Northam Rebounds after Strike

Interim results for the six months ended 31 December 2001

Key Features

  • Sales revenue R669 million
  • Operating profit R193 million
  • Headline earnings R127 million
  • Interim dividend of 70 cents declared
  • UG 2 expansion now fully operational
  • Underground development programme delivering results

Although Northam’s results for the six months ended 31 December had been disappointing due largely to substantially lower dollar metal prices and the effects of the unfortunate strike action in the first quarter, there were encouraging signs of an operational rebound, said Managing Director Ian Watson today.

“On the operational level there has been some modest yet discernible progress. The enhanced exploration drilling programme to address the Merensky production problems associated with the geological difficulties has yielded positive results, with an encouraging build-up of Merensky ore reserves and an improvement in the Merensky head grade from 5.7 to 5.9 g/t. The ore reserve position is expected to improve further in the next six months, which will add to mining flexibility and productivity, and should yield a reduction in unit costs.

“The UG2 expansion is now contributing at optimal levels to production, and is evidenced by the combined tons milled (from UG2 and Merensky) aggregating 900,000 tons, only marginally lower than the 905,000 reported for the previous six month reporting period.”

In spite of the average realised prices for metals (3PGEs + Au) declining by more than 29% from US$688/oz in the previous corresponding reporting period to US$486/oz, the drop in sales revenue was restricted to a creditable 10%, helped partly by the weakening of the South African currency against the US dollar.

Some progress has been made in controlling costs, but unit costs were 12% higher largely as a result of the production loss of 1200 kg of metals owing to the strike. Overhead costs incurred during the strike, together with a decrease in the metal inventory resulted in costs of sales for the period increasing by 22%.

Operating profits of R193 million (R351 million), resulted in a drop in headline earnings to R127 million (R229 million). An interim dividend of 70 cps has been declared for the first six months of the year.

Looking ahead, Ian Watson said that the continued build-up in metal production, and the implementation of a cost containment strategy were likely to contribute to the company delivering an improved performance in the second half of the financial year. At current Rand metal prices, the financial results in the second half of the year are likely to exceed those for the first half.

31 January 2002

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