IMPUY Impala Platinum Holdings Ltd (QX)

JOHANNESBURG—Impala Platinum Holdings Ltd. is to raise 4 billion South African rand ($297.4 million) through a stock sale to bolster its finances, battered by tumbling metal prices and the costs of ramping up South African output which contributed to a hefty annual loss.

The world's second-largest producer of platinum said on Thursday that the capital increase is fully underwritten by Swiss bank UBS and will allow the Rustenburg mine, hit hard by last year's five-month platinum-sector strike, to improve output and profitability.

Implats, along with other South African platinum miners, is still struggling to recover from the worker strike, which hit production and profits at a time when prices for the precious metal were already low. In February, the company began cost-cutting and restructuring in an attempt to improve profit margins and conserve cash. Lonmin PLC, the world's No. 3 platinum producer, said in July that it would cut 6,000 workers, or 17% of its workforce, over the next two years.

Even large diversified mining groups are embarking on drastic measure to rein in costs as raw material prices have tumbled. Anglo American PLC, whose main commodities include platinum, copper and iron ore, has said it would slash 53,000 jobs over several years, a 35% reduction of its current workforce. The group's Johannesburg-listed Anglo American Platinum Ltd. unit, the world's top platinum producer, said in July that it still wants to sell or spin off its older Rustenburg and Union mines, which analysts say are burning through cash.

Implats may have judged its fundraising well. "The timing of it is very good," said SBG Securities platinum analyst Setendra Naidoo. The funds will help the company complete two shafts at the Rustenburg mine by 2020, Mr. Naidoo said.

Platinum miners say they expect the challenging price environment to continue, with further downside still possible for platinum prices, given industrial and investment demand are both relatively flat.

Implats said it would have to tighten its belt further.

"We've now had to go back into our plans and look at further cuts," said Chief Executive Terence Goodlace. Global prices for platinum, which is used mainly to make car exhaust filters and jewelry, have fallen 28% over the last 12 months, recently trading just over $1,000 an ounce.

Implats shares are down 54% over the same period of time. Shares on the Johannesburg Stock Exchange tumbled in early trading Thursday but have since trimmed those loses, recently down 3.5% at 43.04 rand.

"Implats remains committed to returning excess cash flow to shareholders going forward," the company said. Implats hasn't declared a dividend since fiscal 2013.

The company reported a loss of 3.66 billion rand in the year to June 30, a turnaround from a profit of 8 million rand the previous year, in line with expectations. Revenue for the fiscal year rose 12% to 32.48 billion rand.

Implats said its performance was "severely impacted" by the revving up of the Rustenburg mine, after the county's longest-ever strike ended in June 2014, as well as safety-related work stoppages, and power shortages. South Africa's economy is currently blighted by frequent black outs, with capacity-constrained state-owned utility Eskom struggling to supply the country with enough electricity from its aging infrastructure.

The company's Zimbabwe operations were hit by the precautionary closure of a mine there after a partial collapse of underground tunnels in August 2014.

Implats' mine-to-market platinum output was up 16% from the previous year as production began to recover from the industry strike in 2014. Unit costs rose 14%.

A weaker rand, which has recently been plumbing all-time lows against the U.S. dollar, helped cushion those cost increases in dollar terms. The cost to produce an ounce of platinum rose only 3.9% to $1,947, given the rand was an average of 10% weaker over the fiscal year compared with the previous year.

"The rand's been a bit of a safety valve and it probably will continue to be that," said Daniel Sacks, portfolio manager of Investec Asset Management's 353.4 million rand commodity fund in Cape Town.

Still, the average price Implats received for its platinum fell 13% in dollar terms to $1,241 an ounce.

Write to Alexandra Wexler at alexandra.wexler@wsj.com

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(END) Dow Jones Newswires

September 03, 2015 06:45 ET (10:45 GMT)

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