JOHANNESBURG (miningweekly.com) – JSE-listed platinum miner Northam on Tuesday announced that it had approved R340-million capital expenditure (capex) at the company's long-awaited new Booysendal platinum project.

The R340-million, Northam CEO Glyn Lewis said, was to fund an early works programme of road, pipeline and infrastructure building ahead of mine construction, which was expected to start in July.

Booysendal, on the eastern limb of the Bushveld Complex, will be the company's second mine in addition to the long-serving and deep-level Zondereinde mine on the Bushveld's western limb

The company said that the initial Booysendal capex would be funded from internal cash retentions.

Northam, which declared a 20c interim dividend, reported 42% lower earnings to R216-million in the six months to December 31.

Sales revenue was up 8% at R1,7-billion, but there was a 21% decrease in the rand basket price.

A 9% strengthening of the rand against the dollar exacerbated the 14% decline in the average dollar price received for Northam's basket of metals at $1 035/oz, resulting in an average rand basket price received of R254 913/kg.

Total operating costs were 13% higher at R1 094-million reflecting the effects of inflation on the costs of labour, consumables and services.

Unit cash costs were held to a "satisfactory" R196 273/kg, an increase of 7%, the company said, helped by the treatment of secondary materials.

The increase in the cost of sales to R1 503-million resulted mainly from the purchase of concentrates to the value of R305-million during the half year.

These purchases were in line with Northam's strategy of building capacity for downstream beneficiation, and compared with the R14-million in the comparative half-year period.

Costs associated with refining decreased by R28-million to R50-million, reflecting the effect of the exclusion of toll treatment charges incurred in the previous comparative period while the smelter was being rebuilt.

The depreciation charge decreased by 22% to R83-million, as a result of the change in the estimated life of mine from 16 years to 18 years, and metal inventories increased by R30-million.

The net result was that the operating profit for the period declined by 61% to R234-million.

Investment income increased by 49% owing to the inclusion of interest earned on the investment in escrow and payable to Anglo Platinum on the transfer to Northam of new-order mining licences for the Booysendal extension.

Northam's share of the earnings from the Pandora joint venture amounted to R5-million, while sundry expenditure declined from R19-million to R2-million, compared with the R16-million incurred in the comparative period last year on the unsolicited Impala Platinum bid to acquire Northam.

Profit attributable to shareholders decreased by 42% to R216-million compared with that for the six months to December 31.

Cash flow increased to R54-million, with cash flow from operations of R344-million, which included an increase in working capital of R29-million and taxes paid of R96-million.

Investing cash flow absorbed R154-million, the principal components of which were capex at the Zondereinde mine of R99-million, R43-million on the Booysendal project and R11-million on the employee housing project.

Financing cash flow absorbed R136-million including R14-million paid in the final dividend for the year ended June 30, 2009.

The R99-million capex at the Zondereinde mine included R11-million on upgrading the metallurgical plants, R6-million on development, R43-million on access infrastructure to the No1 and the No 16 levels and R11-million on extensions to the backfill system.

Lost time and reportable injury rates showed a 30% improvement over the comparable period, reflecting the intensified focus on safety issues by all employees, with Zondereinde mine achieving two million fatality free shifts on February 2.

Production of metals in concentrate during the period, which included 480kg from the treatment of secondary materials, increased by 4% to 5 415 kg (174 096 oz) with concentrate of 1 013 kg (32 569 oz) being purchased.

Unit sales increased by 33% to 6 143 kg (197 206 oz). Tonnages milled from both the Merensky and the upper-group two (UG2) reefs were 7% lower at 1 076 201 t, while the combined average head grade rose 2% to 5,2 g/t made up of three platinum group elements plus gold, reflecting the improved grade of 5,9 g/t from the Merensky reef.

As a consequence of losses owing to geological features, Merensky ore-reserve availability decreased from 22 months to 18 months.

However, the increase of 20% in the Merensky development was expected to improve the ore-reserve position during the second half of the year.

The UG2 ore-reserve availability remained satisfactory at 24 months.

To subscribe to Mining Weekly's print magazine email subscriptions@creamermedia.co.za or buy now.