Announcements 2019

Dealings in securities

Purchase of Zambezi Platinum (RF) Limited preference shares.


Purchase of Zambezi Platinum (RF) Limited (“Zambezi Platinum”) preference shares (“preference shares”)

In terms of the Northam broad-based black economic empowerment transaction implemented on 18 May 2015, Zambezi Platinum holds ordinary shares in Northam. Pursuant to the preference share terms, Zambezi Platinum is entitled to elect to settle the preference share redemption amount in cash, Northam ordinary shares or a combination thereof.

Accordingly, in compliance with paragraphs 3.63 to 3.74 of the JSE Limited Listings Requirements (“Listings Requirements”), Northam advises its shareholders of the following dealings by an associate of a director of a major subsidiary of the company and Zambezi Platinum:

Name of director of major subsidiaryMr L C van Schalkwyk
Name of the major subsidiaryBooysendal Platinum Proprietary Limited
Name of associateBepro Messina Proprietary Limited
Relationship with directorMr Schalkwyk is a shareholder and director of Bepro Messina Proprietary Limited
Nature of transactionIndirect purchase of preference shares
Date of transaction 4 March 2019
Class of sharesPreference shares
Transactions completed on marketYes
Clearance obtained in terms of paragraph 3.66 of the Listings RequirementsYes
Price per preference share R70.00 per preference share
Total number of preference shares14 200 preference shares
Value of transactionR994 000.00
Nature and extent of director’s interestIndirect beneficial interest in Zambezi Platinum resulting in an indirect exposure to Northam ordinary shares

Johannesburg
07 March 2019

Sponsor and Debt Sponsor
One Capital

Northam posts record operating profit for the half-year

Northam Platinum has posted results for the first half-year of the 2019 financial year. The strategy which was launched in 2015 with the Zambezi Platinum (RF) Limited Black Economic Empowerment transaction, has for the first time unfolded in the numbers. Normalised headline earnings, the primary measure of performance, amounted to R553 million, or 108.5 cents per share, up by 192.6%.


Johannesburg, Friday 22 February 2019. Northam Platinum has posted results for the first half-year of the 2019 financial year. The strategy which was launched in 2015 with the Zambezi Platinum (RF) Limited Black Economic Empowerment transaction, has for the first time unfolded in the numbers. Normalised headline earnings, the primary measure of performance, amounted to R553 million, or 108.5 cents per share, up by 192.6%.

FINANCIAL HIGHLIGHTS

  • Sales revenues increased by 48.5% to R5.0 billion, mainly on the back of higher volumes
  • Operating profit of R1.0 billion, an all-time record for an interim period
  • Operating profit margin of 20.7%, which has more than doubled
  • An 111.1% increase in EBITA to R1.1 billion
  • Normalised headline earnings 192.6% higher at 108.5 cents per share
  • R1.5 billion spent on capital expenditure, mainly in the execution of the group growth strategy
  • Cash cost increases/Pt oz respectably contained to 5.5%

PERFORMANCE OVERVIEW

At a presentation to the investment community in Johannesburg today, Northam chief executive Paul Dunne commented: “Our growth strategy remains on track, and projects are generally ahead of schedule:

  • good progress is being made at Booysendal South with the successful commissioning of the rope conveyor and the re-commissioning of the PGM circuit at the South concentrator;
  • At Zondereinde, excellent progress is being made with the ore reserve development in the western extension.

“We believe that these projects will position the group favourably to benefit from a stronger price environment in the next few years.”

Both Zondereinde and Booysendal delivered solid operating performances and maintained good cost control, limiting group unit cost increases to 5.5%. The transition from contract mining to owner mining at Booysendal has proved to be the correct decision with overall improved performances at the operation.

Good progress was made with the de-stocking of excess inventory. During the period 30 000 ounces were released, resulting in significantly higher sales volumes of almost 300 000 4E ounces, and boosting sales revenues to R5.0 billion. Excess inventory currently sits at approximately 140 000 4E ounces with a market value of around R2.3 billion, using December 2018 prices.

The chrome tailings retreatment project at Booysendal South made a material contribution to the group’s total chrome concentrate, which increased by 18% to 368 000 tonnes. Chrome remains a material contributor to Northam’s revenue.

A combination of higher sales volumes (up by 41%), a 4.2% uptick in the basket price to USD1 013/4E oz, and a 5.7% weakening of the ZAR against the USD, boosted revenues by 49% to R5 billion. Costs of sales were 31% higher, lagging the increase in revenues, and resulting in an operating profit of R1.0 million, and an operating profit margin of 20.7% (2018 H1: 10.1%).

