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Northam achieves record interim R3bn operating profit

Northam Platinum CEO Paul Dunne

Northam Platinum CEO Paul Dunne

Photo by Creamer Media

28th February 2020

By: Marleny Arnoldi

Deputy Editor Online

     

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JSE-listed Northam Platinum delivered a stellar financial performance in the six months ended December 31, with normalised headline earnings up 240% year-on-year at R1.9-billion.

This was on the back of record production of 306 738 oz of platinum, palladium, rhodium and gold (4E) from its  mines in Limpopo.

This compares with the 256 461 oz of 4E produced in the six months ended December 31, 2018.

Northam on Friday reported a record operating profit of R3-billion for the six months under review. This was 187% higher than the R1-billion operating profit generated in the prior comparable period.

The group’s operating profit was supported by a high average basket price achieved of $1 443/oz of 4E, which was 42.4% higher year-on-year.

Although the company returned R2.4-billion in value to shareholders through the purchase of 32.5-million Zambezi Platinum preference shares, the company had not declared a dividend. The company said it would consider dividends in the medium term, once it had de-risked its preference share structure to satisfaction.

“The way Zambezi is structured gives us a very obvious and powerful way to return value to shareholders through the purchase of the Zambezi preference shares. This process had started and we would continue doing this by applying free cash over and above our targeted net debt position,” said CEO Paul Dunne.

Meanwhile, Northam has since 2015 spent R1.8-billion on acquisitions, which added 48.8-million ounces of 4E resources, two concentrator plants with a combined milling capacity of 500 000 t a month and other infrastructure to its portfolio.

The cumulative expenditure to date on developing these projects had totalled R8.3-billion, while the company expects capital expenditure for the current financial year to reach R2.7-billion.

Northam stated in its results release on Friday that its Zondereinde mine was on track to produce 350 000 oz/y soon, as a result of a Western extension and deepening project.

Dunne reported that the Zondereinde mine had experienced a challenging operating period in the six months to December 31, owing to a fire that broke out in July last year, which resulted in business interruption.

The mine was also impacted on by power cuts implemented by State-owned power utility Eskom, and the death of an employee owing to a fall of ground. Nonetheless, Zondereinde contributed 162 380 oz to the group’s production in the six months under review.

The Eland mine’s concentrating plant was undergoing recommissioning, while development of the mine’s Kukuma shaft was progressing well.

Northam expects the Eland mine to produce 150 000 oz/y once its shaft and plant activities are finalised. In the six months under review, the mine produced 16 000 oz.

In the meantime, the operation was treating material through its chrome spirals and secondary platinum group metals (PGMs) circuit. The primary underground development of the mine would be a focus area for the company in the next 18 months. 

The company’s R5.6-billion Booysendal South mine development progressed according to plan and budget during the six months under review.

Combined, the Booysendal South mine and the existing North and Central mines were set to produce 500 000 oz/y soon.

The combined production from the Booysendal North and Central mines was 132 529 oz of 4E.

Dunne pointed out that the six months under review had not been without challenges, as the mining industry in South Africa was faced with a number of risks.

These included the inability of Eskom to provide a reliable source of energy and crime taking its toll on the industry in various forms – illegal mining, attacks on processing facilities and the theft of products in transit.

Dunne called on government to establish a special mining policing unit, as well as provide enabling legislation to encourage greater investment in the industry.

On the market side, Dunne said PGM prices, particularly for rhodium and palladium, had had an extraordinary run in the six months under review.

He said favourable prices for these metals had been driven by industrial demand on the back of stricter automobile emissions regulations in Europe, India and China.

This while the price of platinum had remained relatively soft in the six months under review.

“Our operations were performing well and we expect to deliver a solid performance for the full financial year. We are well positioned to benefit from stronger PGM prices,” Dunne said.

 

Edited by Chanel de Bruyn
Creamer Media Senior Deputy Editor Online

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