Hello and welcome to the OTCQX Best 50 Virtual Investor Conference. On behalf of OTC Markets, we are very pleased you have joined us today. Presenters represent some of the top-performing companies on the OTCQX Best Market in 2025 based on the share performance and volume. Our next presentation of the day is from Impala Platinum. If you wish to ask a question, please submit it via the Q&A box on your screen. You can also view a company's availability for a one-on-one meeting by clicking Book a Meeting. Today, I am excited to welcome Emma Townshend, Executive: Corporate Affairs, of Impala Platinum, which trades on the JSE under the symbol IMP and on the OTCQX under the symbols IMPUY and IMPUF. Welcome, Emma.
Thanks very much. Thank you everyone who's joining us today to hear a bit more about our very special company and the very special metals that we produce. This is just a bit of a health warning, which I'm sure you're all aware of and familiar with in terms of these corporate presentations. Let me move on to a little bit about who we are and what we do. Implats is an integrated global PGM producer, and PGMs are platinum group metals. They're a collection of six precious metals with unique and highly useful chemical properties that are fundamental to many of the technologies and kind of societal forces shaping our world today. A small market, quite niche.
A fraction of the size of both gold and silver, but very significant in terms of value, and widespread nature of use and applications in the modern world. Our business, we have three key geographic locations. We have a small operation in Canada, which we acquired in 2019 called Lac des Îles, primarily a palladium mine. We then have a meaningful presence in Zimbabwe. At the core of our operations and our processing assets sit in South Africa, located on the pre-eminent PGM resource globally, which is the Bushveld Igneous Complex. We are a mine-to-market producer. We operate across the full value chain. Our people manage exploration, the mining of metals. We've got quite a complicated and involved and technically specialized processing value chain in terms of producing refined precious metals.
We've got a team that markets from South Africa, from Johannesburg and in Japan. A very significant part of what we do, and it's a common theme throughout the presentation, is our rehabilitation and our kind of responsibility in terms of minimizing our environmental footprint. We own a number of our assets, but we also share ownership in South Africa with our communities and our employees, and we're also involved in a number of joint ventures with other PGM producers. A very significant resource base. We've got over 315 million ounces of precious metals in the ground in our attributable resource statement. We're driven by our purpose, which is to create a better future.
We do this through the way we do business, through the special metals that we produce, and through our superior performance and to improve the lives of future generations. We take our responsibility as an extractive industry very seriously in the context of South Africa and the nature of our operations and the size and the complexity of our workforce. We really are driven very much by this purpose and our kind of impact on our people and the value that we create for our very diverse range of stakeholders. We anchor our business on the key pillars of our value-focused strategy. Sustainable development is an absolutely key underpin for us. We strive for operational excellence and efficiencies.
Given the dynamic nature of the geopolitics and the socioeconomic realities of where we operate, organizational effectiveness, culture, human resource management and culture is incredibly important to the business. I'll show you some slides later in terms of the cyclicality of the profitability of our business, given it's a resource company. The strength of our balance sheet and the way in which we apply capital allocation has become a very key pillar for us and a very key underpinning to our investment case and our value proposition over the last decade. We operate in a niche environment. There are significant barriers to entry in our industry.
We also believe that we have the ability to improve the competitive positioning of our portfolio over time, and in doing so, try and address some of the volatility that comes from operating in a cyclical resource industry. The final element of our strategy is the extent to which we're future-focused. Even though we are mining, you know, reserves that have been in the ground for billions of years, you'll see a bit later that our metals are unique and demand for them has evolved over time, and they've got significant applications in many of the key technologies and industries that are driving societal change in our world. Another thing that we are incredibly cognizant of, given where we operate, is our context.
Really what we seek to do as a business is in a responsible way balance the diverse stakeholder needs in the context of this operating environment. When we think about those stakeholders, we've got a couple of buckets, and I think some will be familiar to you and are kind of common across, you know, businesses across the world. I think some are quite unique in terms of our operating environment and the nature of our business. Clearly, shareholders you'll be familiar with. Employees for us, given the history of South Africa, given the labor-intensive nature of our operations, the way in which we manage the needs and the safety of our employees is absolutely front of mind.