Incoming chief financial officer Alet Coetzee added, “In the current price environment, our main focus remains on cost control and growing our production base down the cost curve, and hereby creating long term value for all out stakeholders.”

Capex of R1.5 billion was spent in the execution of the groups growth strategy as project delivery was accelerated.

MARKETS

PGM demand in the autocatalyst sector is expected to increase as tighter emissions legislation is introduced in China and India. Real driving emissions (RDE) legislation will become more onerous for the car manufacturers as emission limits will need to be maintained over the lifecycle of a vehicle. This will lead to increased loadings per vehicle. Industrial demand is also expected to grow in the petrochemicals sector and support for fuel cell development has increased. On the supply side, underinvestment in the South African industry over the past decade will lead to lower production in the future.

Palladium autocat demand is expected to increase particularly in China with the introduciotn of China VI legislation. In Western Europe loadings in gasoline vehicles are expected to increase significantly owing to the strict application of RDE standards.

An increased rhodium deficit is expected as demand in the autocatalyst sector follows a similar trajectory to palladium and supplies contract. Rhodium is the most effective metal for the control of nitrogen oxides and cannot easily be substituted.

OUTLOOK FOR THE BUSINESS

“Project execution remains key to our unfolding strategy. We’ve done most of the heavy lifting from both a technical and balance sheet point of view,” said Dunne. “This gives us increased confidence in our ability to deliver our projects on time and within budget in order to take advantage of a rising PGM market.

“Our operations are performing well, and we expect to deliver a solid production performance for the full year. We’ll continue to focus on costs in order to maintain a competitive cost position on the industry cost curve. This is the only parameter on which the company can protect itself during difficult market conditions.

“De-stocking of excess inventory will continue until normal inventory levels are reached. The current rate of processing is greater than the rate of mining. The destocking campaign should be completed by mid-year and should release significant working capital.

“Zondereinde’s most recent wage negotiations in 2018 resulted in a three-year agreement and augurs well for relatively stable labour relations going forward. Booysendal will come to the end of a one-year agreement in June at which time a new wage agreement will be negotiated.”

Dunne concluded, “Our operations are performing well, our growth strategy is on track and we look forward to a good set of full year results when we report again.”

Issued by
R&A Strategic Communications
Johannesburg
Tel +27 (0)11 880 3924
Marion Brower
+27 71 493 0387
Jan Walker
+27 71 493 0429

Operational update

Northam is pleased to announce that it expects to report a record operating profit for an interim period amounting to R1.0 billion for the six month ended 31 December 2018, representing an increase of 204.3% from the comparative prior period (H1 F2018: R338.8 million).


Record operating profit

Northam is pleased to announce that it expects to report a record operating profit for an interim period amounting to R1.0 billion for the six month ended 31 December 2018, representing an increase of 204.3% from the comparative prior period (H1 F2018: R338.8 million). Earnings before interest, taxation, depreciation and amortisation (EBITDA) is expected to increase to R1.1 billion for the interim period (H1 F2018: R532.8 million), representing an EBITDA margin of 22.6%.

This strong financial performance is underpinned by Northam’s growth and diversification strategy, which is on track and well advanced. Project execution risk is reducing rapidly.

Revenue increased by 48.6% to approximately R5.0 billion (H1 F2018: R3.4 billion) primarily driven by a 40.5% increase in 4E oz sales volumes to 294 823 4E oz (H1 F2018: 209 861 4E oz). The average US Dollar basket price improved by 4.2% to USD1 013 per 4E oz (H1 F2018: USD972 per 4E oz) and the average ZAR/USD exchange rate weakened 5.7% to ZAR14.19/USD (H1 F2018: ZAR13.43/USD). On a per unit basis, total revenue per platinum oz sold is expected to increase by 3.8% to R27 524 (H1 F2018: R26 516).

Northam’s unit cash costs per platinum oz increased by 5.5% to approximately R22 007 (H1 F2018: R20 851).

Destocking of excess inventory continues

Total refined metal production increased by 41.1% oz to 299 323 4E oz (H1 F2018: 212 133 4E oz). This increase includes a net destocking of 30 000 4E oz of excess inventory accumulated prior to commissioning the second furnace.

The remaining excess inventory as at 31 December 2018 amounted to 140 000 4E oz, with a value of R1.9 billion at cost and an estimated sales value at period end of approximately R2.3 billion (only taking into account 4E ounces). Destocking is expected to continue for the remainder of the 2019 financial year.

