JOHANNESBURG (miningweekly.com) - JSE-listed platinum-miner Northam said on Friday that despite a year of "mixed fortunes", sales revenues were up 23,8% to R3,9-billion for the year ended June 30, 2010, underpinned by a creditable operating performance from its Zondereinde mine in South Africa's North West province.

Northam CEO Glyn Lewis said that the company's Zondereinde mine posted a respectable operating performance, with solid production and sales volumes reaching record levels at almost 400 000 oz for the year.

The total on-mine production increased to 321 475 oz, while purchased material boosted metal sales by 18,8%% to 395 879 oz.

The company reported that smelter downtime at the operation, owing to an incident in the precipitator in the second half of the financial year, was short-lived, and had little impact on output. "Following the installation of a temporary bypass around the precipitator the smelter is back in operation while the final repairs should be completed in the second quarter of the new financial year."

However, Lewis said that the challenges of mining the Merensky reef at Zondereinde were anticipated to persist in the year ahead. This would likely result in lower production volumes, while unit cash operating costs would continue to rise as the effects of wage demands and the rising costs of chemicals, power and explosives continue to be felt.

During the year under review, Northam received a slightly higher average basket price of around 2,7%, but pointed out that year-on-year, the rand strengthened by about 13,2% against the dollar.

Further increases in mining input costs, in excess of inflation, put pressure on costs and contributed to a 17% increase in total operating costs at the mine. This included R21-million that was paid to the Department of Mineral Resources in terms of the new Minerals and Petroleum Resources Royalty Act.

Lewis said that the 33,4% increase in the cost of sales reflected the higher operating costs, as well as the significantly higher cost and volumes of concentrates purchased, valued at R735,1-million, compared with R140,2-million in the previous year. "This is in line with the company's strategy of building capacity for enhanced downstream beneficiation."

Headline earnings generated from the Zondereinde mine increased from R1,72 a share to R1,78 a share.

"Importantly, however, we now have board approval for the development of our Booysendal project, which promises to be more robust than the initial feasibility work suggested. We are also optimistic about the feasibility of establishing a ConRoast smelting facility in Mpumalanga province, which provides us with more smelting optionality, while also reducing our reliance on Eskom," said Lewis.

An optimisation study of the project suggested that it could support a production rate of 187 500 t/m, and that the capital requirement for the mine would be about R3,6-billion. To date, R132,4-million had been spent on the project.

Lewis said that the activities planned for the early works programme, including detailed engineering, the procurement of long-lead items, the construction of the on-reef boxcut, the off- site establishment of employee recruitment, training and accommodation facilities, safe road access to the site and the establishment of construction power and water facilities were progressing according to plan.

He added that primary construction activities at  Booysendal would start as soon as certain outstanding regulatory approvals were obtained.