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UPDATE 2-South Africa's Implats earnings up nearly 400% on weak rand, costly metal

* Profits surge on higher metals prices

* Declares final dividend

* Implats sees high likelihood of further shareholder returns (Adds outlooks for further dividends, long-term growth strategy)

JOHANNESBURG, Sept 3 (Reuters) - South Africa’s Impala Platinum’s (Implats) annual earnings jumped by nearly 400% after higher metal prices and a weaker rand offset the impact of the COVID-19 pandemic, the company said on Thursday.

Mining in South Africa has been hit hard by COVID-19 as lockdowns led to mine closures and miners contracted the disease, but a weak local currency that reduces local costs limited the impact of reduced output.

High prices for palladium and rhodium, which Implats extracts together with platinum, also boosted profits as the miner said the dollar basket price of the main minerals it mines rose by 46% year-on-year.

It posted headline earnings per share (HEPS), the preferred profit measure in South Africa, of 20.75 rand ($1.23) for the year ended June, 391% higher than the 4.23 rand a year earlier.

The performance represents a turnaround from 2018 when Implats planned to restructure its Rustenburg operations and cut thousands of jobs.

“The progress made in the strategic repositioning of Implats over the past several years enabled the group to successfully navigate the challenges created by the unprecedented external shock of the COVID-19 pandemic,” Implats CEO Nico Muller said.

Implats, which resumed dividend payments this year, declared a final dividend of 4.00 rand per ordinary share in line with its policy of around 30% of free cash flow, bringing the total dividend to 5.25 rand per share.

Muller said it was “highly likely” more value would be returned to shareholders if prices remain high and the rand exchange rate favourable.

“If we can’t find growth opportunities that would add incremental value, the bulk of the cash then would be returned to shareholders,” Chief Financial Officer Meroonisha Kerber said, adding that it could be through a special dividend, increased dividends or share buy-backs.

During the year, free cash flow reached 14.4 billion rand compared with 7.7 billion rand a year ago.

Implats said pandemic-related disruptions had a 9%, or 290,000 ounce, impact on production during the period.

Along with other miners, it faces the prospect of further disruption as South African state utility Eskom struggles to generate sufficient power.

For the longer term, Implats operations in Zimbabwe and Canada could provide the best growth opportunities, but Muller said he would like to see a more stable policy and regulatory environment in Zimbabwe before investing significant growth capital. ($1 = 16.8449 rand) (Reporting by Tanisha Heiberg; Editing by Muralikumar Anantharaman, Amy Caren Daniel and Barbara Lewis)

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