Introduction

In a period typified by increasing global macro-economic headwinds, escalating geopolitical conflict, and several localised challenges, Implats continued to reap the benefit of elevated metal pricing, albeit off the record levels achieved in the prior comparable period. During the year, the Group advanced a suite of ambitious organic growth projects, pursued value-accretive acquisitive growth, concluded an historic wage agreement, strengthened its organisational flexibility, contributed to the socio-economic improvement of mine-host communities and shared significant value with its stakeholders. This continued strong performance is a testament to Implats' increasing strategic and operating agility and the significant capabilities of its resilient and innovative people.

Despite lower received rand PGM pricing and sales volumes, Implats delivered strong EBITDA, earnings and free cash flow in the year-ended 30 June 2022. This was achieved while navigating the numerous operational challenges of FY2022, including rising input costs, constrained supply chains and labour market tightness, the impacts of which were compounded by extended safety stoppages, intermittent power supply and periods of community unrest.

The progress made on our strategic journey has resulted in a stronger Implats, able to withstand numerous headwinds. The Group ended the period with a strong and flexible balance sheet, well positioned to fund its planned capital expenditure programme, sustain shareholder returns and pursue a range of exciting strategic options to further enhance value delivery and long-term sustainability for Implats.

Safety

Implats' goal is to eliminate harm to the health and safety of our employees and contractors, and safe production remains our foremost priority. It is with deep regret the Group reported eight employee fatalities in the year, seven at managed operations. In memoriam: Enos Ikaneng, Mkuzeni Msindo and Nyankwabe Sambo at Impala Rustenburg's 6 Shaft following a mud-rush incident in November 2021; Isaiah Molale and Castor Chabalala in separate incidents at Impala Rustenburg's 16 Shaft; Elisha Khalema at Impala Rustenburg's 20 Shaft; Dean Nyamurenje at Zimplats' Bimha Mine; and Jacob Leshaba at Two Rivers, a joint venture (JV) operated by ARM. The board of directors and the management team have extended their sincere condolences to the families and friends of our lost colleagues, and the Group offers ongoing support to their families.

Following investigations in each case, the Group has renewed its focus on visible leadership, mining discipline and targeted safety interventions. Heightened safety measures implemented, which were shared across the Group and industry, resulted in a fatal-free final quarter.

During the 12 months to end-June 2022, the Group's fatal injury frequency rate deteriorated to 0.056 per million man-hours worked. The lost-time injury frequency rate improved by 14% to 4.21 (FY2021: 4.92) and the all-injury frequency rate by 1% to 9.76 per million man-hours worked (FY2021: 9.84). By year-end, 12 of the Group's 17 operations had achieved millionaire or multi-millionaire status in terms of fatality-free shifts.

The Group is focused on re-establishing the excellent safety performance it demonstrated in the prior comparable period, which saw several historic records reached and earned Implats the MineSafe 2021 Best Safety Performance in the PGM Sector award.

Creating a better future

Implats' purpose is to create a better future. To achieve this, the Group creates and shares value with all stakeholders over the long term, through the metals it produces, the way it does business and through delivering a superior performance. It is pleasing to report on the excellent progress delivered in the period as the Group advances its stated, value-focused strategy.

Having a competitive asset portfolio is a strategic advantage Implats has sought to strengthen through increased operational exposure to shallow, mechanisable orebodies and the continued development of its integrated processing facilities.

Key projects

Implats is committed to a five-year, R50 billion capital investment programme to extend life-of-mine development at several of its operations, increase beneficiation capacity, strengthen energy security and ensure the Group meets its decarbonisation targets. Of this capital investment, R9 billion is earmarked to expand its South African and Zimbabwean smelting and refining facilities. In addition, around R8 billion will be invested across managed and joint venture (JV) South African mining operations over the next few years to extend life-of-mine at producing mines, secure meaningful employment and entrench southern Africa's status as a stable and sustainable global PGM producer, to support enduring benefits for all stakeholders.

Added to several other life-of-mine extension projects at the Impala Rustenburg operation, Implats is confident of sustaining and growing total refined 6E PGM supply from its southern African assets over the next decade. The projects under study and in implementation at our integrated processing assets will benefit the southern African region's production, reduce the Group's processing environmental footprint and directly increase local beneficiation, positioning the region more competitively as a global mine-to-market PGM producer.

In November 2021 the Group launched the proposed acquisition of Royal Bafokeng Platinum (RBPlat), a transaction with the potential to transform the outlook of its key Western Limb assets at Impala Rustenburg, ensure long-term sustainable PGM production and continued economic benefits for the greater Rustenburg area and its communities.

Energy security and decarbonisation projects

Over the next five years, R4.3 billion has been allocated to ensuring each operation has renewable energy in the mix, to meet the Group's decarbonisation targets and strengthen energy security. Impala Canada is already 95% powered by renewable hydro power (5% natural gas), and Zimplats' energy mix is 50:50 thermal to renewable hydro power.

Zimplats obtained a 185MW power generation licence, with the first phase of a solar photovoltaic (PV) project (35MW, US$37 million) in progress and completion expected in Q2 FY2024. This is the first large-scale project towards meeting the Group's short-term (2030) decarbonisation target of a 30% reduction against the 2019 baseline, and it supports Implats' stated ambition of achieving carbon neutrality by 2050.

In addition, several studies are underway – 33MW of solar PV generation is at feasibility stage at Marula, and pre-feasibility studies were completed at Impala Rustenburg and Impala Refineries – to establish additional renewable energy capacity of around 300MW by 2030. These studies are conducted in parallel to Implats' programme to purchase renewable energy from independent power producers.

Zimplats' mine replacement and beneficiation projects

In November 2021, the board approved the expansion of existing smelter capacity at Zimplats and the installation of SO2 abatement to mitigate its air quality impacts, at a total capital vote of US$521 million. Together with the phased solar projects, this will result in an industry-leading environmental footprint for the Zimbabwean smelting facilities. This expansion will accommodate an additional 600 000 6E PGM ounces per annum, the matte from which will be transported to the existing South African processing facilities for further refining. First matte production from the new 36MW furnace is scheduled for Q3 FY2024, with commissioning of the acid plant expected in Q2 FY2025.

The US$468 million mine replacement projects, focused on upgrading Bimha Mine and developing the new Mupani Mine, progressed well and remain ahead of schedule. Full production of 3.1 million tonnes and 3.6 million tonnes per annum remains on schedule for Q1 FY2024 and Q1 FY2028, respectively. Bimha and Mupani will replace the Ngwarati, Rukodzi and Mupfuti mines, on depletion.

The construction of an initial 0.9 million tonnes per annum module at the third concentrator plant (US$104 million), together with associated additional mining fleet (US$18 million) and infrastructure, is on schedule with plant commissioning on track for Q2 FY2023.

In addition, studies are underway to refurbish and commission the base metals refinery at Zimplats, affirming our commitment to furthering in-country beneficiation.

Impala Refineries projects

The nature and quantum of ore feeds contributing to the Group's PGM production continue to evolve over time, and ounce production is set to increase in line with Implats' growth and beneficiation strategy – as such, R3.9 billion over five years has been allocated to improving the South African refining facilities. Circa R500 million was approved to de-bottleneck sections of the Base Metals Refinery in Springs and expand treatment capacity by circa 10% to provide room for future growth. In addition, the Group is completing a new precious metals facility, including three new processing sections and required utilities and ancillary areas. Feasibility studies into further capacity expansions at the South African base and precious metals refineries are also well advanced.

