Northam first half results reflect tough operating conditions
- Difficult Merensky mining conditions persist
- Drive to push UG2 production continues
- Metals in concentrate produced - 150 755 oz (3PGE + Au)
- Buoyant PGM market conditions continue
- 14% increase in operating costs reflect lower production volumes
- Interim dividend of 145 cps declared
Northam Platinum Limited (Northam) today posted results for the first half of the 2008 financial year, reporting lower earnings per share of 199 cents (F2007 H1: 280 cps) and a reduced dividend for the period at 145 cps.
Results for the half year were adversely affected by the loss of 23 production days owing to safety-related stoppages and intensive retraining programmes for employees.
CEO Glyn Lewis said today, “As expected, the difficulties associated with mining the Merensky reef have persisted. Our emphasis on exploiting the more conformable UG2 reef has borne some success, and has helped us to contain the drop in tonnages mined from both reefs to 17.1%, despite the 24.3% decline in Merensky tonnages.”
As a result of the lower tonnages, and a drop in head grade to 5.0 g/t, (associated mainly with the higher UG2 volumes mined), production of metals in concentrate was lower by 16.5% at 4 689 kg (150 755 oz) compared with H1 in F2007.
Sales revenue at R1.5bn was 17% lower year on year, declining from the R1.8bn level reported in the previous comparable period. Although the average US dollar basket price received for metals rose by 16.3% to US$1 396/oz the relatively strong rand in the period offset the potential gains from the higher prices, and resulted in a ZAR basket price received of R311 369/kg, 11.8% up year on year.
Lewis commented that the innovative metallurgical developments at Northam have facilitated the shift to increase volumes mined from the UG2 reef. Expressed as a ratio, the Merensky/UG2 production stands at 1.4:1. “With the additional external sparger column cell commissioned in August last year, we have made good progress in increasing the proportion of UG2 concentrate in the smelter, largely eliminating the previous problems associated with the build-up of chrome, while at the same time maintaining our PGM recovery rates.
“With the introduction of a high pressure roll crusher in the UG2 circuit within the next couple of months, it may be possible to further increase the throughput of the UG2 concentrator which has a design capacity of 75 000 tonnes per month.”
Reflecting the overall decline in production and general inflationary increases, total operating costs were higher by 14.8%.
Looking ahead, Lewis commented on the ore reserve position, saying there would be a stepped up focus on the deepening project to access the more easily mineable Merensky reef in order to counter the life-of-mine loss in the eastern transition zone of the mine. “We have already established 14 level, with development progressing on 15 level.” Every level opened up below 12, adds some 2.8 years to the mine’s life.
Referring to the situation with regard to power supply, and the possible effect on second half-year results, Lewis noted that production and metal sales should approximate those of H1 if Eskom could continue to supply the company with 90% of its consumption requirements.
On this basis earnings will be determined largely by the average Rand basket price received in the second half, currently at significantly higher levels than the R311 369 per kilogram received in the first half of the 2008 financial year.
Russell and Associates
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