Solid performance and sound cost control as Northam plans for a rising market

Johannesburg, Friday 25 August. Northam Platinum Limited (Northam) issued its results for the 2017 financial year today, Friday 25 August 2017.

OPERATIONAL AND FINANCIAL HIGHLIGHTS

  • Production 8.5% higher at 474 007oz (4E)
  • Group sales revenues increased 12.6% to a record R6.9 billion
  • Group operating profit up 60.2% to R614.0 million
  • Group cash profit per equivalent refined platinum oz up 44.0% to R5 314/oz
  • Group unit cash costs – per equivalent refined Pt oz well contained at R19 736/oz
  • 40.1% rise in capex to R1.6 billion.
  • Positive cash balance of R1.8 billion at year end
  • Normalised headline earnings of R398.3 million

At a briefing to the media and investment community today Northam chief executive Paul Dunne drew attention to the group’s 60% rise in operating profit to R614.0 million, reflecting a higher PGM basket price and significantly higher chrome revenue and well-contained group unit cash costs – a cash cost per equivalent refined platinum oz of R19 736/oz.

This translated into group cash profit per equivalent refined platinum oz of R5 314/0z, 44% higher year on year.

Commendable operational performances at both the Zondereinde and Booysendal North mines boosted equivalent refined metal production to 474 007oz (F2016: 436 960oz) (4E).  Solid production performance was accompanied by good cost control, resulting in group cash cost increases being held to 4.6%.

The higher production however failed to translate into a similar increase in sales volumes, given the current smelting capacity constraint of the group.  This will soon be a thing of the past when the new furnace is commissioned at the beginning of the next calendar year.  “We expect to destock approximately 70 000 ounces valued at some R1 billion,” said Dunne.  Nevertheless, sales revenues hit record levels at R6.9 billion.

To date, this project which includes a new drying plant and furnace at Zondereinde, has absorbed R671.6 million in capex, and is a significant contributor to the 40.1% increase in group capex to R1.6 billion.  The balance was spent on the development of the remaining expansion projects at both the group operations.

At Zondereinde expansionary capital expenditure was pegged at R619 million (F2016: R294 million). Combined with sustaining capital expenditure of R187 million (F2016: R260 million), total capital spend was R806 million (F2016: R554 million). The F2018 expansionary and sustaining capital expenditure is estimated at R326 million and R199 million respectively.

Total capex at Booysendal reached R774 million (F2016: R616 million). The key elements were R121 million spent on the UG2 deepening project, R326 million on the Booysendal South project, R202 million on the Merensky North decline and R112 million on sustaining capital expenditure. F2018 capex is estimated at R1.3 billion comprising R1.2 billion on expansionary, and R109 million on sustaining capex.

The group continues to execute its expansion strategy of growing production down the cost curve, both organically and through acquisitions. Acquisitions include:

  • the Tumela block’s mineral resources from Anglo American Platinum Limited for R1.0 billion
  • Eland Platinum mine from Glencore Operations South Africa Proprietary Limited for R175.0 million
  • subsequent to year-end, PGM recycling assets in Pennsylvania, United States, from A-1 Specialized Services Inc. for USD10.7 million

“Looking forward,” said Dunne, “we continue to adopt a conservative view on prices.

“We remain confident of our thesis that over time PGM demand will grow in line with world GDP, but primary supply from South Africa will contract resulting in a more positive price environment for our metals.

“The operational outlook for Northam is healthy. We have a stable production base at Zondereinde and a growing production profile from Booysendal. Both operations are in a competitive position on the cost curve. We envisage Zondereinde benefiting from the Tumela acquisition over the next three years raising its production profile to 350 000 4E ounces.

“The Booysendal South developments will over the next few years increase the total Booysendal production profile to 500 000 oz. The Eland operation is expected to contribute 150 000 4E ounces allowing for a five year ramp up.

“We still have a large capital expansion programme ahead of us. Project execution will be key for the foreseeable future. This will ensure that our expansion plans are delivered within the project parameters to take advantage of a rising PGM market,” Dunne concluded.

Distributed by R & A Strategic Communications

Johannesburg
Tel: +27 (0)11 880 3924
Marion Brower: +27 (0)71 493 0387
Jan Walker: +27 (0) 71 493 0429