Marula's Phase II expansion project

The R5.1 billion Marula Phase II project was approved by the board during the year. It serves to replace production as the current Marula life-of-mine depletes and includes a concentrator plant expansion allowing for incremental production growth. The project will deliver a 17-year life-of-mine extension to FY2039, with a circa 20% increase in milling capacity to 2.4 million tonnes per annum. Capital expenditure is planned over six years, with first production scheduled for FY2023 and full capacity expected in FY2028.

Two Rivers' Merensky Mine, UG2 plant expansion and tailings projects

After experiencing delays due to Covid-19-related supply-side challenges, the pace of project execution at Two Rivers accelerated in FY2022. In partnership with African Rainbow Minerals, Implats has committed R5.7 billion over the next five years to construct a new Merensky Mine at the Two Rivers operation. The Merensky mining project was approved in FY2021 and will expand production by circa 180 000 6E ounces, with first concentrate production scheduled in FY2024 and full production planned for FY2025. Initial mining activities to support the creation of a run-of-mine (ROM) stockpile started in February 2022 with mining project completion expected in December 2024. Implats has a 46% stake in Two Rivers, but 100% of the 180 000 ounces of 6E PGM project production will be treated through the Group's smelting and refining facilities.

The 40 000 tonne per month UG2 plant expansion was commissioned in early H2 FY2022, with mining rates ramping up to maintain higher annualised feed rates to secure increased ounce production. Expansion of the tailings storage facility (TSF), which facilitates both the UG2 expansion and Merensky project, is nearing completion.

Mimosa's North Hill project

The US$90 million North Hill project will extend Mimosa's life-of-mine by circa 10 years to FY2044. The feasibility study was completed and presented to the Mimosa board in FY2022 and a memorandum of understanding to support the project execution is under discussion with the Zimbabwean government. The project will increase life-of-mine at the current production platform and sustain 227 000 tonnes per month into the existing processing plant. Steadystate production is forecast for FY2034. A plant optimisation project underway at Mimosa is aimed at improving process recoveries.

Impala Canada mill decoupling project

A mill decoupling project at Impala Canada was approved in May 2021 and will decouple the SAG mill from the crushing section to optimise the availability of milling capacity, throughput and grind. Inclement weather compounded supply chain challenges prevalent in Ontario, necessitating scope and equipment changes. Project costing has been revised to C$29.3 million and the expected completion date has been deferred by three months to Q2 FY2023.

Royal Bafokeng Platinum (RBPlat) transaction

The Group launched the proposed acquisition of RBPlat in November 2021, with an offer of R90.00 in cash and 0.3 Implats shares per RBPlat share. At year-end, the Group held 37.83% in RBPlat, and the transaction was still subject to regulatory approval. The proposed transaction is highly compelling – creating sustainable socio-economic benefits for the Rustenburg region and its communities, securing employment, unlocking significant value from the neighbouring operations and contiguous orebodies of Impala Rustenburg and RBPlat, and securing a Western Limb production base to entrench the region's position as the most significant source of global primary PGM production. The RBPlat board's recommendation of the offer and the achieved ownership levels to date indicate the broad support received and affirm the strategic rationale and value proposition provided by the acquisition.

The considerable organic and acquisitive growth ambitions outlined above were made possible by a relentless focus in recent years on achieving an optimal capital structure and ensuring that windfall profits from the current PGM cycle are appropriately harnessed to secure enduring benefit through enhanced flexibility and asset integrity to entrench operational excellence.

Sustainability

Implats' aspiration is to become an industry leader in ESG, producing metals that sustain livelihoods beyond mining and create a better future. The Group's achievements in sustainable development during the year were anchored by a sound environmental and social performance, an increase in capital allocation to ESG projects, and through prioritising safe, responsible, competitive and consistent operational delivery, while applying industry-leading ESG practices.

During the year, Implats was honoured to be recognised for its outstanding ESG performance. The Group retained, and in some cases improved, several important external rankings by leading global and regional agencies. Implats' MSCI ESG rating was upgraded to 'A' from 'BBB', reflecting an improved approach to emissions and water management, and its strong governance structures. The Group was also proud to be one of only four JSE-listed metals and mining companies to be included in the S&P Global Sustainability Yearbook 2022 – and the only company, globally, awarded the prestigious Metals and Mining Industry Mover Award.

For the third consecutive year, Implats achieved an A-rating by the Carbon Disclosure Project (CDP) for management of water security risk, a B-rating for climate change action and disclosures, and was included in the Bloomberg 2022 Gender-Equality Index. Implats remains a constituent of the FTSE4Good Index Series and the FTSE/JSE Responsible Investment Top 30 Index. All operations, bar Impala Canada, are ISO 14001:2015 certified, with three out of the five operations also ISO 45001:2018 certified. Impala Refineries holds the London Palladium and Platinum Markets Responsible Sourcing Standard certificate.

Health and wellbeing

Implats continued its proactive approach to Covid-19 prevention and treatment – including extensive employee education, strict Covid-19 protocols, the distribution of immune-boosting packs, capacitated medical facilities and employee and community vaccination outreach – which ensured lower mortality rates relative to those in the regions in which the Group operates. In recognition of its extensive employee and community vaccination programme, Implats was delighted to be awarded the SAIMM MineSafe 2021 award – Industry-leading Covid-19 Response by a Large Company. Currently, more than 90% of employees are fully vaccinated, exceeding both industry and national vaccination rates in South Africa.

As signalled by international and local health bodies, the Omicron variant of Covid-19, which emerged during the period under review, saw a shift from the pandemic phase of the outbreak to an endemic phase, where the virus is managed seasonally. Covid-19-related restrictions have adjusted globally as a result.

Further progress was made on targeted interventions to reduce the main occupational and non-occupational health risks facing employees. No new cases of noise-induced hearing loss (NIHL) as defined by the South African Industry Noise Milestones of 2023 were reported. However, 31 cases reported in prior years were assessed and compensated by a third party. Pulmonary tuberculosis (TB) and HIV levels were well controlled, with pulmonary TB cases among employees decreasing slightly to 109 (FY2021: 111). At the South African operations, the annualised TB incidence rate of 222 per 100 000 employees remains well below the estimated national average of 615 per 100 000 citizens. The Group's estimated HIV prevalence rate has remained level at 23%, with high adherence to HIV treatment at over 95%. Implats aims to increase the uptake of antiretroviral treatment to eliminate Aids-related deaths among in-service employees by 2025.

Environment

The Group's achievements in responsible stewardship were anchored by a sound environmental performance during the period. Implats introduced a Group-wide environmental strategy, four new environmental policies, and will publish its first supplementary report on climate-related risks and opportunities in line with the recommendations of the Task Force on Climate-related Financial Disclosures (TCFD). The Group's decarbonisation strategy targets carbon neutrality by 2050 and R1.3 billion was invested in environment-related projects in the period.

