“Ours is a very capital intensive business with long investment horizons, we cannot reorganise our business rapidly based on short-term external events. For example, the coronavirus has resulted in growing concern that there may be a dip in near-term commodity prices due to a decline in demand. So far we have not had a single cancelled order from our customers with the level of demand we sell into remaining steady. This may be a crisis right now, but it will pass and won’t have a long lasting impact on the industry," said Nico Muller, chief executive officer of Impala Platinum (Implats).
He was sharing his thoughts on the future of the industry and how to strategise in an ever-changing environment at the Joburg Indaba 2020 breakfast.
“We’re all bad at predicting the future. If I could have predicted the recent upturn, then we would have made better strategic decisions. So the big question for us is not necessarily getting the future predicting right, but how to tailor ourselves as a responsive organisation that can adapt to a changing environment. We need flexibility in strategic options and decision making, not only a portfolio of robust assets.
“We need to fundamentally reorganise companies to be able to withstand the downtimes; to re-balance the asset portfolio and strengthen organisational resilience. The acquisition of North American Palladium (NAP) in Canada was an important step in doing that it creates the kind of company we want to be.”
Muller’s move from running South Deep at Gold Fields to Implats has resulted in significant improvements at the latter, from soaring share prices to the unexpected move in 2019 to buy Toronto-listed NAP for R11.4bn, which produces around 250,000 ounces of PGM annually. The company was in a position to pay dividends at the end of 2019 alongside an incredible potential debt payback period of just two years.
“The platinum industry in general is in a good place despite many challenges; palladium and rhodium prices have doubled and this does aid a company significantly. I am delighted for our shareholders who had faced a decade of lean times before this change.”
He is very proud of where the company is currently: “The restructuring in 2018 was stressful as we made the bold decision to close loss-making shafts, knowing that just cutting costs further wouldn’t shift the dial. We needed fundamental, almost revolutionary change. The lean times created an organisation that has grown the ability to make big decisions quickly and to execute these decisions with confidence.”
What does he attribute his success to? Muller says he still not ready to be the CEO: “I rely on strong team and on their collective expertise. I make sure I am surrounded by people I really trust; people who each in his or her own capacity knows a lot more than I do. It’s a survival technique - I identify good people and empower them to gel and work together as a team.
“One of the success stories of Implats is the collective talent on display. We have the most diverse team in the industry. We didn’t set out to create that; we were just fortunate with the right people presenting themselves when we needed to strengthen the team.”
Inevitably, the conversation turned to Eskom: “Access to affordable and reliable electricity is critical. With the renewed openness of Eskom and government in terms of independent power production, we can initiate supplementary power production. In SA we are in the process of initiating feasibility studies at each operation for solar plants to mitigate the Eskom crisis because this could take many years to resolve itself.
“Regarding water security, our growing concern is the deterioration of water distribution infrastructure on the one hand and climate change on the other. SA has not done enough to develop additional water storage facilities and we are working with local municipalities to assist in improving distribution infrastructure.”
In conclusion, he says any decision about the future is all about timing; research and understanding of the market: “Alignment between the board and exco and rigorous debates among them are critically important. It takes a lot of courage from a core group of people to make brave decisions.”
