Announcements 2022

Condensed reviewed interim financial results for the six months ended 31 December 2021

Strategically, the period under review has been significant for Northam.


Strategically, the period under review has been significant for Northam.


Key features:

    Reviewed 6 months ended 31 December 2021 Reviewed 6 months
ended 31 December 2020
Variance %
Normalised headline earnings R000 3 867 300 3 270 084 18.3 
Normalised headline earnings per share cents 975.1 641.5 52.0 
Sales revenue R000 13 881 445 11 884 898 16.8 
Operating profit R000 5 851 165 5 191 659 12.7 
Operating profit margin % 42.2 43.7 (3.4)
Profit after tax for the period R000 3 503 439 2 099 031 66.9 
Total comprehensive income for the period R000 3 513 166 2 083 307 68.6 
Headline earnings per share cents 961.5 599.9 60.3 
Earnings per share cents 965.0 599.9 60.9 
Cash generated from operating activities R000 2 911 944 3 144 590 (7.4)
EBITDA* R000 6 444 638 5 411 578 19.1 
Capital expenditure R000 2 298 033 1 298 511 77.0 
Total number of shares in issue   396 615 878 509 781 212 (22.2)

* Profit before Zambezi preference share dividends adding back interest and depreciation

Strategically, the period under review has been significant for Northam.

Firstly, the maturity of the broad-based black economic empowerment transaction with Zambezi Platinum (RF) Limited (“Zambezi”), (“Zambezi BEE transaction”) was accelerated as part of the Composite Transaction (as contemplated in the circular to shareholders dated 31 May 2021), which was approved by 99.9% of shareholders on 30 June 2021. The implementation of the Composite Transaction will enable Northam to achieve a number of strategic outcomes that will position the group for the next phase in its development. The Composite Transaction also resulted in the introduction of Northam Holdings as the new listed entity which was achieved by way of a share exchange implemented on a one-for-one basis in terms of which Northam shareholders exchanged their Northam shares for Northam Holdings shares. The introduction of Northam Holdings optimises the group structure for compliance with the historically disadvantaged persons ownership requirements as set out in the Mining Charter.

Secondly, the acquisition of a 34.68% shareholding in Royal Bafokeng Platinum Limited (“RBPlat”) aligns with Northam’s long-term growth, sustainability and operational diversification strategy. The consequent introduction of Royal Bafokeng Investment Holding Company Proprietary Limited as a significant shareholder in Northam Holdings further strengthens the group’s empowerment credentials.

Northam believes that this acquisition holds the potential for substantial long-term value creation. It further provides inherent optionality. The complementary metals mix of RBPlat, with a higher relative platinum contribution, fits well within the broader Northam metals basket. The RBPlat assets are young, shallow and well capitalised and occupy a strategically important position in the western limb of the Bushveld Complex. Northam recognises the Royal Bafokeng Nation’s important contribution and ongoing legacy in respect of RBPlat and is cognisant of Northam’s responsibility in respect of the long-term sustainability of RBPlat’s operations and its impact on the broader communities and the Royal Bafokeng Nation as a whole.

Financial results

Sales revenue for the six months ended 31 December 2021 was R13.9 billion, an increase of 16.8% compared to the sales revenue of R11.9 billion reported in the six months ended 31 December 2020 (“H1 F2021”). The increase in sales revenue was as a result of higher USD basket prices which was offset by a decrease in sales volumes on a 4E basis and a stronger ZAR/USD exchange rate, compared to H1 F2021. 4E sales volumes were impacted by the planned rebuild and upgrade of smelter furnace 1 at the Zondereinde metallurgical complex (“furnace 1”), which commenced during May 2021 and was successfully completed at the end of October 2021.

Despite the operational and inflationary challenges experienced, operating profit increased by 12.7%. Operating profit was impacted by the 16.8% increase in sales revenue which was partially offset by a corresponding 20.0% increase in cost of sales, resulting in an operating profit of R5.9 billion for the period under review (H1 F2021: R5.2 billion). This translates to an operating profit margin of 42.2% (H1 F2021: 43.7%).

