Record production results for Northam Platinum while stronger SA currency dents earnings

Northam Platinum Limited reported strong PGM production for the first half of the 2004 financial year, with output of precious metals in concentrate exceeding the 180,000 oz level, 9.4% higher than for the comparable period in F2003.

With the higher output, unit sales of precious metals rose strongly by 32.4% to 208,523 oz. Sales revenues however increased by only 3.2%, reflecting the effects of a sustained stronger Rand, which offset the 8.1% increase in the US dollar basket price to US$549/oz. The net effect was an average basket price realised of R123,121/kg, 22.2% lower than for the six months ended December 2002.

Operating profit fell by 44.6% to R167 million. This, together with sundry expenditure, translated into a drop of 44.9% in headline earnings to R104 million, equivalent to 44.9 cents per share.

The directors have declared a dividend of 45 cents per share for the period ended 31 December 2003.

The mine’s stronger operational performance is also evidenced by the higher tonnages milled in the period, increasing by 7% to 1.2125 million tonnes (Merensky – 0.8541 million; UG2 0.3584 million) and the higher combined headgrade of 5.5 g/t made up of Merensky at 6.1 g/t (Dec 2002: 6,0 g/t), and UG2 at 4.3 g/t (Dec 2002: 4.0 g/t).

The Merensky Reef ore reserve position has remained constant, with availability of 18 months. This unchanged position is the result of reduced extraction ratios flowing from poor ground conditions. The UG2 ore reserve position is at 31 months’ availability, in line with expectations and providing for some mining flexibility.

Costs were well controlled in the period under review, with unit cash costs rising only marginally by 2.5%. This was a very creditable performance taking into account the 11% increase in labour costs since July 2003. As anticipated, the growth in production volumes resulted in total operating costs increasing by 12.1%.


Opportunities to acquire growth assets are actively being pursued in conjunction with Mvelaphanda Resources Limited, which has a 22.3% equity interest in Northam. Shareholders will be advised of developments as they occur.

Discussions in respect of Pandora are continuing. It is the understanding of the directors of Northam that the Department of Minerals and Energy has not yet processed the application for a mining licence.


In F2003, on account of the company’s sensitivity to metal prices and the exchange rate, Northam embarked on a programme of hedging metals to protect its revenues from any significant decline in metal prices and to ensure the company’s continued sustainability. Whilst the palladium programme has proved successful, a strong, unanticipated rise in the platinum price resulted in an unrealised loss of R22.8 million at 31 December 2003 being recorded. The platinum hedging programme was suspended in October 2003.

With the continued strengthening of the ZAR against the US Dollar during the first six months of the financial year, the hedging programme was extended to include the forward sale of currency for the period ending June 2004. A total of US$66 million was sold forward at an average rate of US$1 = R6.87. Whilst this programme resulted in gains of R8.1 million being realised up to 31 December 2003, the sudden turnaround in the value of the Rand at the end of the period resulted in an unrealised loss of R6.8 million being recorded.

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