Access to water is a vital operational resource, a basic human right, and essential to the socioeconomic development of mine-host communities – sound water management is critical at Implats' water-scarce southern African sites. Implats is a member of a R50 billion long-term water infrastructure public-private-partnership project with other commercial water users on the Eastern Limb, which will supply bulk water to adjacent communities along the pipeline. Group water-use practices continue to improve and, in the period, water recycling/reuse of 53% was achieved against a target of 48% – the goal is to reach 70% by 2030.

Implats recorded no major (level 5) or significant (level 4) environmental incidents and achieved a 43% reduction in limited-impact (level 3) environmental incidents to four. Total carbon emissions intensity improved 8% year-on-year to 0.16 tonnes of CO₂ per tonne milled and the Group's renewable energy projects, outlined in 'Key projects' above, will contribute significantly to a progressive decline in carbon emissions over time.

Of the non-mineral waste generated, 62% was recycled against a target of 60%. Hazardous waste management continues to receive attention. All Group operations have appointed independent tailings review boards (ITRBs) to provide senior, independent and ongoing reviews of all aspects of their tailings facilities, as recommended by the ICMM's Global Industry Standard for Tailings Management. The annual ITRBs' reviews concluded that all facilities are being operated safely and effectively, have minimal risk to local communities and the environment, and meet the applicable local government and international standards. The construction of Marula's second tailings dam was completed during the year.

Social

Efforts to improve organisational effectiveness saw improved stakeholder engagement and strengthened technical capacity during the year. Successfully securing an historic five-year wage agreement at the Marula and Impala Rustenburg operations during the year was a welcome development and a testament to the Group's maturing relationships with organised labour and improved engagement processes. The agreement assures employees of increases to all major components of remuneration over the next five years and recognises the inflationary pressures they face. Importantly, the agreement secures a long period of stability as Implats progresses its growth projects. Wage agreements are also in place at the Group's Refineries, Zimplats and Canadian operations.

Stakeholder engagement was prioritised against the backdrop of high youth unemployment in many mine-host communities, union contestation and industrial action among the South African contractor workforce. High expectations lead to acrimonious competition for procurement opportunities from local business groupings and, in Canada, an ongoing critical skills shortage continues to challenge management. Implats aims to maintain constructive and beneficial relationships with its mine-host communities and prioritises sustainable socio-economic development to mitigate, where it can, challenging conditions.

In South Africa, the Group spent R170 million on community development initiatives and a further R228 million on its industry-leading housing development. In South Africa, R14 million was invested in developing local enterprises and R2.0 billion was spent with host communities (16% of discretionary spend at Impala Rustenburg and Marula), while US$55 million (or 10% of total spend) was spent with local community enterprise development suppliers in Zimbabwe. In Canada, supplies to the value of C$40 million were procured from indigenous communities.

In South Africa, Implats contributed to mine communities' wellbeing through improved healthcare services benefiting more than 32 800 people, and directly providing sustainable food security and agriculture programmes to address household food security reaching more than 400 households. Through community education and skills development programmes, the Group supported 47 schools and more than 21 000 learners, which resulted in improvements in academic performance. Eight key school infrastructure projects, aimed at improving the quality of learning and teaching environments, were completed, while three mine-community schools were equipped with state-of-the-art science laboratory apparatus to enhance performance in science and technology-related subjects. More than 630 bursaries and learnerships were offered to community members during the year, with the intention of absorbing these candidates into scarce-skills categories.

Inclusive procurement and strengthening mine-host community SMMEs remain key priorities. During the year, the Group trained and supported more than 450 SMMEs, which facilitated ongoing employment opportunities for 3 700 community members. Implats completed 24 key infrastructure projects in mine communities – spanning education, health, water, power, roads and community infrastructure – directly benefiting more than 60 000 community members. In FY2022, a further 674 houses (218 in South Africa and 456 in Zimbabwe) were built and 231 new homeowners were created in South African mine communities. Collectively, these initiatives supported more than 5 300 employment opportunities and directly benefited more than 100 000 people with a total of R779 million spent on sustainable development in mine communities during the year.

During the period, the Group donated R10 million to NGO Gift of the Givers Foundation, to support disaster relief efforts following the devastating floods in South Africa's KwaZulu-Natal province.

Stakeholder engagement efforts continue to be prioritised and take place through established formal community engagement structures across the Group. Zimplats enjoys cordial relations with its communities and Impala Canada continues to make progress in developing strong relationships with host Indigenous communities.

Group operational review

Implats navigated several operating challenges during the year. Extended safety stoppages, intermittent industrial action and power supply interruptions at Impala Rustenburg had a notable impact on production, while a storm-related provincial power outage, ongoing supply-chain and labour availability constraints hampered operational continuity at Impala Canada. Marula delivered record production in the period and Zimplats sustained production levels despite a complex operating environment and increased project activity.

Tonnes milled from the Group's managed operations decreased by 4% to 22.36 million tonnes (FY2021: 23.21 million tonnes) with lower reported volumes at Impala Rustenburg and Impala Canada offsetting improved throughput at Marula and Zimplats. 6E concentrate production at managed operations decreased by 4% to 2.27 million ounces (FY2021: 2.37 million ounces).

Production volumes at the JV Two Rivers operation were impacted by extended safety stoppages while the JV at Mimosa continued to grapple with a drop in process recoveries. 6E concentrate production from JV operations declined by 2% to 548 000 ounces (FY2021: 561 000 ounces). Third-party 6E concentrate receipts decreased by 2% to 351 000 ounces (FY2021: 358 000 ounces) as the ramp-up of deliveries from new contracts was slower than expected, with third-party customers facing a series of operational challenges. In aggregate, total 6E concentrate production of 3.17 million ounces was 4% lower (FY2021: 3.29 million ounces).

Group refined 6E production of 3.09 million ounces (including saleable production from Impala Canada) was 6% lower (FY2021: 3.27 million ounces), impacted by lower concentrate production and the extended maintenance required on the Number 3 furnace at Impala Rustenburg. Refined volumes in the prior comparable period benefited from increased availability of processing capacity due to the timing of annual processing maintenance.

Inflationary pressures from energy and consumables were compounded by the planned increase in headcount across the Group and the payment of the previously signalled discretionary employee bonus in recognition of the strong financial performance in FY2021. Total cash operating costs increased by 12%, with the impact of lower mined and refined volumes resulting in a 17% increase in unit costs to R17 364 per 6E ounce (FY2021: R14 840 per ounce) on a stock-adjusted basis.

Capital expenditure increased by 41% to R9.1 billion (FY2021: R6.4 billion) as investment accelerated across the mining and processing operations at Impala Rustenburg and several Group replacement and growth projects were initiated during the period. Spend in the previous comparable period was constrained by Covid-19-related factors.

Impala

Impala Rustenburg navigated an increasingly disrupted operating environment in FY2022. Challenges from the socio-economic pressures facing its labour force, communities and municipal, provincial and national administrations resulted in additional complexity. Production was negatively impacted by heightened community contestation, poor service delivery, unprotected industrial action among the contractor workforce and unstable power supply from Eskom. A disappointing retracement in safety performances also resulted in lengthy mine stoppages. These factors resulted in interruptions to the mining cycle and impacted grade due to changes in ore mix mined, resulting in severely impeded operational momentum. By the end of the period, performance had yet to return to optimal levels. However, sequential improvements were delivered in the final quarter of the period as a series of targeted strategies and interventions were scoped and implemented to address the underlying challenges.