EBITDA increased by 19.1% to R6.4 billion (H1 F2021: R5.4 billion).

The group’s financial results were affected by the challenging operational performance which impacted sales volumes, and in turn impacted operating profit, and the resultant cash position of the group. The cash position was further impacted by the acceleration of the maturity of the Zambezi BEE transaction, as well as the acquisition of the RBPlat shares.

During the period under review the group generated cash flow from operations amounting to R2.9 billion (H1 F2021: R3.1 billion). Cash generated was impacted by marginally lower sales volumes and higher than inflation cost increases. Sales volumes were impacted by higher inventory levels arising from the planned rebuild and upgrade of furnace 1 during the period under review, together with the increased pipeline as a result of the introduction of a second precious metal refiner. As at 31 December 2021, inventory on hand amounted to 379 874 oz 4E. Applying the average basket price realised during the period under review, inventory on hand is valued at c. R18.7 billion as at 31 December 2021.

Cash generated was applied towards both the Composite Transaction, resulting in an outflow of cash in excess of R6.6 billion, and the acquisition of the investment in RBPlat amounting to an outflow of R4.1 billion during the period under review. This resulted in net debt increasing to R14.3 billion, excluding the deferred portion of the purchase consideration relating to the acquisition of the RBPlat shares (“deferred acquisition consideration”) of R5.7 billion. 

As previously communicated to shareholders, Northam is comfortable with a self-imposed long-term net debt to EBITDA ratio of 1 to 1 (“net debt ratio”) in the pursuance of the group’s growth strategy. Excluding the deferred acquisition consideration, which relates to a corresponding cash generative underlying asset with no net debt, the net debt ratio as at 31 December 2021 (expressed on a rolling twelve month basis) amounted to 0.81. Inclusive of the deferred acquisition consideration, the net debt ratio was 1.13. The ongoing release of metal built up ahead of the smelter following the recommissioning of furnace 1, as well as a normalisation of the metal pipeline following the introduction of a second precious metal refiner, combined with the strong current metal price environment and the receipt by Northam of the dividend declared by RBPlat subsequent to the period end, will contribute to normalising the net debt ratio (post settlement of the deferred acquisition consideration) by 31 December 2022.

Group operational review and capital expenditure

The period under review has been extremely challenging, but Northam’s growth aspirations remain on track.

A key feature has been the difficult operational environments at the Zondereinde and Booysendal mines. Tragically, Zondereinde suffered two mining related fatalities, together with elevated medical absences relating to the ongoing COVID-19 pandemic. Furthermore, regional community unrest in the eastern region of the Bushveld Complex resulted in lost production days at Booysendal. This has negatively impacted the group’s metal production and unit cash costs. Despite this, Northam’s expansionary projects remain on track. Development of the Western extension at Zondereinde has progressed well. Booysendal has made good progress on South mine whilst recording seven million fatality-free shifts and remaining fatality free since inception. Eland mine continues to ramp-up and the addition of the recently acquired Maroelabult section adds considerable benefits.

The group’s equivalent refined metal from own operations decreased marginally to 351 359 oz 4E (H1 F2021: 352 741 oz 4E). The health, safety and community issues mentioned above resulted in lower production at Zondereinde and only marginal growth at Booysendal.

Group chrome concentrate production decreased by 17.3% to 430 697 tonnes (H1 F2021: 521 086 tonnes), as a result of a commensurate lower UG2 concentrator throughput.

Group unit cash costs per equivalent refined platinum ounce increased by 18.6% to R32 814/Pt oz (H1 F2021: R27 660/Pt oz) as a result of cost increases at all of the operations. Zondereinde cash costs increased by 21.3% to R34 544/Pt oz (H1 F2021: R28 473/Pt oz), with a corresponding increase of 19.1% at Booysendal to R24 158/Pt oz (H1 F2021: R20 288/Pt oz), and Eland recording an increase of 7.9% to R42 583/Pt oz (H1 F2021: R39 476/Pt oz).

