($/oz)  780   673  
  – per platinum ounce refined*  
(R/oz)  10 801   10 003  
   ($/oz)  1 536   1 324  
  – net of revenue received for other metals*  
(R/oz)  3 552   4 045  
   ($/oz)  505   535  
  – per platinum ounce refined  
 (R/oz)  10 732   10 399  
   ($/oz)  1 526   1 376  
CAPITAL EXPENDITURE (Rm)  4 240   3 435  
   ($m)  603   455  
LABOUR INCLUDING CAPITAL AS AT 30 JUNE (number)  46 653   45 587  
Own employees     32 909   31 870  
Contractors     13 744   13 717  
Centares per panel man per month**   (m2/man)  29.6   32.8  
* Excluding share-based compensation
** Conventional mining and own employees efficiency.
# The ex-mine tonnage and grade statistics tabulated above excludes the low grade material from surface sources.