Impala's strategic focus remains on transitioning to a lower-cost and sustainable operation. The team continues to focus on strengthening and optimising the business through investing in mineable face length, enhancing and de-risking critical infrastructure, and progressing a suite of life-of-mine extensions to support sustained production levels in the medium and longer term. Plans to increase capacity across its industry-leading processing assets are being advanced.

Total development declined by 8% in the period; however, mineable face length increased by 2% to 25.8km with improvements at 12, 16 and 20 shafts compensating for the closure of 9 Shaft. Tonnes milled decreased by 8% to 9.80 million tonnes (FY2021: 10.69 million tonnes) and milled grade declined to 3.86g/t (FY2021: 4.05g/t) due to operational interruptions at high-grade shafts and higher relative production in the lower-grade trackless section, which negatively impacted ore mix.

The Section 54 safety stoppage at 16 Shaft following a fatality at end-November 2021 was lifted in mid-January and full production was restored by end-February 2022. The Section 54 safety stoppage at 6 Shaft, following three fatalities in a mud inundation at the bottom of the shaft at end- November 2021, was lifted in early March 2022, with full production achieved during April 2022. Section 54 stoppages by the DMRE increased by 89% to 36 in the period, with a 9% increase in management stoppages.

Further improvements in concentrator recoveries partially offset lower mined volumes and milled grade. 6E production in concentrate decreased by 9% to 1.17 million ounces, while stock-adjusted 6E production declined by 9% to 1.20 million ounces (FY2021: 1.31 million ounces).

Refined 6E production of 1.14 million ounces was 15% lower than the prior comparable period, due to lower production volumes coupled with reduced available processing capacity flowing from the extended rebuild of Number 3 Furnace. This furnace was scheduled for a partial rebuild during Q3 FY2022. However, worse than expected refractory wear led to the decision to undertake a full rebuild – extending the maintenance period to approximately four months from the previously expected six weeks. The availability of processing capacity in the prior comparable period benefited from expedited annual maintenance, which was performed in the final weeks of FY2020 to coincide with the slower-than-usual rate of mining production given Covid-19 lockdowns.

Sales volumes declined by 5% to 1.16 million 6E ounces (FY2021: 1.23 million 6E ounces) as higher platinum sales were offset by lower sales of palladium, rhodium and the minor PGMs.

Total cash costs, including corporate and marketing costs, increased by 11% to R24.4 billion (FY2021: R21.9 billion). Above-CPI increases on consumables, including steel, fuel and chemicals, utilities and labour, resulted in mining inflation of 8.9%, which was compounded by the increase in average working cost headcount, contractor expenditure and the discretionary employee bonus payment of R544 million. On a stock-adjusted basis, unit costs increased by 22% to R20 340 per 6E ounce (FY2021: R16 729 per ounce), with inflationary pressures exacerbated by lower production volumes.

Capital expenditure increased by 35% to R3.4 billion (FY2021: R2.5 billion). Stay-in-business spend increased by 38% to R3.1 billion as investment in several mining and processing projects to improve asset and infrastructure integrity was accelerated. Replacement capital declined by 24% to R186 million as the 16 Shaft project neared completion and spend on the 11C Shaft UG2 and 12 Shaft decline projects was approved and initiated during the period. R796 million (FY2021: R224 million) of total spend was invested in the Rustenburg smelters and the base and precious metal refineries.

Impala delivered R10.6 billion in free cash flow, a 37% decrease from the prior comparable period, due to lower sales revenue, a higher cost base and increased capital investment in the period. Impala made a gross profit of R15.6 billion (FY2021: R25.2 billion) and contributed R11.5 billion to Group headline earnings (FY2021: R17.3 billion).

Impala Refining Services (IRS)

Receipts of 6E matte and concentrate from mine-to-market operations increased by 2% to 1.41 million ounces (FY2021: 1.38 million ounces). Receipts from managed operations at Marula and Zimplats increased by 11% to 878 000 6E ounces (FY2021: 788 000 ounces), while receipts from Two Rivers and Mimosa declined by 10% to 534 000 ounces (FY2021: 591 000 ounces). Third-party 6E receipts decreased by 2% to 351 000 ounces (FY2021: 358 000 ounces) as the ramp-up of deliveries from new contracts was slower than expected and certain third-party customers faced operational challenges. Receipts in the prior comparable period benefited from the deferred receipt of concentrates accumulated during the South African Covid-19 lockdown at IRS in FY2020. In aggregate, gross 6E receipts of 1.76 million ounces were 2% higher than the prior comparable period (FY2021: 1.74 million ounces).

Refined 6E volumes increased by 1% to 1.72 million ounces (FY2021: 1.69 million ounces), benefiting from a consistent processing performance in H1 FY2022 and the reduction in previously accumulated excess inventory. Sales volumes of 1.75 million 6E ounces decreased by 3% (FY2021: 1.81 million 6E ounces) as sales of minor PGMs decreased period-on-period, following the opportunistic destocking of refined inventory into higher pricing in the prior comparable period.

The cash operating costs associated with smelting, refining and marketing IRS production increased 6% to R2.0 billion (FY2021: R1.8 billion). Provisional pricing adjustments for material in the contractual pipeline at a lower closing price resulted in the cost of metals purchased declining by 14% to R54.6 billion (FY2021: R63.3 billion). IRS reported a gross profit of R8.0 billion (FY2021: R9.5 billion) and contributed R5.7 billion to headline earnings (FY2021: R7.1 billion). Free cash flow generated declined by 7% to R8.4 billion (FY2021: R9.0 billion).

Zimplats

Zimplats continued to deliver consistent results with sustained operating momentum. During the year, capital project activity increased significantly as the operation focuses on harnessing the inherent mining flexibility and optionality offered by the asset. Project development is concentrated on optimising processing capacity and infrastructure, while simultaneously delivering a step-change in the mine's carbon footprint and environmental performance. This will position Zimplats as a low-carbon producer of PGMs, entrenching its position as a premier low-cost, capital-efficient, shallow and mechanised asset.

Milled volumes increased by 1% to 6.88 million tonnes (FY2021: 6.82 million tonnes) as increased milling from the ROM stockpile compensated for lower volumes from Ngwarati (following repairs to the decline access necessitated by the high-wall subsidence in FY2021) and Mupfuti (where equipment availability was negatively affected by a changeover in its maintenance contractor). 6E concentrate production of 589 000 ounces was flat year-on-year, while matte production increased 1% to 583 000 ounces. Sales volumes increased by 15% to 625 000 6E ounces (FY2021: 543 000 ounces) and benefited from the deferred deliveries of production in the current period following export administrative delays in late FY2021.

Total cash costs increased by 8% to US$423 million (FY2021: US$387 million), with mining inflation of circa 5% compounded by a higher average headcount and the payment of a discretionary employee bonus. Unit costs per tonne milled increased by 7% to US$61 per tonne, while stock-adjusted unit costs of US$724 per 6E ounce increased by 10% (FY2021: US$661 per ounce).

Capital expenditure increased by 70% to US$270 million (FY2021: US$159 million) and was 68% higher in rand terms as the Mupfuti Mine replacement project increased, and housing development and spend on both the third concentrator plant and the new smelter accelerated in the period.