We've developed a business where we are creating meaningful employment at a significantly above average kind of national wage with significant benefits in terms of employment and housing and retirement benefits. Our relationship with unionized labor has matured significantly over the last three decades, but they remain a very important stakeholder. One of the things which I think is quite unique and a particular focus for South African companies and for PGM companies is the way in which we manage the needs of communities. South Africa is unfortunately faced with very high unemployment, quite low economic growth, and quite poor service delivery in many of the areas in which we operate. As a responsible producer and kind of company within this, we provide and support our communities through a number of initiatives. Government, another significant force for South African companies.
We operate and meet significant set of environmental and labor legislation. We pay significant royalties. We're an important contributor to the fiscus. Again, I think it's a relationship which at times was a source of friction, but it is something where we've benefited from maturation of those relationships over the last kind of two decades. I think another very important kind of segment for us in terms of stakeholders is our customers. PGMs are unique in that they tend to be generated and produced in kind of developing nations, but they are primarily consumed by developed nations because they're used in high-end industrial and consumer applications.
As time has evolved, our customers are asking us more and more to be able to prove to them that the way in which we generate this product is done in a responsible way, meeting the societal needs and the sustainability kind of imperative of modern society. Just a bit of a lag there. As I said, environmental, social, and governance or our ESG framework, it underpins our purpose in terms of creating a better future. It really is I think a very integral part of our business.
Because we're an extractive industry, because we operate in an environmentally stressed location in terms of Southern Africa, in terms of clean water and climate change, because of the nature of the labor intensity of our operations and those communities around our environment, they really do take up a very considerable time and effort in terms of our business operations, our strategies, and our approach and our leadership team and our focus areas. I think governance is the one area where South Africa has always been slightly unusual in that it's had many very first world, developed world kind of sensitivities in terms of governance. We've got a very well-established investment industry. There's mandated retirement savings. We've got world-class financial institutions.
The level of governance that we are held to by operating in this country and being listed on the exchanges that we are mean that we are very often and consistently recognized in terms of our excellence in governance. I think one of the things we are often questioned about and one of the things we need to explain is our safety performance. We have nearly 70,000 employees working 270 days a year, and every one of those shifts is an opportunity to take care of and ensure that the safety of our employees is sacrosanct and they get to go home. It's one where we are very firmly focused on attaining zero harm.
A lot of our time and effort and our leadership focus over the last two to three years has been achieving that step change in terms of narrowing the gap between the very pleasing and long-term reduction in the number of incidents and the safety incidents we see in our business. The disconnect between that improvement and the nature and the severity of those incidents when they do occur. We are using technology where possible. We are going further and further in terms of employee wellness. We look at things like psychosocial health and financial counseling. We want everything set up to ensure that when a person goes underground into our operations, they have the best possible opportunity to come up to surface after working and go home to their families safe and sound.
As I mentioned earlier, our social performance is absolutely key in terms of our business delivery. These are focused around four key pillars in terms of our efforts in community wellbeing, education and skills development for our employees and our communities, significant gains in terms of inclusive procurement, and ensuring that our operations really do have a meaningful social impact and economic impact in the areas where we operate. Also, as I mentioned before, trying where possible to minimize and mitigate the gaps in service delivery that unfortunately plague many of the geographic areas in terms of where we operate. I'm very pleased to say that our efforts in these regards are consistently and widely recognized by a number of leading international agencies. We are a consistent top performer in many of the kind of well-known surveys that track performance.
Despite the challenges of an extractive industry, of being a labor-intensive industry, we have very, very strong sustainability focuses and targets and strategies, and they are yielding improvements. I mean, on an annual basis, I'm engaged in a number of ESG engagements with our shareholder base, and it's been fantastic to see the kind of recognition for those improvements and the extent to which we engage and we collaborate and we meet those stakeholder needs, from a global perspective in terms of these efforts and this performance. This is just a brief highlight of some of the metrics that we focus on in terms of environmental performance.
You can see in particular energy and carbon intensity, given that we're an energy-intensive industry, and also in terms of water and power and land management, obviously key metrics which we focus on very keenly and are pleasingly yielding improvements over time. Now, just to talk, to kind of take a step back and talk a little bit about those amazing metals and what they do, and maybe to lead into, you know, some of the things that have led to that extraordinary price improvement and share price performance, you know, that got us an invitation to this conference. PGMs, as I said, are a special metal. We tend to look at demand and we put it into three key kind of buckets. There's consumer in terms of jewelry and investment.