Capital expenditure increased to R2.3 billion (H1 F2021: R1.3 billion). This is the result of the restart of capital projects that had been curtailed following the onset of the COVID-19 pandemic, partially offset by capital projects having either been completed, or being near completion at Booysendal mine. R1.5 billion (H1 F2021: R918.1 million) was spent on expansionary capital expenditure and R776.9 million (H1 F2021: R380.5 million) on sustaining capital expenditure.

The significant increase in sustaining capital expenditure was as a result of the planned rebuild and upgrade of furnace 1, together with a number of extensions to strike belts at Zondereinde mine and the first significant fleet replacements at Booysendal.

Expansionary projects that had been temporarily scaled back included: the Central Merensky and BS4 modules at Booysendal mine; aspects of the Western extension number 3 shaft project at Zondereinde mine; and the stoping build-up at Eland mine. Following improved market certainty during the previous corresponding period, all curtailed growth projects were re-initiated and the majority of workflow impacts resulting from the stoppage were clawed back. As such, the overall impact on the group’s growth strategy has been minimal. Group capital expenditure for the full financial year is forecasted to amount to R4.6 billion. The potential for further disruption to operations and the metal markets as a result of the COVID-19 pandemic remains. In addition, there is a continued risk of regional community unrest on the eastern limb of the Bushveld Complex. We continue to monitor the market and the societal landscape and will amend our capital programme when and where prudent. 

At Zondereinde mine, stoping is ramping-up within the Western extension section and further progress has been made on the deepening project. Reaming of number 3 shaft is progressing on track. At the metallurgical facilities, upgrades to the material handling infrastructure together with the planned rebuild of furnace 1 were completed as stated above. Capacity upgrades at the base metal removal plant have commenced, in order to align with our growth profile.

The development of Booysendal South is progressing well despite work stoppages due to community unrest in the region. Construction of surface infrastructure has been completed and underground development and stoping ramp-up at the Central UG2 modules is progressing. Decline development at the South Merensky module is on track. Underground stoping has commenced at the BS4 UG2 module and will ramp-up over the coming twelve months. The North aerial rope conveyor was commissioned in December 2021 and is operating within design parameters.

At Eland mine, processing of surface sources continues. Development of the Kukama decline system has progressed well, as has strike development to connect with the Maroelabult mine which was purchased from Eastern Platinum Limited. Underground stoping ramp-up is in progress. In addition, open-pit mining of UG2 commenced in the eastern portion of the mining right during the first quarter of the 2022 financial year. First ore was delivered to the concentrator during the second quarter.

Returning meaningful value to our shareholders

There are a number of ways that value can be returned to shareholders. This includes cash dividends, but also includes share buy-backs and, previously, the purchase of Zambezi preference shares.
The group has returned significant value to shareholders over the last two years through the acquisition of Zambezi preference shares and the early maturity of the Zambezi BEE transaction, which resulted in a reduction in the group’s issued share capital of 28.9%. 

The company considers an interim and final dividend at each reporting period. At its discretion, the board of directors of the company (“board”) may consider a special dividend where appropriate and dependent on the perceived need to retain funds for expansion or operating purposes. The quantum of any dividend would be determined by also taking into account expected future metal prices and exchange rates, together with capital commitments at the time of consideration by the board.

The company is currently at a critical juncture in respect of its growth trajectory, with various potential outcomes which remain to be determined. These outcomes will contribute to and inform our approach to dividends.

Accordingly, the board has resolved to not declare an interim dividend for the six months ended 31 December 2021 (H1 F2021: R Nil per share).

About this announcement

This short-form announcement is the responsibility of the board and is only a summary of the information in the group’s published condensed reviewed interim financial results for the six months ended 31 December 2021 and does not contain full or complete details.

Any investment decisions by investors and/or shareholders should be based on the published condensed reviewed interim financial results accessible via the JSE link at https://senspdf.jse.co.za/documents/2022/JSE/ISSE/NPHE/Interim_22.pdf and on the company’s website at: www.northam.co.za.