The benefit of higher achieved nickel pricing and improved sales helped offset the impact of negative provisional pricing adjustments of R1.5 billion. Sales revenue declined by 4% to R19.3 billion (FY2021: R20.1 billion). Gross profit was R10.2 billion (FY2021: R11.6 billion). Zimplats generated R3.8 billion in free cash flow (FY2021: R4.8 billion) and contributed R6.8 billion in headline earnings to the Group (FY2021: R4.5 billion).

Marula

Marula delivered a stellar operating performance during the year. The mine achieved record production as ongoing stakeholder interventions limited community disruptions and the safety performance improved, allowing the operation to reap the full benefit of an improved mining performance.

Milled tonnage improved by 11% to 2.00 million tonnes (FY2021: 1.80 million), while a strong mining performance advanced the ratio of stoping-to-development tonnes, resulting in a 4% increase in the 6E milled head grade to 4.53g/t (FY2021: 4.37g/t). Concentrate production increased by 12% to 259 000 6E ounces from 231 000 ounces in FY2021, which had benefited from yield gains from surface sources.

Mining inflation of 8.8%, higher variable costs, additional headcount and the discretionary employee bonus payment weighed on cash costs, which rose 22% to R3.4 billion (FY2021: R2.8 billion). Cost inflation was partially offset by higher volumes and unit costs increased by 9% to R13 200 per 6E ounce (FY2021: R12 157 per ounce). The bonus contributed R241 per ounce or 2% of the reported unit cost increase. Capital expenditure decreased by 6% to R321 million as spend on fleet replacement slowed and the TSF facility was completed in the period. This was partially offset by the initiation of spend on the Marula Phase II replacement project.

The 14% increase in 6E sales volumes to 261 000 ounces (FY2021: 229 000 ounces) was more than offset by the 7% decline in revenue per 6E ounce sold to R35 423 (FY2021: R38 260) and the impact of negative provisional pricing adjustments. Sales revenue declined by 10% to R8.4 billion (FY2021: R9.3 billion). Gross profit declined by 26% to R4.3 billion (FY2021: R5.9 billion), while headline earnings increased to R3.0 billion from R1.7 billion in the prior comparable period when reported profitability was impacted by the R1.5 billion IFRS 2 BEE charge. Marula generated R3.1 billion in free cash flow, an 8% increase from the prior comparable period when cash flow generation reflected the lagged impact of delayed contractual payments resulting from the South African Covid-19 lockdown in FY2020.

Impala Canada

Impala Canada continued to struggle with a challenging and complex operating environment. During an extreme winter storm in April 2022, significant damage to the Ontario power grid infrastructure resulted in an eight-day power outage at the mining operation. The impact of a shortage of critical skills and logistical constraints related to supply chain issues were compounded by the Omicron wave of the pandemic, which saw the reintroduction and tightening of certain lockdown measures. Several interventions to address staffing constraints and increase operational flexibility and consistency are being implemented.

The operation delivered mill throughput of 3.69 million tonnes, a 6% decline from the prior comparable period (FY2021: 3.90 million tonnes). The 4% improvement in head grade to 2.68g/t (FY2021: 2.59g/t) partially offset lower milled production and yielded 249 000 6E ounces in concentrate (FY2021: 260 000 ounces). Cash costs were impacted by mining inflation of 8.5%, compounded by retention and recruitment initiatives and additional maintenance spend on equipment and the mill, and increased by 19% to C$316 million (FY2021: C$266 million). Unit costs increased by 25% per 6E ounce in concentrate to C$1 272 (FY2021: C$1 021 per ounce).

Capital expenditure of C$107 million (FY2021: C$94 million) was incurred on developing the underground expansion project, the TSF, the mill decoupling project and strengthening critical infrastructure at Lac des Iles.

Average palladium pricing softened from the prior comparable period. Sales volumes decreased by 4% to 250 000 6E ounces and revenue of R6.9 billion (FY2021: R9.0 billion) was impacted by the negative effect of provisional pricing and declined by 23%. Gross profit was R1.7 billion (FY2021: R4.1 billion) and Impala Canada contributed R965 million in headline earnings to the Group (FY2021: R2.8 billion). Free cash flow of R1.0 billion (FY2021: R3.1 billion) was negatively impacted by the timing of final tax payments relating to FY2021.

Two Rivers

Two Rivers faced several operational challenges in a period marked by extended safety stoppages, community interruptions and intermittent power instability.

The secondary mill expansion project was commissioned in February 2022 and facilitated higher milled throughput, partially offsetting the impact of operational challenges. Milled volumes improved by 5% to 3.46 million tonnes (FY2021: 3.28 million tonnes), despite the impact of an extended safety stoppage early in the period. These volume gains were offset by a 6% lower milled grade of 3.22g/t 6E (FY2021: 3.43g/t), impacted by both the split reef and the milling of ore stockpiles to offset the production impact of safety stoppages. As a result, 6E concentrate volumes increased by 1% to 302 000 6E ounces.

Total cash costs increased by 8% to R3.4 billion, with inflationary pressures somewhat offset by lower mined volumes. Unit costs per tonne milled benefited from the drawdown of ore stockpile and increased 3% to R973 per tonne (FY2021: R949 per tonne). Costs per 6E ounce in concentrate increased by 14% to R11 491 per ounce on a stock-adjusted basis (FY2021: R10 074 per ounce).

Capital expenditure increased by 48% to R1.8 billion (FY2021: R1.2 billion) as spend on the new Merensky Mine expansion project accelerated.

Lower pricing for platinum, palladium and rhodium saw sales revenue decline by 8% to R33 968 per 6E ounce. Sales revenue was further impacted by lower sales volumes and negative swings in provisional pricing adjustments and declined by 21% to R9.4 billion (FY2021: R12.0 billion). Gross profit of R4.9 billion (FY2021: R7.5 billion) was 35% lower than the prior comparable period. The 46% attributable share of profit from associates to the Group increased by 17% to R2.0 billion (FY2021: R1.7 billion) and Implats received R1.1 billion (FY2021: R1.2 billion) in dividends from Two Rivers.

Mimosa

Mimosa operated well in the period. However, the operation was hampered by processing instability due to a change in reagent suppliers because of global supply chain constraints, intermittent power interruptions and poor water quality, which together led to lower process recoveries and negatively impacted reported metal production.

Milled volumes declined by 2% to 2.82 million tonnes (FY2021: 2.86 million tonnes), while milled grade was marginally lower at 3.82g/t (FY2021: 3.87g/t). Process recoveries were negatively impacted by constrained capacity, changes in the reagent suite and poor water quality issues. As a result, 6E concentrate volumes decreased 6% to 246 000 ounces (FY2021: 261 000 ounces). Ongoing work to improve plant performance yielded some recovery benefits towards period end. Sales were impacted by transport constraints and administrative delays and declined by a pronounced 17% to 235 000 6E ounces (FY2021: 283 000 ounces). Volumes in the prior comparable period benefited from the deferred delivery of concentrate inventory accumulated during the South African Covid-19 lockdown in late FY2020.

Cash costs at Mimosa increased by 4% to US$226 million (FY2021: US$217 million) with inflationary pressures partially offset by lower transport and selling expenses because of lower sales volumes. Unit costs per tonne milled rose by 5% to US$80 per tonne (FY2021: US$76 per tonne), while unit costs per 6E ounce of US$915 were skewed by poor yields and increased by 10% (FY2021: US$832 per ounce).