There's the automotive industry where PGMs are integral in removing harmful emissions from internal combustion engines. Then there's a very significant non-auto industrial component. Really when we look at demand over time, and it's a big part of my job in the group, you know, over the last 50 years we have seen evolving shifts in terms of demand, and we expect those to continue. A lot of what we do in the business, given the long lead time and capital intensive nature of our operations, is to kind of look into the future and anticipate where those shifts in demand are going to come from and how we respond in terms of positioning our portfolio and our investment decisions to meet those needs.
As I said, when we look at the kind of market forces, we look at them from a short-term perspective, a medium perspective, and a long-term perspective. Short-term, really tactically, we would look at things like balance sheet and capital allocation. Medium-term, there's more we can do in terms of portfolio planning and investment. Longer term is really, you know, long lead times like market development focus, and kind of longer term portfolio investment and project planning and delivery. Our three key markets are platinum, palladium and rhodium. Over time, these three metals contribute well over 85% of our revenue. They are distinct markets. Although there are common threads throughout, we do have times where certain forces are kind of influencing prices of one metal at the expense of another.
Even though we produce from a single ore body, we produce nine separate products that do face different market dynamics. This is illustrated in these charts. Essentially on the left-hand side, you can see a revenue chart. This is a dollar per ounce chart of our product over time in nominal terms. You can see very clearly the peaks and the troughs there, but you can also see the way the colors change over time in terms of that revenue contribution. As I said, those kind of intermetal cycles within general revenue. What that leads to is extraordinary cyclicality in terms of earnings. The chart on the right-hand side is a margin chart for 30 years for our industry. The blue is a cash margin, the green is a cash and CapEx margin.
You know, in a more general term, it's a kind of proxy for EBITDA and EBIT margins over time. You can see the extent to which this industry does go through kind of troughs and peaks. Towards the end of the chart you can see that very sharp upward trend and really that is what drove share price performance last year. It was this absolutely synchronized movement in the basket price of our PGMs. What that's done is create significant earnings gearing, a significant step change in terms of profitability and free cash flow, and driven share price performance.
A lot of the drivers of this were kind of global in nature. We went from an environment where we believe the market become complacent about availability of our metals to where a combination of geopolitics and trade policy created, and I think more broadly the theme of, you know, de-dollarization and kind of polarization in terms of the world. More and more people became concerned about supply. The smaller PGMs and precious metals of which we are part obviously got caught up in that and then benefited. We had this slightly delayed, but when it came very significant recovery in prices as the security of supply of these critical minerals became more and more of an imperative over time.
Obviously, of course, that created an investment support which led to exchange-traded fund buying and positive support from speculative positioning on major exchanges as well. What that's translated to is, as I said, a very meaningful change in revenue. This is just a snapshot of our results, which were an interim, which we reported about two weeks ago. Essentially, over a 12-month period, we benefited from a 40% uplift in the basket price per ounce produced of our metal. That obviously then translates, if you remember the cyclicality of that margin, into just quite staggering shifts in terms of financial performance, reported earnings and free cash flow generated and then very pleasingly, our ability to, you know, reward shareholders through our capital allocation policy in terms of an increased distribution.
I think before I kind of move to questions, I think it's the last thing I want to share about our business just as a snapshot. That really is our capital allocation priorities and principles. I think that the absolute key for us is that it's consistent, that it's balanced, that it's predictable and it's suitable and appropriate for the nature of our business which as I've said a million times now already is cyclical. Very simply, what we look to do is return a minimum of 30% of free cash flow generated
Hi, Emma. If you can hear me, if we can please try refreshing your browser. We've lost a little bit of your audio. Colleagues, audience, we'll try and get Emma's audio back but.
Our CFO.
There we go.
is very consistent in the fact that Meroonisha Kerber can obviously move on to some of the questions that I can see have been put through in the group. First question says: With a much stronger balance sheet and significant liquidity headroom, what is at the top of your capital allocation priority list over the next 12-24 months? Okay. That ties in very nicely to that capital allocation slide. Really, our balance sheet is strong. We've got headroom in place, but our assets are significantly cash generative and are very capable of supporting incremental capital expenditure, which we're going to up by about 10%-15% in the medium term to deliver life of mine extensions at some of our major operations.