The condensed reviewed interim financial results are also available for inspection at no charge at the company’s registered office (Building 4, 1st Floor, Maxwell Office Park, Magwa Crescent West, Waterfall City, Jukskei View) and the offices of its sponsor, One Capital Sponsor Services Proprietary Limited (17 Fricker Road, Illovo), during normal business hours.

Johannesburg
31 March 2022

Northam navigates challenging operational environment

Northam Platinum Holdings Limited (Northam Holdings) today reported results for the first half of the 2022 financial year. The interim results are available on the Northam Holdings website at www.northam.co.za.


…….organic growth projects on track

Northam Platinum Holdings Limited (Northam Holdings) today reported results for the first half of the 2022 financial year. The interim results are available on the Northam Holdings website at www.northam.co.za.

Operational performance was adversely affected by the ongoing impact of COVID-19, particularly at Zondereinde, and by regional community unrest in the eastern bushveld on the Booysendal operation.

HIGHLIGHTS

  • 60.3% growth in headline earnings per share to 961.5 cents
  • A reduction of 22.2% in the issued shares of the group
  • Production largely unchanged – 351 359 oz 4E
  • 16.8% growth in sales revenue to R13.9 billion
  • Operating profit increases to R5.9 billion, with a margin of 42.2%
  • Free cash flow of R541.0 million
  • R2.3 billion investment in capex, with all projects on track

CHALLENGES

  • Zondereinde still impacted by COVID-19
  • Eastern limb community unrest affects Booysendal production
  • Unit cash costs higher by 18.6%

CORPORATE DEVELOPMENTS

  • New group structure established and listing of Northam Holdings
  • Value unlock for BBBEE and share repurchase of circa 30%
  • Strategic investment of 34.68% in Royal Bafokeng Platinum Limited (RBPlat)
  • Introduction of Royal Bafokeng Holdings Proprietary Limited (RBH) as a significant empowerment shareholder
  • Organic growth projects progressing well

GROUP OPERATIONAL PERFORMANCE

  H1 F2022 H1 F2021 Variance
Mill throughput (tonnes) 3 898 217 4 012 697 (2.9%)
Equivalent refined metal production (oz 4E) 351 359 352 741 (0.4%)
Total refined metal production (oz 4E) 298 797 322 170 (7.3%)
Chrome concentrate produced (tonnes) 430 697 521 086 (17.3%)
Cash costs/refined Pt oz (ZAR/Pt oz) 32 814 27 660 (18.6%)
Operating profit (ZAR) R5.9bn R5.2bn 12.7% 

A challenging operational environment impacted the group’s performance. Zondereinde was adversely affected by elevated medical absences associated with COVID-19, and also suffered two mining-related fatalities. Community unrest in the eastern Bushveld region led to production interruptions at Booysendal. Despite this, equivalent refined metal from own operations dropped only marginally to 351 359 oz 4E (H1 F2021: 352 741 oz 4E). Lower volumes and the impact of higher general mining inflation on costs added pressure, increasing the unit cash cost per equivalent refined platinum ounce by 18.6% to R32 814/Pt oz (H1 F2021: R27 660/Pt oz).

Expansionary projects remain on track with good progress at the Zondereinde Western extension and at Booysendal’s South mine. Booysendal’s fatality-free record remains intact with 7 million shifts since inception. Eland mine continues to ramp-up and the addition of the recently acquired Maroelabult section adds considerable synergistic benefits.

Significant growth in sustaining capital to R776.9 million (largely owing to the smelter furnace rebuild at Zondereinde and fleet replacements at Booysendal) (H1 F2021: R380.5 million) led to an increase in total group capex, to R2.3 billion (H1 F2021: R1.3 billion). Group capital expenditure for the full financial year is forecast to amount to R4.6 billion.

