Northam interim results

Northam Zondereinde mine reports a strong operating performance

Cash positive, healthy operating margin in difficult market conditions

Northam Platinum Limited (Northam, JSE: NHM) released results for the half year ended 31 December 2008.

Key features:

  • Metal production higher by 10.7% at 5 193 kg (166 952 oz)
  • Sales revenue increases by 7.7% to R1 612 million
  • Cash operating cost increases held to below inflation
  • Smelter refurbishment completed on schedule and within budget
  • Booysendal bankable feasibility study on track
  • Cash positive in tough market environment
  • Operating margin at 37.5%

Financial and operating results

Higher production and sales volumes from Northam’s Zondereinde mine, contributed to a 7.7% increase in sales revenues to R1 612 million for the half year ending 31 December 2008.

The rand basket price received over the period was slightly higher than in the comparable period in F2008, largely owing to the 21% decline in the rand/US dollar exchange rate, thereby partially offsetting the lower US dollar price for Northam’s basket of metals at US$1 197 per ounce.

A sustained focus on cost control has contained unit costs to single-digit increases, below inflation:

  • R/tonne milled - 7.1% higher at R823
  • R/kg produced - 9.8% higher at R184 213

Inflationary increases in the cost of labour, consumables and services, in combination with the 10.7% increase in production resulted in total operating costs of R970 million. Reflected in the cost of sales are those associated with additional smelting and refining, which were R42 million higher over the period owing to once-off costs relating to toll treating charges during the Northam smelter refurbishment, which was completed on schedule and within budget.

Profit attributable to shareholders decreased by 21.5% to R371 million compared with that for the six months ended 31 December 2007. Headline earnings per share were lower at 113.5 cents, also reflecting the increase in share capital associated with the acquisition of Booysendal during the period.

Northam metallurgical operations

The metallurgical upgrade programme continued during the reporting period with the refurbishment of the smelter, which started in October 2008 and which was completed on schedule and within budget at the end of December 2008. The smelter has been successfully recommissioned.

In line with Northam’s stated strategy of leveraging the metallurgical operations at the Zondereinde mine, and providing a competitive alternative to juniors entering the sector, an offtake agreement was concluded during the period with Platmin’s Pilanesberg platinum mine, and a toll-treatment agreement with Braemore Resources was concluded.

Northam CEO Glyn Lewis said today, "In the medium term Northam will benefit from the additional flexibility which we will derive from mining different ratios of reef type; in the longer term this adds an opportunity to increase our sales offering to the market and represents a further step in our stated strategy of growing production to feed into the modular build-up of the Heraeus Refinery SA."

Booysendal platinum project – shallow ounce growth into the future

The Booysendal bankable feasibility study is on track for completion in the first half of F2010, according to plan. The expectation that Booysendal’s development will be modular, with an incremental production build-up, remains unchanged. Optimisation studies on alternative mine designs have been completed, and have confirmed that a mechanized approach remains the preferred and lowest cost option.

Commenting on Booysendal’s development Lewis said, "We are initially focusing on developing a 120 000 tpm production unit which will be replicated as market conditions and the availability of power allow. This approach gives us the flexibility to manage our capital expenditure and production in line with prevailing market conditions."

Lewis added, "At current spot metal prices, Northam remains cash positive at an operating level, has no debt and should be able to develop Booysendal from a combination of internal retentions and medium-term loan finance."


Production of metals in concentrate is expected to be marginally lower in the second half of the year, whilst sales of PGMs are expected to be in line with those of the first half. Given the prevailing uncertainty in the global economic climate, and its dampening effect on commodity prices, the rand PGM basket price is likely to remain at current levels in the medium term. This should result in earnings in the second half of the financial year being lower than the first half.

Distributed by:

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