I think that given the nature of how we look at capital allocation, the increase in free cash flow generated is going to flow disproportionately to shareholder returns. That's very much the guidance from both our CEO and our CFO. We want to ensure that we harness some of the benefit of improved pricing to strengthen the business, but we do benefit from a lot of the hard work that's gone in over the last kind of eight to 10 years, and that does allow us then to increase returns to shareholders in line with those profits. Next question. Let's see if I can get this order. The next question says: Given the growing focus on hydrogen and fuel cell technologies, where is Implats already participating in that value chain, and could that opportunity realistically become for you over time?
Part of my work at Implats is on the market development, and research for these commodity markets. I'm kind of mocked for my passion and excitement about them. I think that the potential for hydrogen to create a structural underpin to future PGM markets is very significant. That said, it is nascent. It is a market that is evolving. There are kind of highs and lows. The shifts in policy, particularly from the EU and the US over the last couple of years with changing administrations, you know, the impact of the Ukraine war. We've seen some kind of bumps along the way in terms of the rollout of those projects.
For us as at Implats, we see this as a big trend driving structural growth in the 2030s and 2040s, which we're happy about because we plan our operations on a multi-decade view. How we currently try and play our role is we are an active participant in a private equity fund called AP Ventures. We're in Fund II. It's an incubating private equity fund which is aimed at commercializing extraordinary variety of-
Hi, Emma. We're losing your audio again.
All of that kind of just by looking at the deal flow that we get exposure to, even though not all of those businesses get included in the fund, it builds on our confidence in the varied nature of potential applications and the ability that that's gonna have to underpin particularly platinum, iridium, ruthenium demand, you know, over the next 20-30 years. In terms of how big that opportunity could become, from a platinum perspective, we think that hydrogen over time will more than offset any potential impact that we may lose from the electrification of the light-duty powertrain, so that your hydrogen and hydrogen related demand will offset the loss of auto demand over time. That is over time, and it is through varied end uses.
Next question says, "The company has shown strong community and social investment metrics. How does the social footprint help de-risk your operations and support long-term volume growth?" Yeah, thanks for that question because I think it's something I'm incredibly proud of in terms of working for a business like Implats and being part of an industry that really does do good and does create meaningful change. And I think you've captured it in terms of de-risking it. I think when you align interests and when you share value, you reduce risk from particularly for us. It traditionally would've been industrial action. It would've been labor strikes.
I think that when you share value, which we do through equity ownership but also through our procurement and our skills development, I think you are seen as a force for good, and I think you earn the right to be a custodian of natural resources. In terms of the South African constitution and kind of charter, the resources of the country belong to the people of the country and that's why we have this responsibility to share value. Obviously we do that to the fiscus in terms of royalties and taxes, but I think very keenly in terms of communities, this is their land and we're generating wealth from it.
I think that those relationships and that social compact is absolutely key to long-term growth because effectively it de-risks your ability to allocate capital. We're gonna run out of time. I'm gonna try one more. Over the next five years, what are the projected supply-demand gaps, if any, across PGM? It's different for each of those metals. We think that all three... well, actually all five of the major PGMs, so that's Platinum, Palladium, Rhodium, Iridium, and Ruthenium, are currently in deficit. We expect the deficits to ease and go to balance and possibly surplus for Palladium and Rhodium, which have particular exposure to automotive demand. We actually expect them to kind of maintain and sustain for Platinum, Iridium and Ruthenium. It is our preference in terms of revenue drivers is skewed towards those metals.
We believe that the market outlook for those metals gives us enough pricing certainty that from a collective revenue perspective, we can invest, we can continue to produce and we can deliver, you know, meet our hurdle rates and deliver returns. It's a preference in terms of fundamental market outlooks for platinum, iridium, ruthenium, nickel, copper over palladium and rhodium. I've got 30 seconds left. I can try to do one more, but I will respond to all of your questions. We'll respond via email. I think we receive the questions from the conference organizers and our team will respond to any that we haven't addressed in the chat.