At Zondereinde mine, stoping is ramping up within the Western extension section, the deepening project has made further progress and reaming of number 3 shaft is on track. At the metallurgical facilities, upgrades to the material handling infrastructure together with the planned rebuild of furnace 1 were completed. Capacity upgrades at the base metal removal plant have also begun, aligning with the group’s growth profile.

Booysendal South development is on track. Construction of surface infrastructure has been completed and underground development and stoping ramp-up at the Central UG2 modules is progressing. Decline development at the South Merensky module is on track. Underground stoping has started at the BS4 UG2 module and will ramp up over the coming 12 months. The North aerial rope conveyor was commissioned in December 2021 and is operating within design parameters.

At Eland mine, processing of surface sources continues. Development of the Kukama decline system has progressed well, as has strike development to connect with Maroelabult mine. Underground stoping ramp-up is in progress. In addition, open-pit mining of UG2 commenced in the eastern portion of the mining right during the first quarter. First ore was delivered to the concentrator during the second quarter.

MARKET VIEW

Turning to the market, Northam CEO Paul Dunne points to the dearth of mining investment for over a decade, which, he says, has a consequence for supply: “There is a systemic global primary supply problem and it is the scarcity of new mining projects to replace the depleting profiles of currently operating, mature mines.”

“The eastern and western limbs of the Bushveld Complex host ore bodies with favourable platinum and rhodium loadings. These deposits are extremely rare and their intrinsic value will grow over time,” says Dunne.

FINANCIAL PERFORMANCE

Sales revenue for the six months ended 31 December 2021 was R13.9 billion, an increase of 16.8% compared to the revenue of R11.9 billion reported in the six months ended 31 December 2020 (H1 F2021). The increase in sales revenue was as a result of higher USD basket prices which was offset by a drop in sales volumes on a 4E basis and a stronger ZAR/USD exchange rate, compared to H1 F2021. 4E sales volumes were impacted by the planned rebuild and upgrade of smelter furnace 1 at the Zondereinde metallurgical complex, successfully completed at the end of October 2021.

Despite the operational and inflationary challenges, operating profit increased by 12.7%. Operating profit was impacted by the 16.8% increase in sales revenue which was partially offset by a corresponding 20.0% increase in cost of sales, resulting in an operating profit of R5.9 billion for the period under review (H1 F2021: R5.2 billion). This translates to an operating profit margin of 42.2% (H1 F2021: 43.7%). EBITDA rose by 19.1% to R6.4 billion (H1 F2021: R5.4 billion).

The group’s financial results were affected by the challenging operational performance which impacted sales volumes, and in turn impacted operating profit, and the resultant cash position of the group. The cash position was further impacted by the acceleration of the maturity of the Zambezi BEE transaction, as well as the acquisition of the RBPlat shares.

During the period under review the group generated cash flows from operations amounting to R2.9 billion (H1 F2021: R3.1 billion). Cash generated was applied towards both the composite transaction, resulting in an outflow of cash in excess of R6.6 billion, and the acquisition of the investment in RBPlat amounting to an outflow of R4.1 billion during the period under review. This resulted in net debt increasing to R14.3 billion, excluding the deferred portion of the purchase consideration relating to the acquisition of the RBPlat shares of R5.7 billion.

As previously communicated to shareholders, Northam is comfortable with a self-imposed long-term net debt to EBITDA ratio of 1 to 1 in the pursuance of the group’s growth strategy. Excluding the deferred acquisition consideration, which relates to a corresponding cash generative underlying asset with no net debt, the net debt ratio as at 31 December 2021 (expressed on a rolling 12-month basis) amounted to 0.81. Inclusive of the deferred acquisition consideration, the net debt ratio was 1.13. The ongoing release of metal built up ahead of the smelter following the recommissioning of furnace 1, as well as a normalisation of the metal pipeline following the introduction of a second precious metal refiner, combined with the strong current metal price environment and the receipt by Northam of the dividend declared by RBPlat subsequent to the period end, will contribute to normalising the net debt ratio by 31 December 2022.

