Growth strategy begins to deliver

Johannesburg, Friday 7 September 2018. Northam Platinum Limited (Northam) has released its results for the year ended 30 June 2018. The following publications are available on the group’s website for further information:

Northam chief executive Paul Dunne presented the group’s progress to the investment community today. 

KEY FEATURES

  • Normalised headline earnings at R421.5 million
  • Metal production 5.2% higher at 549 000oz 6E
  • Record group capital expenditure at R3.8 billion
  • Execution of the growth strategy on track
    • 19% increase in resource base to 238Moz
    • New 20MW furnace successfully commissioned
    • Steady progress at Booysendal South
    • 2 000 permanent jobs created
    • Eland acquisition finalised
    • Significant progress in accessing Zondereinde’s Western extension

MARKETS

The average US$ basket price increased by 13%, owing largely to higher palladium and rhodium prices, which rose by 33% and 101% respectively. The stronger ZAR over the period, however, limited the increase in the rand PGM basket price to just 5.3%. Dunne believes platinum market fundamentals will improve in the medium term, with jewellery stabilising in China following a sharp fall over the last two years and growth is expected to continue in India and the United States. Autocatalyst demand remains resilient. Diesel car sales are declining in Europe but tighter emission controls and growth elsewhere in the world has compensated. The outlook is for stable demand in 2018 while South African mine supply remains under severe economic pressure.

Palladium autocat demand has grown significantly over the past few years largely on the back of the rapid rise in car sales in China. The existing market deficit is expected to persist, keeping prices buoyant.

Dunne believes rhodium will remain strong for the foreseeable future. “Tighter exhaust emission standards are being rolled out in China from this year resulting in higher rhodium loadings on three way catalysts.

“The combination of stronger Chinese demand and a reduction in South African mine supply has tightened the market,” he said.

GROUP PERFORMANCE

Zondereinde has enjoyed relatively stable labour relations over the past few years which has contributed to good operating performances. Wage negotiations are currently in progress after the conclusion of a three-year wage agreement. At Booysendal the transition to owner operator, settled in May this year, has been very successful.

The commissioning of the new furnace at Zondereinde helped to boost total refined metal production to 549 000oz 6E. Purchased metal increased significantly year on year to 105 000oz with two additional long-term customers secured.

The significant increase in third party material in the last quarter of the year deferred the destocking progress to F2019.

Production of chrome concentrate increased by 11% to 650 000 tonnes with improved contributions from both Booysendal and Zondereinde. Copper and nickel production was also significantly higher year on year.

Total revenue per platinum ounce was 4.2% higher than the previous year primarily on the back of a higher PGM basket price and improved base metal contributions. “Full mine to market unit cost increases were contained to 7.8% in line with mining inflation to R21 270 per platinum ounce. We believe this positions Northam favourably on the industry cost curve,” added Dunne.

Year on year the group’s resource base has grown by 19%, demonstrating the benefits of the unfolding growth strategy. The Western extension at Zondereinde has made a considerable contribution. The finalisation of the Eland transaction added a further 19.3Moz to the resource base.

During the year capex absorbed a record R3.8 billion. The main items were:

  • R1.0 billion spent on the purchase of Zondereinde’s Western extension,
  • R1.5 billion spent on the Booysendal South project,
  • R202.7 million spent on the aerial rope conveyor at Booysendal,
  • R175.0 million spent on the acquisition of Eland platinum, and
  • USD10.8 million spent on the acquisition of the US recycling assets.

IN CONCLUSION

“Looking forward, project execution remains key, particularly at Booysendal South. We’ve acquired the assets and allocated the capital and it is important that our expansion plans are delivered within the project parameters in order to take advantage of a rising PGM market.

“We believe we have a solid operational base and maintaining a competitive unit cost position is essential to future profitability. The company protects itself in this difficult market on this parameter above all else.

“Lastly, we are focused on releasing the working capital locked up in our surplus inventory. Our growth strategy remains firmly on track and we can look forward to significant revenue growth the next time we report,” Dunne concluded.

Issued by
R&A Strategic Communications
Johannesburg
Tel +27 (0)11 880 3924
Marion Brower +27 71 493 0387
Jan Walker +27 71 493 0429