Capital expenditure increased by 32% to US$78 million (FY2021: US$59 million) as spend on the plant optimisation project accelerated and studies on the North Hill life-of-mine extension was completed.

Lower sales volumes and negative swings in provisional pricing caused revenue to decline by 25% to R8.0 billion (FY2021: R10.8 billion). Gross profit was lower at R3.7 billion (FY2021: R6.2 billion). The 50% attributable share of profit from associates to the Group decreased by 18% to R1.3 billion (FY2021: R1.6 billion) and R438 million (FY2021: R561 million) in dividends was received from Mimosa.

Mineral Reserves and Mineral Resources

The attributable Mineral Resource estimate decreased to 268.6 million 6E ounces, due to the exclusion of 4.0 million 6E ounces at Afplats from the expired prospecting rights on the farms Kareepoort 407-JQ and Wolvekraal 408-JQ. Overall production depletion was slightly offset by the addition of 0.37 million 6E ounces Mineral Resource from 12 Shaft decline at Impala Rustenburg.

The attributable Mineral Reserves increased by 4.3% to 55.7 million 6E ounces. This increase relates to the following changes at Group operations:

• Impala Rustenburg's inclusion of the 12 Shaft decline and 11C Shaft UG2 projects as Mineral Reserves
• The approval of the Marula Phase II UG2 Mineral Reserves of 3.6 million 6E ounces
• Mimosa's 1.6 million 6E ounce increase relates to the approval of North Hill Mineral Reserves
• Lac des Iles' inclusion of converted Mineral Resources to Mineral Reserves in the Offset C-zone.

Financial review

Implats continued to deliver robust EBITDA, earnings and free cash flow in FY2022 despite lower rand PGM pricing and the need to navigate several operational challenges. Implats' strong and flexible balance sheet allowed the Group to pursue value-accretive organic and acquisitive growth, while maintaining its stated commitment to sustainable shareholder returns.

Revenue of R118.3 billion was 9% or R11.2 billion lower than the prior comparable period:

• Lower sales volumes resulted in a 5% or R6.6 billion reduction in revenue. 6E sales declined by 4% to 3.15 million ounces. Sales were impacted by lower production volumes, compounded by extended furnace maintenance, but benefited from the release of refined stocks of platinum and palladium. Platinum sales increased by 7% to 1.49 million ounces, palladium sales at 1.07 million ounces were similar to the prior comparable period, while rhodium sales were 11% lower at 177 300 ounces. Sales volumes in the prior comparable period benefited from destocking of minor PGMs
• Lower dollar metal prices resulted in a 3% or R3.6 billion reduction in revenue. Weaker achieved palladium, rhodium and platinum prices accounted for a R3.5 billion, R2.9 billion and R800 million decline in revenue, respectively. Stronger pricing for the minor PGMs and base metals helped offset these declines. Total dollar revenue per 6E ounce sold benefited from changes in the sales mix, with higher platinum sales and lower ruthenium sales in the period, and declined by 4% to US$2 481 per ounce (FY2021: US$2 587 per ounce)
• The achieved rand exchange rate strengthened slightly to R15.22/US$ (FY2021: R15.26/US$) resulting in a further R0.5 billion decrease in revenue. Consequently, the rand revenue per 6E ounce sold decreased by 4% to R37 703 (FY2021: R39 478).

Cost of sales of R77.0 billion increased 1% or R927 million:

• The combination of lower volumes purchased from JVs and third parties and softer rand metal pricing resulted in a 21% or R7.0 billion decrease in the cost of metals purchased. Volumes in the prior comparable period were elevated by the deferred receipt of concentrates accumulated during the South African national Covid-19 lockdown in FY2020
• Cash costs increased by 12% or R4.2 billion due to the impact of 8.3% mining inflation, the payment of a once-off discretionary employee bonus and a higher average labour complement
• Depreciation increased by 6% to R5.8 billion, with the impact of lower production offset by the higher carrying value of Impala Rustenburg's assets following the impairment reversal in FY2021
• Royalties declined by 27% or R1.3 billion, with the impact of lower profitability partially offset by the unwinding of the Royal Bafokeng Nation royalty
• The credit to the cost of sales arising from movement in inventory decreased to R21 million from R5.3 billion. Lower levels of refined stock were offset by the higher cost of mined production and higher Impala in-process stock levels at the smelter due to extended maintenance.

Stock-adjusted unit costs increased by 17% or R2 524 per 6E ounce to R17 364:

• Group mining inflation of 8.3% at managed operations contributed R1 223 per 6E ounce to the increase, with inflation of 8.9% at South African operations increasing from 6.4% in FY2021. The Group recorded US dollar inflation of 5.4% at Zimplats. Inflation at Impala Canada was exacerbated by retention and recruitment initiatives and exposure to energy pricing, which resulted in inflation increasing to 8.5%
• A 5% increase in average working cost employee numbers at managed operations accounted for R164 per 6E ounce, or 1% of the increase, while the discretionary employee bonus contributed R290 per 6E ounce, or 2%, to the recorded increase
• Tonnes milled at managed operations declined by 4% while gross refined 6E PGM volumes declined by 6%. These lower production volumes accounted for R733 per 6E ounce, or 5% of the recorded unit cost increase.

The combination of lower revenue and higher cost of sales reduced gross profit by 23% to R41.3 billion from R53.5 billion in FY2021.

Implats accounted for two significant once-off, non-cash items in FY2021: an impairment reversal of R14.7 billion; and a R1.5 billion IFRS BEE charge relating to the restructuring of Marula's BEE debt, which was included in other expenses. Income also benefited from reduced foreign exchange losses of R161 million (FY2021: losses of R1.3 billion), with the rand closing the period at R16.27/US$ (FY2021: R14.32/US$).

Income from associates increased by 34% or R1.1 billion to R4.3 billion, bolstered by the reversal of unrealised profits in inventory at both Mimosa and Two Rivers, mostly due to lower closing 6E rand prices. Implats accounted for a maiden earnings contribution of R825 million, associated with its 37.83% stake in RBPlat at year-end.

The Group recorded EBITDA of R53.4 billion (FY2021: R61.4 billion) at an EBITDA margin of 45% (FY2021: 47%).

The tax charge for the year amounted to R12.1 billion resulting in an effective tax rate of 26.7% (FY2021: R20.1 billion and 29.5%).The tax charge in the prior comparable period was elevated by the deferred tax charge of R4.1 billion raised on the impairment reversal, while in the current period it benefited from a credit of R0.2 billion following the change in the South African tax rate.

Basic earnings declined to R32.0 billion or 3 856 cents per share, from R47.0 billion or 5 996 cents per share. Headline earnings of R32.0 billion or 3 853 cents per share were 12% and 17% lower, respectively. The weighted average number of shares in issue increased to 831.25 million from 784.43 million, with total issued capital at 30 June 2022 increasing to 850.22 million shares, including treasury shares. Implats issued 32.95 million shares, with a fair value of R6.5 billion, in part consideration for the 37.83% stake acquired in RBPlat.