RBPLAT INVESTMENT

Northam’s strategic investment in RBPlat amounts to a holding of 34.68%. We also have options and rights of first refusal to acquire a further 3.29% of the RBPlat shares.

CEO Paul Dunne said today: “Our investment in RBPlat creates significant long-term optionality for Northam. It aligns perfectly with our growth, sustainability and diversification strategy, and the consequent introduction of RBH as a significant shareholder further strengthens our empowerment credentials.”

In summary, the RBPlat investment is underpinned by the following important underlying factors:

  • Northam’s view on the PGM market
  • The Northam growth strategy and future opportunities
  • Operational risk reduction
  • Empowerment and transformation
  • Community and labour relations

For the period under review, the group’s share of earnings from RBPlat amounted to R128.4 million. Furthermore, a dividend was declared subsequent to the period end, of which the group’s share was R536.2 million.

OUTLOOK AND KEY FACTORS IMPACTING FUTURE FINANCIAL RESULTS

  • Safety performance and health and wellness of our employees
  • Exchange rate and commodity prices volatility
  • Reliability of energy supply
  • Management of production and performance targets
  • Effective project execution
  • Effective cost control
  • Operational and financial performance of RBPlat

The global economic outlook remains uncertain, resulting in volatile metal markets and exchange rates. The group’s financial performance is influenced by the exchange rate and commodity prices together with the stability of our operating environment. Management is confident that Northam is in a position to take advantage of improved market conditions going forward whilst reducing our operational risk profile and improving our business resilience.

R&A Strategic Communications, Johannesburg, Tel +27 (0)11 880 3924

  • Marion Brower +27 71 493 0387
  • Memory Johnstone +27 82 719 3081

Takeover regulation panel dismisses submission by the independent board of Royal Bafokeng Platinum limited (“RBPLAT”) in relation to an alleged mandatory offer by Northam

Shareholders are referred to the announcement published by Northam on SENS on 9 December 2021 in response to the announcement published by RBPlat on the same date regarding, inter alia, a submission made to the Takeover Regulation Panel (“TRP”) by the independent board of RBPlat, as constituted in terms of regulation 108 of the Companies Regulations, 2011, alleging that Northam had possibly triggered a mandatory offer in terms of section 123 of the Companies Act, No. 71 of 2008 (“Alleged Mandatory Offer”), (“RBP TRP Submission”).


Shareholders are referred to the announcement published by Northam on SENS on 9 December 2021 in response to the announcement published by RBPlat on the same date regarding, inter alia, a submission made to the Takeover Regulation Panel (“TRP”) by the independent board of RBPlat, as constituted in terms of regulation 108 of the Companies Regulations, 2011, alleging that Northam had possibly triggered a mandatory offer in terms of section 123 of the Companies Act, No. 71 of 2008 (“Alleged Mandatory Offer”), (“RBP TRP Submission”).

Following, inter alia, Northam’s submission to the TRP in response to the RBP TRP Submission, Northam is pleased to advise that the TRP has today, 30 March 2022, ruled in favour of Northam’s position that the Alleged Mandatory Offer has not been triggered and accordingly, the RBP TRP Submission has been dismissed.

The board of directors of Northam Holdings (to the extent that the information relates to Northam Holdings) accepts responsibility for the information contained in this announcement and certifies that, to the best of its knowledge and belief, the information contained in this announcement relating to Northam Holdings is true and this announcement does not omit anything that is likely to affect the importance of such information.

Johannesburg
30 March 2022

Corporate Advisor and Sponsor to Northam Holdings
One Capital

Attorneys to Northam Holdings and Northam Platinum
Webber Wentzel

Corporate Advisor and Debt Sponsor to Northam Platinum
One Capital

Change in external auditor

Shareholders and noteholders are advised that the board of directors of the company (“board”), on recommendation of Northam’s audit and risk committee, has appointed PricewaterhouseCoopers Inc. (“PwC”) as the new external auditor of the group for the financial year ending 30 June 2023, with the designated audit partner being AJ Rossouw.


