H1 results marred by rand metal price slide

Go-ahead for Booysendal early works programme

Key features

  • 33% increase in sales volumes to 6 134kg (197 206oz)
  • Sales revenues 8% higher at R1.7 billion
  • 21% slide in rand basket price to R254 913/kg (H1 F2009: R322 814/kg)
  • Earnings 42% lower at R216 million
  • Initial capex approved for Booysendal
  • Dividend of 20cps declared

Northam's Zondereinde mine produced a respectable performance in the half-year, with a 33% increase in sales volumes, reaching a high of 6 134kg. The higher sales though were largely negated by the 21% slide in the rand basket price to R254 913/kg.

Expanding on the effect of metal prices and currency on the company's results, Northam chief executive Glyn Lewis explained, "Year-on-year the rand was 9% stronger against the US dollar at R7.66 (H1 2009: R8.40), and exacerbated the 14% decline in the average US dollar price for the company's basket of metals at US$1 035/oz."

The higher sales volumes were largely attributable to the inclusion of 480kg of secondary material, along with 1 013kg of metals in concentrate purchased, in line with our strategy of leveraging our metallurgical infrastructure. The concentrate purchases, valued at R305 million, added significantly to the cost of sales for the half-year.

Total operating costs were 13% higher at R1 094 million, reflecting the effects of inflation on costs of labour, consumables and services. "The increase in unit cash costs however was held to 7%, or R196 273/kg, flattered by the treatment of secondary materials. Compared to the 2009 H1 period, costs associated with refining declined by 36% to R50 million, illustrating once again the cost-effectiveness of using our in-house metallurgical processing facilities post the scheduled smelter rebuild," added Lewis. The net effect was that operating profit for the period was 61% lower at R234 million.

Investment income increased by 49% owing to the inclusion of interest earned on an investment in escrow which is payable to Anglo Platinum upon the transfer to Northam of certain new order mining licences in respect of the Booysendal extension. The group's share of the earnings from the Pandora Joint Venture amounted to R5 million, whilst sundry expenditure declined from R19 million to R2 million.

Attributable profits were 42% lower year on year at R216 million, with the earnings per share lower by 47% at 60cps, reflecting the increased number of shares in issue compared with the previous comparable period.

Alluding to the dividend of 20cps declared, Lewis explained "The dividend cover should not come as a surprise; we have always indicated that we will be conserving cash in line with our expansion requirements. This level of cover may be increased further depending on economic circumstances and the company's performance."


Board approval has been granted for an early works programme at Booysendal, which will be launched with immediate effect. The approved capex of R340 million will be allocated to construction of roads, pipelines and infrastructural facilities ahead of mine construction, which is likely to start in July this year. Going forward, Lewis said the main issues to be addressed would be securing an approval of the Environmental Management Programme (EMP), identifying appropriate contractors, establishing a community forum and exploring funding options.


Both production of metals in concentrate and sales volumes are expected to be lower in the second half of the year. Although there are signs that the global economic climate is improving, some uncertainty remains regarding the sustainability of the recovery. At current basket prices earnings in the second half are likely to be at similar levels to the first half.

View the Results for the half year ended 31 December 2009 (PDF - 146KB)