Solid operational performance

The group produced 256 461 oz of equivalent refined 4E oz from own operations (H1 F2018: 246 473 4E oz), representing an increase of 4.1%. This follows a strong operational performance at both Zondereinde mine and Booysendal mine.

Zondereinde mine’s equivalent refined metal from own operations increased to 154 078 4E oz (H1 F2018: 152 487 4E oz). Metal in concentrate produced at Booysendal mine increased to 105 285 4E oz (H1 F2018: 96 650 4E oz), representing an increase of 8.9%. This is a very pleasing outcome given that the mine transitioned to owner-operator in 2018.

Growth and diversification strategy on track

The group invested R1.5 billion in capital expenditure during the six months ended 31 December 2018 (H1 F2018: R2.6 billion), of which R877.3 million was spent on the continued development of the Booysendal South mine. At period end, a total of R2.8 billion has been invested into the development of the Booysendal South mine which is well advanced, ahead of schedule and within budget.

The Booysendal South rope conveyor was commissioned in December 2018 with the first ore being transported to the receiving pad at the Booysendal South concentrator. The Booysendal South mine is designed to sustain annual production of up to 300 000 4E refined oz for more than 25 years, increasing the total production for the greater Booysendal complex to approximately 500 000 4E oz. Expansion of the group’s smelting capacity (the second furnace) was well timed and is more than sufficient to handle the projected mine volume increase from Booysendal. Northam continues to grow down the industry cost curve as Booysendal’s low cost production volume increases.

Capital expenditure during the interim period was funded by operational cash flows and available debt facilities, with net debt at approximately R2.9 billion as at 31 December 2018. However, the sales value of excess 4E inventory at 31 December 2018 is estimated to amount to approximately R2.3 billion.

The financial information contained in this announcement has not been reviewed or reported on by Northam’s auditors. The condensed reviewed interim results for the period ended 31 December 2018 are expected to be published on or about 22 February 2019.

Johannesburg
7 February 2019

Sponsor and Debt Sponsor
One Capital

Trading statement

In terms of paragraph 3.4(b) of the JSE Limited Listings Requirements, companies are required to publish a trading statement as soon as they are satisfied, with a reasonable degree of certainty, that the financial results for the current reporting period will differ by at least 20% from the financial results of the previous corresponding period.


In terms of paragraph 3.4(b) of the JSE Limited Listings Requirements, companies are required to publish a trading statement as soon as they are satisfied, with a reasonable degree of certainty, that the financial results for the current reporting period will differ by at least 20% from the financial results of the previous corresponding period.

Improvement in normalised headline earnings

The group expects normalised headline earnings, defined as the group’s headline earnings adjusted for the impact of Northam’s black economic empowerment transaction, which constitutes the group’s main measure of performance, to be in excess of R550.0 million (H1 F2018: R189.1 million), representing an increase in excess of 190%.

Improvement in loss and headline loss per share

Shareholders are advised that the loss per share for the six months ended 31 December 2018 is expected to be between 17.8 cents and 18.6 cents per share and headline loss per share is expected to be between 18.6 cents and 19.4 cents per share, compared with the loss per share of 81.1 cents and headline loss per share of 80.0 cents reported in the comparative prior period (“H1 F2018”). The aforementioned ranges expressed in percentage terms, are, in respect of the loss per share, a decrease of between 77% and 78% and, in respect of the headline loss per share, a decrease of between 76% and 77%.

The anticipated loss and headline loss per share is attributable to Zambezi Platinum (RF) Limited’s non-cash preference share dividends, which are consolidated into Northam’s results in terms of International Financial Reporting Standards.

The number of shares in issue remains unchanged at 509 781 212 (H1 F2018: 509 781 212), which the group uses to determine the normalised headline earnings per share. The weighted average number of shares in issue for the period ended 31 December 2018 also remains unchanged at 349 875 759 (H1 F2018: 349 875 759 shares), which the group uses to calculate the loss and headline loss per share.

The expected improvement in earnings is primarily driven by a 40.5% increase in 4E metal sales volumes, which is underpinned by Northam’s growth and diversification strategy. The US Dollar basket price improved by 4.2% to USD1 013 per 4E oz (H1 F2018: USD972 per 4E oz) and the average ZAR/USD exchange rate weakened 5.7% to ZAR14.19/USD (H1 F2018: ZAR13.43/USD).

The financial information contained in this announcement has not been reviewed or reported on by Northam’s auditors. The condensed reviewed interim results for the period ended 31 December 2018 are expected to be published on or about 22 February 2019.

Johannesburg
7 February 2019

Sponsor and Debt Sponsor
One Capital