- Published on 20 February 2015
Opportunities emerging in exciting sector
Northam Platinum chief executive Paul Dunne told analysts and the media today that some clear opportunities were emerging in the platinum sector, which Northam is exploring and progressing in terms of its strategic review process. Dunne was speaking at a presentation to update the market on the group results and prospects.
Salient features of the strategic update:
- Northam is able to grow its production in a capital efficient manner at the lower end of the platinum industry cost curve by developing its >100 million 4E ounce resource at Booysendal. Northam has already taken a step in this direction with the announced acquisition of the Everest assets from Aquarius Platinum (South Africa) Proprietary Limited (AQPSA).
- By diversifying its production assets Northam should be in a position to reduce its operating risk, a welcome feature for the group which had been a ‘single asset’ operator for many years.
- Northam can reduce, over time, its risk exposure by focusing future growth on mechanised bord-and-pillar mining methods. This approach is neither labour nor capital intensive and history shows that it delivers materially better safety statistics.
- At Zondereinde, Northam has the opportunity to become more competitive, optimising its operations by focusing on less geologically complex reserves of Merensky and UG2 reefs. The Zondereinde mine is relatively well placed by virtue of having pre-developed, de-stressed, relatively high-grade UG2 reef and under-exploited, more conformable Merensky reef accessible from its developing sub-decline shaft system. Management estimates that the Zondereinde operation should be able to deliver around 300 000oz 4E per annum over the next 20 years.
- Northam will continue to assess opportunities which may arise from restructuring in the sector and which fit its objective of growing down the industry cost curve.
- Northam is well positioned to deliver powerful cash flow for its shareholders when the next commodity price upcycle begins. This said, management firmly believes it prudent to position the group for positive free cash flow at current commodity prices.
Looking to the more immediate prospects for the group, Dunne said today, “Metal prices are likely to remain subdued in the near term. We remain concerned about the unstable electricity supply in South Africa, along with an unsettled labour climate. Nonetheless,” said Dunne, “and despite the difficult operating conditions, we believe Northam is well positioned for the future.”
Issued by Russell & Associates
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