Northam’s short and long term credit ratings re-affirmed and outlook raised
Northam wishes to advise shareholders that the credit rating agency, Global Credit Rating Co. (“GCR”), has reaffirmed Northam’s short term credit rating at A1-(ZA) and the company’s long term rating of BBB+(ZA) with the Outlook raised from Stable to Positive.
Although the GCR view on resource corporates is a Negative Outlook, there is sufficient comfort in the developments at Northam for the panel to accord a Positive Outlook.
GCR has published a detailed credit rating report (available from GCR at http://globalratings.net) detailing the key criteria which form the basis for its rating, these include:
- The impact of Northam’s fully funded R6.6 billion black economic empowerment transaction (“BEE Transaction”), which secured Northam’s status as a fully-empowered mining company, for at least 10 years and incorporated a cash injection of R4.6 billion, which will be used to fund the expansion of platinum group metal (“PGM”) output to 800,000 oz annually in six years.
- Further diversification into mechanised and inherently lower cost ore bodies which secure stronger margins and return on capital, providing greater operational and financial flexibility.
- The timely delivery of steady-state production at Booysendal North and the strategic acquisition of Booysendal South (formerly Everest Mine).
- The 7% increase in PGM sales volumes which has sustained Northam’s revenue above R6 billion in the financial year ended 30 June 2016, despite a 6% fall in the ZAR basket price from the prior year.
- The marginal year-on-year increase in normalised headline earnings to R444.1 million in the financial year ended 30 June 2016, after removing the effect of the preference dividends accrued and capital items related to the BEE Transaction.
- Operations remained cash generative for the year ended 30 June 2016, which coupled with R265 million in interest income, nearly trebled operating cash flow.
- Northam’s operations are expected to be net ungeared in the medium term assuming no significant decrease in PGM prices.
- Following the issue of 3 and 5 year domestic medium term notes, which raised R425 million in aggregate, Northam has sound debt service ratios.
13 October 2016
Sponsor and Debt Sponsor