The Implats board approved the declaration of a final dividend of R8.9 billion or 1 050 cents per ordinary share, in terms of the Group's dividend policy, which is aligned to its capital allocation framework, and after considering the Group's forecast cash requirements and obligations under the guarantees provided to the Takeover Regulation Panel (TRP) in respect of the RBPlat mandatory offer of R16.2 billion. This brings the total dividend for FY2022 to R15.75 per share (FY2021: R22.00 per share). The dividend was declared from retained earnings and will be paid on Monday, 26 September 2022.

Net cash from operating activities of R34.9 billion declined by 16% or R6.9 billion due to lower sales volumes delivered into weaker average rand pricing. Capital cash outflows increased by 43% to R9.0 billion (FY2021: R6.3 billion). Investment in stay-in-business and replacement spend in the prior comparable period was limited by Covid-19 constraints. In the current period, investment spend increased by 26% to R7.6 billion (FY2021: R6.3 billion) across Group operations. The increased investment in Zimplats' processing assets resulted in expansion capital increasing to R1.4 billion.

The cash consideration associated with the RBPlat acquisition resulted in a R9.9 billion outflow during the period. Implats received R2.1 billion in dividends from its JV associates, while dividend payments totalling R14.8 billion (FY2021: R11.2 billion) were made to shareholders and non-controlling interests.

The Group balance sheet remained debt free, with closing net cash (excluding finance leases of R1.2 billion) increasing to R26.5 billion (FY2021: R23.5 billion). At the end of the period, the Group had undrawn, dual-tranche revolving credit facilities of R6 billion and US$125 million in place, resulting in liquidity headroom of R34.5 billion.

The Group has provided guarantees of R16.8 billion to the TRP in terms of the mandatory offer for the remaining circa 62% in RBPlat, with a liquidity covenant requiring cash holdings to fully cover the quantum of the guarantee. Subsequent to year-end, the guarantees were reduced to R16.2 billion in line with outstanding shares in RBPlat subject to the offer.

Implats' capital allocation framework aims to sustain and grow meaningful value for all stakeholders and provide attractive returns to shareholders, while retaining financial flexibility for the Group.

During the period, Implats incurred R7.6 billion spend on stay-in-business capital, with a further R867 million spent on acquiring shares for the Implats share incentive schemes. After adjusting for R559 million in foreign exchange translation gains, the Group generated R29.9 billion in adjusted free cash flow (FY2021: R36.0 billion).

Of this adjusted free cash flow, 38% was allocated to growth and investment through funding the cash consideration for the Group's 37.83% investment in RBPlat, investment in brownfield expansion projects at our processing operations, and contributions to AP Ventures (PGM venture capital). Free cash flow allocation to shareholder returns, through the interim and final dividends and payments to Zimplats minority shareholders, accounted for circa 47% of adjusted free cash flow in the period.

The interim dividend of R4.6 billion accounted for 30% of H1 FY2022 adjusted free cash flow, in line with the Group's previously signalled minimum dividend policy, while this allocation increased to circa 65% of H2 FY2022 adjusted free cash flow for the final dividend declared. As a result, total dividends declared for the financial year amount to circa 47% of adjusted free cash flow, which is above the minimum of 30% and reflects the robust cash generation during the period – after considering the Group's cash and liquidity obligations under the RBPlat mandatory offer. R4.5 billion, or 15% of adjusted free cash flow generated, was allocated to the balance sheet, R306 million was invested for future rehabilitation obligations, and R4.2 billion was retained to meet the Group's liquidity requirements in terms of the TRP guarantees and fund the Group's potential obligations under the RBPlat mandatory offer.

Market outlook (calendar years unless otherwise stated)

All three major PGM markets – platinum, palladium, and rhodium – recorded fundamental surpluses in 2021. The combination of accelerated destocking of producer inventories, coupled with the shortfall in expected auto demand due to the worsening semi-conductor chip shortage, resulted in a year characterised by extreme volatility with tight physical markets and price support in the first half of the year countered by increased primary and secondary refined supplies and erratic auto purchasing in the latter months.

2022 has seen several revisions to forecast PGM demand and supply: supplies will be impacted by operational challenges at South African and North American operations, refined volumes will be affected by required maintenance at several major processing complexes, and the pattern of Russian sales is complicated by the potential impact of restrictions on routes to market. From a demand perspective, auto volumes have been downgraded by the lingering impact of supply chain challenges, the lockdown in China in the first six months of the year and the deteriorating outlook for global growth, in Europe in particular. Industrial demand is expected to soften off the high base of 2021 and a weaker Chinese jewellery market will offset growth elsewhere.

Implats' supply and demand models reflect updated supply guidance provided with the release of peer group reporting and rolling auto demand revisions. The Group has lowered its estimates of recycling flows in the medium term and adjusted for lower growth expectations on industrial demand. Group forecasts indicate tight rhodium and palladium markets and continued surpluses in the platinum market in 2022.

The pandemic-battered global economy showed an initially strong recovery in 2021. Activity was at times uneven, the pace of the recovery saw inflation rising across the globe and, with this, came expectations for less accommodative monetary and fiscal policy. The economic damage triggered by Russia's invasion of neighbouring Ukraine will compound these pre-existing headwinds and cause a significant slowdown in global growth in 2022 and beyond, through its spill-over effects on trade, commodity markets and financial channels.

The July 2022 update to the International Monetary Fund's (IMF's) World Economic Outlook projected global economic growth of 3.2% in 2022 and 2.9% in 2023, reflecting negative revisions to the outlook for the major economies of the US, China and Europe. The risks to the outlook remain tilted to the downside – the potential for reduced gas supplies to Europe could materially alter both the inflation and growth outlook in the region, while an ongoing zero-Covid policy in China is likely to further suppress economic momentum.

The platinum price closed the financial year 28% weaker at US$907 per ounce, with average pricing declining by 4% to US$1 003 per ounce. The platinum market remains in a 'pre-investment' surplus, with underlying auto, industrial and jewellery demand insufficient to absorb primary and secondary refined supply. Pricing is therefore heavily dependent on macro-economic news flow in general and the trajectory of the US dollar and the gold price, in particular.

Palladium closed FY2022 some 31% lower at US$1 888 per ounce, with average pricing of US$2 206 some 9% weaker, negatively impacted by stuttering auto production and increased physical flows from South African producer destocking in the final quarter of 2021. The escalation of the Russian-Ukrainian conflict in the early months of 2022 saw pricing race higher, however, before the perception of supply risk receded and the demand outlook became clouded by the impact of China's zero-Covid policy and the increasingly uncertain macro-economic outlook.

Rhodium pricing exhibited significant price volatility in FY2022, with an almost 50% differential between peak-to-trough pricing. While average pricing of US$16 160 per ounce declined by 12% versus the prior comparable period, the closing price at period end of US$14 000 per ounce was 28% lower, buffeted by aggressive destocking of producer inventories accumulated during processing facility repairs in 2020, together with additional supply from autocatalyst recycling, which coincided with softening purchases by automotive firms grappling with production shortfalls because of chip shortages.

2022 brought a series of new challenges to the struggling global light-vehicle market. European supply chain difficulties, compounding the already chip-constrained situation, intensified almost immediately after Russia invaded Ukraine – several key suppliers in the country could not operate due to the war. In addition, China's zero-Covid policy and associated lockdowns have reduced production results in the first six months of the year. LMC Automotive retains the view that supply constraints remain the most pressing issue for the near-term automotive outlook, with lengthy delays on new vehicle deliveries and inventories well below normal operating levels. Simply put, while underlying demand may be reduced by the effects of inflation, there remains a significant reservoir of unmet demand which should provide underlying support to a rebound in automotive production once supply chain constraints ease. Forecasts have been revised down to factor in the challenges and constraints faced year-to-date.