Shareholders and noteholders are advised that the board of directors of the company (“board”), on recommendation of Northam’s audit and risk committee, has appointed PricewaterhouseCoopers Inc. (“PwC”) as the new external auditor of the group for the financial year ending 30 June 2023, with the designated audit partner being AJ Rossouw.

The incumbent external auditor, Ernst and Young Inc. (“EY”) will continue to act as external auditor of the group for the financial year ending 30 June 2022. EY’s appointment will accordingly terminate upon the conclusion of the audit in respect of the financial year ending 30 June 2022. PwC’s appointment as external auditor will be effective immediately after EY’s appointment terminates and will be proposed for approval by shareholders at the annual general meeting of the company, scheduled to be held in October 2022.

The change in external auditor was initiated following Northam’s decision to early adopt the mandatory audit firm rotation rule, issued by the Independent Regulatory Board for Auditors, which is effective for financial years commencing on or after 1 April 2023.

The board would like to extend its appreciation to EY for their long-standing service to the group and looks forward to working with PwC.

Johannesburg
29 March 2022

Trading statement and trading update

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.

Northam expects to report an increase in earnings per share in the range of 55.9% to 65.9% for the six months ended 31 December 2021 (“H1 F2022”) compared to the six months ended 31 December 2020 (“H1 F2021”). 

As published on SENS on 20 September 2021, Northam Holdings was introduced as the new holding company for the group by way of a share exchange implemented on a 1 for 1 basis, in terms of which Northam Platinum shareholders exchanged their ordinary shares (net of treasury shares) in Northam Platinum (“Northam Platinum shares”) for ordinary shares in Northam Holdings (“Northam Holdings shares”). Simultaneously, Northam Platinum became a subsidiary of Northam Holdings and all Northam Platinum shares in issue were delisted from, and all Northam Holdings shares in issue were listed on, the Main Board of the exchange operated by the JSE Limited, thereby ensuring the continuation of the group listing.

In light of the above, the condensed reviewed interim financial results of Northam Holdings (H1 F2022) reflect the arrangement that is in substance a continuation of the group. Northam Platinum is the predecessor for financial reporting purposes (H1 F2021).

Key financial features of H1 F2022 (Northam Holdings), compared to those of H1 F2021 (Northam Platinum) were as follows:

Metric H1 F2022 H1 F2021 % variance
Basic earnings per share (cents) 935.0 – 995.0 599.9 55.9% – 65.9% 
Headline earnings per share (cents) 931.5 – 991.5 599.9 55.3% – 65.3% 
Normalised headline earnings per share (cents) 943.0 – 1 007.2 641.5 47.0% – 57.0% 
Number of shares in issue including treasury shares (note 1) 396 615 878 509 781 212 (22.2%)
Weighted average number of shares in issue (notes 1 and 2) 363 052 144 349 875 759 3.8%

Notes:

  1. Since the consolidated financial results of Northam Holdings are in substance a continuation of the group, the shares used in calculating the number of issued shares and weighted average number of issued shares are based on the issued stated capital of the listed entity at that stage.
  2. Used to determine the basic and headline earnings per share.

The number of shares in issue reduced by approximately 22.2%. This is the net outcome across both entities (Northam Holdings and Northam Platinum) resulting from, inter alia:

  • a reduction in Northam Platinum shares pursuant to the early maturity of the broad-based black economic empowerment (“BBBEE”) transaction with Zambezi Platinum (RF) Limited (“Zambezi BEE transaction”) (shareholders are referred to the circular dated 31 May 2021 setting out further details to this transaction); and
  • a subsequent issue of Northam Holdings shares to Royal Bafokeng Investment Holding Company Proprietary Limited (“RBH”) in settlement of a portion of the purchase consideration for the acquisition of the Royal Bafokeng Platinum Limited (“RBPlat”) shares (“RBPlat shares”) from RBH.

