Northam Platinum reports strong set of results in tough operating conditions
Establishes firm strategic foothold in the eastern Bushveld Complex
Johannesburg, 25 August 2008: Northam Platinum Limited (Northam, JSE: NHM) released results for the year ended 30 June 2008 today, Monday 25 August 2008. Highlights include:
- The diversification of the company’s asset base with the consummation of the Booysendal transaction, thereby transforming the company’s prospects to grow into a significant, long-life PGM producer;
- Securing the company’s BEE credentials at the equity level and establishing a strategic foothold in the eastern limb of the Bushveld Complex;
- Signing a concentrate offtake agreement with Platmin’s Pilanesberg Platinum Mines;
- Sales revenues climb to record R3.89 billion;
- Northam mine continues to generate strong cash flows at R1.55 billion;
- 12.6% increase in after-tax profits to R1.50 billion;
- Healthy operating margin at 58.9%;
- Headline earnings reach 627 cps;
- Final dividend of 185 cps declared (330 cps for the year);
- Strong, ungeared balance sheet remains intact.
The Northam mine continued to generate strong levels of cash, at R1.50 billion in the year under review, underpinned by the growth in revenue from metal sales, 3.9% higher year on year at R3.89 billion. Exceptionally strong metal prices, particularly in H2, helped to offset the effect of lower production of metals in concentrate at 9,113 kg (292,989 oz). The 9.7% drop in output was attributable largely to the effects of safety-related stoppages, operational difficulties arising from intermittent power supply and industrial action, which was a feature of the mining industry in South Africa in the reporting period. These impacts were exacerbated at the Northam mine by the ongoing difficulties associated with mining the Merensky pothole facies. Year on year, tonnages mined from the Merensky reef horizon were 17.8% lower at 205,251 tonnes.
“However,” said Northam chief executive Glyn Lewis, “with the continued management focus on improvements to our metallurgical operations, we were able to grow the proportion of UG2 ore treated, which contributed to the 3.8% increase in tonnages from this reef to 963,033 tonnes (F2007: 928,149). Taking into account the production shifts lost, this was a creditable performance and helped to stem the decline in total tonnages milled to 10.9%.”
The lower volumes, along with inflationary cost pressure, had a negative impact on unit cash costs, which at R175,197/kg were 29.5% higher year on year. However the increase in total operating costs was contained to 19.5%. Looking to F2009, Lewis commented, that in the absence of external factors affecting operations, production levels in the next year were likely to increase, which would lead to some improvement in the relative cost performance.
Booysendal platinum project
With the consummation of the Booysendal transaction, work continues apace on the Booysendal project. The prefeasibility study review, which included a geological review, an investigation of mining methods and project elements such as metallurgy, engineering, infrastructure and the associated environmental issues, has been concluded.
Lewis added that the intensive and extensive work of the prefeasibility review had now laid the foundation for the bankable feasibility study. “We are pleased with the progress made by our enormously experienced project team and are very encouraged by the outcomes of the prefeasibility review. A range of production scenarios, 11 in all, ranging in scale from 120,000 to 480,000 tonnes per month have been considered. Although these are initial findings, results suggest a modular production build-up offering flexibility and ameliorating potential risks relating to issues such as power supply and water.”
The year under review was characterized by another period of buoyant market conditions and robust demand for Northam’s basket of metals. This was particularly apparent in the H2 period, when the average basket price rose to levels in excess of R500,000/kg.
Commenting on the recent slump in metal prices, Lewis acknowledged that this had been prompted by negative sentiment from the world’s major vehicle manufacturers and significant speculative disinvestment. “Nevertheless,” he added, “the current basket price still compares favourably with the average basket price of R304,000/kg in the first half of the year.
“With the softer platinum price, there are already some signs of a modest increase in demand from jewellery manufacturers. For the automobile sector, which we believe will continue to be the principal driver of PGM prices, emissions legislation continues to tighten. We believe that these factors, combined with the prospect of higher vehicle sales in the BRIC countries will continue to support demand, and we are confident that the outlook for fundamental demand for PGMs remains sound.”
After an eventful year in the life of the company, Northam continues to build on its track record of consistent delivery to shareholders, generating strong levels of cash, standing the company in good stead as it develops a new project. With the Booysendal transaction concluded Northam has now established a firm strategic foothold in the eastern limb of the Bushveld Complex, and has acquired a world-class PGM prospect which brings a near-term expansion opportunity and asset diversification. This new project, together with Northam’s associated metals processing infrastructure and downstream beneficiation opportunities, offers the possibility to provide processing alternatives also for emerging producers in the sector.
In acknowledging the role of Anglo Platinum in the company’s fortunes, Lewis concluded, “The finalisation of the Booysendal transaction has brought with it the exit of Anglo Platinum as a long-standing, supportive shareholder and partner in our business. In particular too I must pay tribute to Norman Mbazima, who has recently resigned from the Northam board, and who played an important part in the conclusion of this company-transforming deal.”
Russell & Associates
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