Northam secures R2 billion of additional funding capacity for growth initiatives and an update regarding the second furnace at Zondereinde
Additional R1 billion revolving credit facility
Northam is pleased to advise shareholders that it has secured a new R1 billion two-year unsecured revolving credit facility (“New R1bn RCF”), which matures in April 2020. This facility is in addition to Northam’s existing R2 billion unsecured revolving credit facility (“R2bn RCF”), which matures in November 2021, and increases Northam’s total revolving credit facilities to R3 billion up until April 2020. The New R1bn RCF will accrue interest at the same rate as the R2bn RCF (variable rate of JIBAR plus a margin of 3.3%).
R1 billion fixed rate Domestic Medium Term Notes placement
Northam announced the issue of a R450 million tranche and a R550 million tranche of one-year senior unsecured fixed rate notes (“Notes”) on 19 April 2018 and 17 May 2018, respectively. The cumulative R1 billion of Notes were issued under Northam’s R2 billion Domestic Medium Term Note Programme and attract a fixed coupon of 11% per annum, compounded annually. Interest on the Notes is payable upon redemption.
Rationale for and application of the additional funding
During the past 12 months Northam has completed the construction and commissioning of its second furnace at Zondereinde (at a capital cost of approximately R1 billion); settled its purchase price commitments pertaining to the acquisition of the Tumela resource, the Eland mine and the recycling assets in the USA; accelerated certain capital growth projects; and made significant progress with the development and construction of its new Booysendal South mine. The combined funding requirement in respect of the aforementioned was well in excess of R3 billion. During this period a significant surplus concentrate stockpile, with an approximate value of R2 billion, was built up at Zondereinde in anticipation of commissioning the second furnace. Processing of this stockpile at the second furnace is currently underway and the working capital lock-up is expected to be released during financial year 2019.
A significant new purchase of concentrate agreement has been entered into with a third party and processing of this concentrate has already commenced.
A portion of the proceeds from the Notes has been used to repay previous drawdowns under the R2bn RCF and the New R1bn RCF remains undrawn. In view of the successful commissioning of the furnace and the ongoing working capital release from the concentrate stockpile, Northam opted to place the Notes for a one-year term only.
As at 30 April 2018, Northam’s net debt position amounted to approximately R2.5 billion, comprising R875 million of domestic medium term notes in issue and a net drawdown of approximately R1.6 billion on the R2bn RCF. The Notes issued on 17 May 2018 will have no impact on the net debt position and the proceeds from this issue have been paid into the R2bn RCF.
The addition of the New R1bn RCF is intended to right-size Northam’s standby facilities from R2 billion to R3 billion during a capital intensive development period at the Booysendal South mine whilst releasing value locked in the stockpile and, following that, to maintain a prudent level of standby facilities, taking into account Northam’s significantly enlarged operational footprint.
Update on the second furnace at Zondereinde
Ramp-up of the newly commissioned second furnace is progressing as planned with concentrate feed currently averaging approximating 400 tonnes per day at 13.5 MW. Northam is on track to complete processing of the surplus stockpile in financial year 2019, taking into account the additional concentrate purchased.
Paul Dunne, Northam’s Chief Executive Officer, said “the additional R2 billion funding flexibility addresses our investment in the concentrate stockpile during this capital intensive period for the Booysendal South project. The increased RCF also provides additional medium-term flexibility to take advantage of further potential opportunities Which may arise in the PGM sector.”
23 May 2018
Corporate Advisor and JSE Sponsor to Northam
Attorneys to Northam
Cliffe Dekker Hofmeyr Inc.
Arranger, Dealer and Debt Sponsor to Northam in respect of the Notes
Legal Advisors to Northam, Arranger and Dealer in respect of the Notes
Bowman Gilfillan Inc.
Mandated Lead Arranger, Original Lender and Facility Agent in respect of the RCF
Nedbank Limited (acting through its Corporate and Investment Banking division)