PGM demand from the global heavy duty auto sector has benefited from tightening legislation in both China and India, while expectations for the role of fuel-cell-powered heavy duty vehicles continues to increase and provide longer-term support to platinum demand from this sub-sector.

At the light-duty vehicle (LDV) powertrain level, the growing momentum in the battery-electric vehicle (BEV) sector continued. A combination of government policy, OEM strategy and increasing environmental concerns will be key factors in fuelling further BEV growth, while there are rising concerns of availability and pricing of required commodities. High PGM pricing and the maturation of recent emission legislation has prompted thrifting efforts by OEMs, and changes in the conformity factors to be applied to future Chinese standards have resulted in downgrades to previously assumed catalyst loadings. The next series of major emission standards changes is expected in 2023. In 2022, changes in auto demand will primarily be driven by underlying production volumes, which are expected to run ahead of sales to replenish depleted inventory levels, and changes in the underlying choice of metals used.

The platinum jewellery sector continued to struggle with intermittent Covid-19 outbreaks in the key Asian markets of China, Japan and India in 2021, limiting the pace of the expected rebound in demand from pandemic-ravaged 2020. Conversely, demand in North American and European markets exceeded initial expectations as pent-up consumer demand and limited opportunities for expenditure on travel and services saw restocking by the trade. Softer Chinese demand will likely offset growth elsewhere and, in total, a stable jewellery market is expected in 2022.

Lower economic activity and industrial production, in Europe in particular, are likely to lead to an easing of industrial demand for PGMs in 2022.

Positive momentum and intent continued to build for the nascent hydrogen economy in 2021 – with the current energy crisis in Europe resulting in additional policy and funding support in 2022. Platinum and iridium are used in proton exchange membrane (PEM) electrolysers, which produce hydrogen through the electrolysis of water, and various PGM technologies are emerging to store and transport both hydrogen and ammonia. At present, hydrogenrelated PGM demand is dominated by consumption in stationary and portable fuel cells, but the role of fuel-cell electric vehicles in the future drive train of both light- and heavy-duty powertrains is widely recognised as a structural growth driver for platinum demand. We expect forecasts for hydrogen-related PGM demand to evolve over the medium term as technology paths, loading factors and market sizes become clearer. Although current demand remains small, it is expected this sector represents the most material potential new source of PGM demand over the next decade.

Implats' base case remains for muted investor activity in PGMs during 2022, given the macro-economic headwinds to platinum sentiment and previously accumulated ETF holdings. The Group's primary supply outlook for 2022 has been downgraded due to the need for extensive processing maintenance at key South African processing facilities and further logistical challenges in North America. The pattern of Russian supply and growth is also clouded by uncertainty, given the geopolitical headwinds and uncertain path-to-market of PGMs.

In total, medium-term supply is expected to drop sharply from the elevated base in 2021 and lag pre-Covid levels, before processing facility maintenance and debottlenecking facilitate a modest recovery in volumes. In 2022, rising interest rates, the rapid escalation in transport costs and the weaker-than-expected new vehicle sales outlook are likely to dampen recycling volumes once again, delaying the expected growth in secondary supplies into 2023.

Implats benefits from a series of long-term customer relationships and its reputation as a consistent, sustainable and reputable producer of premiumquality key products. Conversations with our core customer base continue to reflect increased requests for metal on long-term supply contracts and support our view of robust medium-term demand for platinum, palladium and rhodium. Customer requests reflect growing industrial and automotive uses for platinum while discussions on long-term availability for iridium and ruthenium continue to rise in importance.

Prospects and outlook

Macro-economic uncertainty, inflationary pressures and geopolitical challenges are likely to persist in FY2023 and the Group remains vigilant in timeously assessing and responding to the risks this uncertain environment presents to its people, operations and the implementation of its strategy.

The operational focus in the near term will be the re-establishment of positive operational momentum at Impala Canada and Impala Rustenburg, the ramp-up of installed milling capacity at Zimplats and Two Rivers and the timeous and cost-effective advancement of the Group's significant suite of life-of-mine extension and growth projects across its mining and processing assets.

Implats continues to proactively pursue the conclusion of the offer process associated with the proposed acquisition of RBPlat, with a key focus on securing outstanding regulatory approval from the Competition Tribunal.

PGM pricing remains robust, and the Group has retained a strong and flexible balance sheet which provides a meaningful underpin to its ability to withstand short-term headwinds and fluctuations in consumer and industrial demand, while pursuing its capital investment programme and sustaining attractive shareholder returns.

Implats' future-focused strategy seeks to sustain and grow value by supporting present and future PGM demand, aligning production to evolving demand, and creating and sustaining strong customer relationships. Along with its investment in AP Ventures, which supports market development for evolving end-uses for PGMs – such as hydrogen technologies, fuel cells and other energy storage – Implats promotes research and development and plays a leading role in the industry bodies supporting the PGM investment and jewellery markets.

In the longer term, the Group's strategy aims to evolve with the world in which it operates. Internal capacity to explore and understand the potential associated with new business opportunities, and the transition to alternative future-facing high-value commodities, has been increased.

Guidance

Mine-to-market concentrate volumes in FY2023 will be supported by growth from Zimplats and Two Rivers and the expected improvement in operating momentum at Impala Rustenburg and Impala Canada. The conclusion of two contracts at IRS will result in lower third-party receipts. Group 6E refined production is expected to be between 3.0 and 3.15 million ounces and will be impacted by the scheduled rebuild of the next furnace during the period. Group sales are expected to be in line with refined volumes. Group unit costs are forecast to rise by between 5% and 11% to between R18 200 and R19 200 per 6E ounce on a stock-adjusted basis. Group capital expenditure is forecast to be between R11.5 and R12.5 billion, inclusive of growth capital of between R2.9 and R3.3 billion. This guidance assumes exchange rates of R16.00/US$ and C$1.26/US$, respectively.

	Unit	Actual FY2022		Guidance FY2023
Refined production	6E koz	3 087		3 000 – 3 150
Concentrate production	6E koz	3 171		3 100 – 3 300
Impala		1 174		1 175 – 1 275
Zimplats		589		620 – 650
Two Rivers		302		300 – 320
Impala Canada		249		250 – 280
Mimosa		246		240 – 260
Marula		259		240 – 260
IRS (third party)		351		270 – 310
Group unit cost	R/oz 6E	17 364		18 200 – 19 200
Group capital expenditure	Rm	9 081		11 500 – 12 500
Exchange rate assumptions	R/US$	15.22		16.00
	C$/US$	1.27		1.26

The financial information on which this outlook is based has not been reviewed and reported on by Implats' external auditors.

Directorate

Ms Babalwa Ngonyama resigned as an independent non-executive director of the board at the conclusion of the annual general meeting in October 2021. Post the end of the period, Ms Mametja Moshe and Mr Billy Mawasha were appointed as independent non-executive directors with effect from 1 July 2022 and 1 September 2022, respectively. Mr Alastair McFarlane will resign as an independent non-executive director of the board at the conclusion of the annual general meeting in October 2022.