Impala Acquires Impala Refining Services in R8-billion Deal

Impala Platinum Holdings (Implats) (JSE:IMP) subsidiaries Impala Platinum and Impala Refining Services (IRS), have entered into an agreement that allows Impala to acquire the metal purchase and toll refining operations of IRS for R8-billion, the companies announced on Wednesday (July 25).  

With this deal, IRS becomes a division of Implats instead of a standalone company.

“Implats holds 96 percent of the shares in Impala. Impala conducts mining operations, operates a smelting plant near Phokeng, Rustenburg and a refinery for base and precious metals in Springs,” Implats stated in a press release.

“IRS does not own or operate any processing and/or refining assets, but have agreements in place with Impala to process material acquired by IRS under contract through its processing and refining facilities,” it added.

Implats notes that there are several benefits to IRS becoming a part of Impala. The first benefit is that it will secure IRS business tenure through the precious metals refining licence currently held by Impala. The second involves the simplification of the corporate structure and ongoing toll refining business model by combining IRS’ contract administration function and the processing/refining function through Impala’s facilities.

The deal is also positive on a tax basis. The company notes that the transaction does not have any adverse tax consequences for either IRS or Impala and will ensure efficient administration. IRS is currently administered by Impala and the company will now likely benefit from the net value‐added tax and income tax position of Impala thereafter.

The most important component of this deal stems from the fact that IRS found itself in need of a precious metals refining license, as per the department of mineral resources request,but was unsuccessful in obtaining one in December 2016. The company initially held a beneficiation licence in terms of the precious metals act (PMA), which governs the acquisition, possession, smelting, refining, beneficiation, use and disposal of precious metals in South Africa.

IRS failed to obtain the license under the prevailing operating model where IRS used Impala’s facilities, which operates with a fully compliant precious metals refining licence.

Following the inability to gain access to the license, it was agreed that the most efficient way for IRS to commercially meet the requirements to obtain a precious metals refining licence was to become a fully integrated division of Impala, which already processes all the material acquired by IRS and conducts most of the regulatory and administrative duties required in terms of the PMA.

On Wednesday, shares of Implats were trading down 1.78 percent at ZAC 1,826.00.

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Securities Disclosure: I, Nicole Rashotte, hold no direct investment interest in any company mentioned in this article.