JOHANNESBURG (miningweekly.com) – JSE-listed Northam Platinum’s six months earnings fell by 65% as production declined by one-third after operational difficulties at the Zondereinde mine.
Operational problems associated with mining the Merensky reef at its Zondereinde mine were also unlikely to abate in the short term.
CE Glyn Lewis said that the turnaround at the Zondereinde mine should start manifesting, albeit slowly, during the next financial year, as the company established additional stoping areas in the upper and central western portions of the mine and as the decline development started contributing to production.
“However, it will probably be at least another 18 months before we are out of the woods,” he stated.
The situation was further aggravated by the protracted strike, the slow start-up after the strike, and safety stoppages, resulting in a loss of 31% of available production time.
Production declined by 33% to 116 665 oz of 3PGE + Au in the half-year and the company cautioned that the full-year output would fall “significantly short” of the 300 000 oz level.
In the medium term though, as Zondereinde starts recovering from its operational difficulties, Northam should be well positioned to take advantage of the continuing improvement in global economic conditions.
“In the longer term, the growth opportunity, which Booysendal presents, would also add a critical element of geographic diversification, thereby reducing the risk associated with operating a single mining asset,” Lewis stated.
He reported that good progress continued at the Booysendal site. All mining licences have been received and executed and any project risk associated with regulatory permitting was now significantly reduced.
Capital expenditure (capex) on the expansion project to date was R378-million, while capex for the full financial year was estimated at R747-million, to be funded from internal resources.
Capex was expected to amount to R238-million for the 2011 financial year.
Further, Lewis noted that the cash injection of R650-million, which would come into Northam after the Mvela unbundling and Northam’s proposed acquisition of Mvela’s rump, would boost the cash component of the Booysendal funding mix, the finalisation of which was gaining momentum.
Sales revenues declined by 7,1% to R1,6-billion, owing to the lower exchange rate. Tonnages milled were also significantly lower at 693 460 t.
Cash flow from operations was 47,3% lower, compared with the previous period, in line with the decline in Northam’s profitability, the lower interest earned and the increase in working capital, mainly attributable to trade and other receivables.
Investing cash outflows were higher at R349,1-million in the reporting period, owing primarily to capital expenditure of R214,5-million associated with the construction of the Booysendal mine, while financing cash outflows were much lower, in line with the reduction in the dividend paid in the previous period.
The net result of these cash flows was a cash balance of R967,9-million, some R218,8-million lower than the balance at the beginning of the period.
Meanwhile, the disruptions to operations also impacted on the Zondereinde mine’s safety performance, where a higher injury rate was recorded during the half-year. Northam aimed to improve on its safety performance and was working on its relationship with the unions.