Implats Acquires North American Palladium

Implats will now own the Lac des Iles mine in Ontario, which is on track to meet its 2019 guidance of 220,000 to 235,000
ounces of palladium. (Photo: NAP)
Impala Platinum Holdings (Implats) has entered into a definitive agreement to acquire North American Palladium (NAP) in a transaction valued at $758 million. NAP owns and operates the Lac des Iles mine 90 kilometers (km) northwest of Thunder Bay, Ontario, and has shareholdings in two exploration properties, the Sunday Lake project and the Shebandowan joint venture, which are also in northwest Ontario.

Implats is one of the world’s leading producers of platinum and associated platinum group metals (PGMs). The group’s mining operations are located on the Bushveld Complex in South Africa and the Great Dyke in Zimbabwe, two of the most significant PGM-bearing regions in the world. It has refining operations in Springs, South Africa, 35 km east of Johannesburg. In its fiscal year to June 30, Impala’s refined production totaled 1.5 million ounces (oz) of platinum, 910,000 oz of palladium, 206,000 oz of rhodium, and 16,000 metric tons (mt) of nickel.

During calendar year 2018, NAP’s Lac des Iles mine produced 237,461 oz of palladium, and the operation is on track to meet its 2019 production guidance of 220,000 oz to 235,000 oz of palladium. Impala’s acquisition of NAP provides an opportunity for the company to strengthen its competitive positioning by acquiring a palladium-rich operating asset in an established mining jurisdiction. Lac des Iles is a low-cost producer that generated cash margins of 53% in the 12 months to the end of June. The mine is fully mechanized, with a low labor complement and leading safety statistics. Lac des Iles’ current resource base will support a mine life of 15 years, with potential future upside. The operation leverages modern infrastructure and advanced underground mining technologies to capitalize on its highly prospective exploration portfolio.

Implats CEO Nico Muller said, “Implats has had an exploration presence in Canada for more than two decades, and over the past three years, we have developed a strong relationship with and understanding of NAP and its management team and operations. The ability to acquire NAP and deliver on its medium- term production plans and exploration potential is an exciting development for our group. Ownership of NAP will accelerate our progress against a number of key strategic imperatives.

“It is Implats’ view that the palladium market will remain in a structural deficit in the medium term, which should lend considerable support to stronger-for-longer pricing. The increase in rand PGM pricing, together with the step-change in operational momentum at Implats, resulted in considerable free cash generation and a substantial strengthening of the group’s balance sheet during fiscal year 2019. This has allowed Implats’ to pursue this transaction through a prudent and efficient financing structure and, in doing so, enhance value accretion and returns for the group and its stakeholders, generating returns above the group’s internal cost of capital and with attractive payback periods.”

NAP President and CEO Jim Gallagher said, “This transaction delivers attractive value for our shareholders and reflects five years of hard work we have devoted to realize the potential of our assets. We have successfully established Lac des Iles as one of Canada’s largest, lowest-cost, and safest underground mines, producing a metal that contributes to a cleaner global environment.

“Our employees, suppliers, customers, and community stakeholders can all join me in feeling tremendous pride at this pivotal moment in our company’s trajectory. By becoming a significant part of a larger, integrated global producer, we will benefit from greater access to technical, operational, and financial resources with which to pursue our production, development, and exploration objectives in Canada.”

As featured in Womp 2019 Vol 11 -