JSE-listed Northam Platinum expects to report basic earnings per share (EPS) of between 583.5c and 616.3c apiece for the six months ended December 31, 2020, which is an 80% increase on the basic EPS reported for the prior comparable six months.
Normalised headline earnings per share (HEPS) will be between 623c and 660c apiece, or between 68% and 78% higher, compared with normalised HEPS of 369.6c reported for the six months ended December 31, 2019.
The group achieved a 15% increase in production from its own operations in the reporting period to 352 741 oz of platinum, palladium, rhodium and gold (4E). This was notwithstanding the phased restart of operations as a result of Covid-19 restrictions.
The company reports that sales volumes during the period under review were adversely affected by Covid-19-related factors, particularly the negative effect it had on metal transport logistics. Northam explains that border closures resulted in reduced metal volumes being sent to its refiner in Germany, which, in turn, created a refining and available metal for sale backlog, particularly for rhodium.
The miner confirmed the relative contribution of rhodium to sales would normalise during the course of this year.
Despite this impact on sales volumes, the company nonetheless reported increased sales revenue of 51.9% from R7.8-billion in the prior corresponding six months to R11.9-billion in the six months under review.
The increase was attributable to a 50% increase in the average 4E basket price achieved to $2 160/oz and a 9% weaker rand/dollar exchange rate realised.
During the six months under review, Northam generated R1.9-billion of free cash flow, which was used in conjunction with more debt to buy 74-million Zambezi Platinum preference shares, taking the company’s total amount of preference shares held to 128-million – 80.4% of all preference shares in issue.
Northam’s strategy of returning value to shareholders remains unchanged and the company believes that, to date, the most efficient mechanism to return value to its shareholders has been through the purchase of Zambezi preference shares.
The acquisition of the Zambezi preference shares reduces the preference share dividend expense and liability included in Northam’s consolidated financial results, as well as Northam’s potential financial exposure under the guarantee provided to holders of Zambezi preference shares, should the guarantee be called upon.
Further, in the event that Zambezi elects to redeem the Zambezi preference shares through a distribution of Northam ordinary shares held by Zambezi, then the redemption of the Zambezi preference shares held by Northam at such time will result in a distribution of Northam shares to Northam, thereby reducing the number of Northam shares in issue.
Northam achieving more than 80% ownership of the Zambezi preference shares represents a significant step in the company’s pursuit to accelerate the maturity of the empowerment transaction that concluded between the parties in May 2015.
Northam forecasts its group capital expenditure for the 2021 financial year to be around R3-billion, after curtailed growth projects, including the Central Merensky module at the Booysendal mine, aspects of the Number Three shaft project at the Zondereinde mine and stoping build-up at the Eland mine, were re-initiated in October last year.