Platinum supply heading for a deficit, says Northam's Dunne

Northam CEO Paul Dunne

Northam CEO Paul Dunne

24th March 2023

By: Darren Parker

Creamer Media Contributing Editor Online


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Without the addition of new platinum group metals (PGMs) projects, production will continue to fall, PGMs producer Northam Platinum CEO Paul Dunne has said.

“With platinum, we see an accelerating contraction in supply as the South African production base ages. The market may not necessarily believe this, but it is inevitable from here on out, and it's compounded by a particularly challenging operating backdrop in South Africa,” he said while presenting the company’s interim financial results for the six months ended December 31, 2022.

He added that the company’s current forecast for palladium was one of flat supply until 2027, with a moderate decline thereafter.

“New applications are leading to additional demand that was not foreseen a few years ago, such as use in the hydrogen economy, food preservation and new medical technologies.

"Moreover, the evolving quest to reduce carbon released into the atmosphere also requires growing amounts of a range of metals,” he said on March 24.

However, he noted that the cost of building new mining operations continued to rise, while regulators and lobbyists delayed and even prohibited new mine development. The barriers to entry were increasing, not decreasing, he said.

“South Africa is the key to ongoing supply into the long future of PGMs. There are resources in the ground – many millions of ounces sitting in the ground, which are untouched,” Dunne said.

He explained that starting a new mine could take as long as seven or eight years before entering production.

“If you wake up tomorrow and want to build a mine, you're looking at something like 2030 before you’ve got a chance of producing significant ounces into the market. But that is work that must be done if we we're going to bridge that gap. If we're going to flatten the depletion curve, which has to have an impact on price,” Dunne explained.

He said that, if price was affected positively, there would be more incentive to build new mines.

“But it takes money. And it takes a lot of time. And it takes a lot of expertise. I would say the time is more valuable than the money. Capital around the world is available, but time is not,” he said.

Northam reported a 44.9% year-on-year increase in revenue to R20.1-billion for the period under review. Operating profits also increased by 55% to R9.1-billion.

Earnings before interest, taxes, depreciation and amortisation (Ebitda) increased by 54.5% year-on-year to R10-billion.

With net debt of R12.4-billion, Northam ended the interim period with a new debt to Ebitda ratio of 0.62, which is further away from the company’s target of 1 than it was at the end of the 2022 financial year - June 30, 2022 - when it was at 0.97.

During the period, Northam suffered three fatalities at its Zondereinde mine, with one of them currently under investigation by the South African Police Service.

In terms of electricity generation, Northam has ramped up its diesel generator use over the interim period owing to increased grid instability. Dunne said it was a difficult time managing the company’s greenhouse-gas emission reduction target of 27% by 2030 and carbon intensity reduction of 60% by 2030 when faced with the need to consume an additional 2.5-million litres of diesel fuel over six months to run 56.7 MW of back-up generators across the company’s operations.

Northam has installed 1.125 MW of rooftop solar at its Booysendal and Eland operations. Additional solar installations have been earmarked at Eland and Zondereinde, with environmental studies under way.

Northam said it was also investigating the possibility of pursuing wind farm energy projects by partnering with third-party service providers.

Edited by Chanel de Bruyn
Creamer Media Senior Deputy Editor Online



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