Production and unit cash costs

The group’s equivalent refined metal from own operations decreased marginally to 351 359 oz 4E (H1 F2021: 352 741 oz 4E), as a result of challenging operational circumstances experienced during the period under review and was largely attributable to lower production at Zondereinde. 

The Zondereinde and Booysendal mines experienced particularly difficult operational environments during this period. Tragically, Zondereinde suffered two mining related fatalities, together with increased medical absences relating to the ongoing COVID‑19 pandemic. Furthermore, regional community unrest resulted in various production stoppages at Booysendal. These factors negatively impacted the group’s metal production as well as unit cash costs.

Group unit cash costs per equivalent refined platinum ounce increased by 18.6% to R32 814/Pt oz (H1 F2021: R27 660/Pt oz) as a result of cost increases at all operations. Zondereinde’s unit cash costs escalated by 21.3% to R34 544/Pt oz (H1 F2021: R28 473/Pt oz), with a corresponding increase of 19.1% at Booysendal to R24 158/Pt oz (H1 F2021: R20 288/Pt oz), and a 7.9% increase at Eland to R42 583/Pt oz (H1 F2021: R39 476/Pt oz). These increases were the result of higher input costs and lower than anticipated production volumes. Higher input costs were the result of an increase in the number of employees in service as the group continues to grow the labour component to enable the planned expanded production profile, as well as higher than normal inflation relating to, in particular, electricity tariffs and consumables such as diesel, steel and chemicals. 

Despite the challenging operating environment, the group’s expansionary projects remain on track. Development of the Western extension at Zondereinde has progressed well. Booysendal has made good progress on South mine, whilst recording seven million fatality free shifts and remaining fatality free since inception. Eland mine continues to ramp-up and the addition of the recently acquired Maroelabult section, transferred in January 2022, provides flexibility which will positively impact the overall mine build programme.

Unit cash costs for the group and per operation for H1 F2022 compared to H1 F2021 were as follows:

  Unit cash cost  
R/Pt oz  
H1 F2022 H1 F2021 % variance
Group cash cost per equivalent refined platinum ounce 32 814 27 660 (18.6%)
Zondereinde cash cost per equivalent refined platinum ounce 34 544 28 473 (21.3%)
Booysendal cash cost per platinum ounce in concentrate produced 24 158 20 288 (19.1%)
Eland cash cost per platinum ounce in concentrate produced 42 583 39 476 (7.9%)

Key production metrics for H1 F2022 compared to H1 F2021 were as follows:

  Equivalent refined production  
oz 4E  
H1 F2022 H1 F2021 % variance
Own production from Zondereinde 156 688 166 773 (6.0%)
Own production from Booysendal 173 606 165 864 4.7% 
Own production from Eland 21 065 20 104 4.8% 
Total production from own operations 351 359 352 741 (0.4%)
Purchased material 25 188 18 772 34.2% 
Total production 376 547 371 513 1.4% 

Volumes of purchased material increased by 34.2% to 25 188 oz 4E (H1 F2021: 18 772 oz 4E). The cost of purchased material is determined by applying the ruling commodity prices to the prill split of the purchased material. During the period under review third party material purchased contained more platinum, with a lower cost, and less palladium, with a higher cost, than the previous corresponding period which impacted the cost of the material purchased, resulting in a cost increase of 21.7%.

Equivalent refined production from own operations for the full financial year ending 30 June 2022 is forecast to be between 680 000 and 710 000 oz 4E. This will result in an estimated unit cash cost per platinum ounce of between R33 000 and R34 000, assuming no further adverse inflationary pressure during the remainder of the current financial year.

Sales

Sales volumes were impacted by the planned rebuild and upgrade of smelter furnace 1 at the Zondereinde Metallurgical complex (“furnace 1”) which commenced during May 2021 and was successfully completed at the end of October 2021.

Sales revenue for the period amounted to R13.9 billion, an increase of 16.8% from the previous corresponding period (H1 F2021: R11.9 billion). This increase was the combined result of softer PGM sales volumes (309 255 oz 4E versus 315 320 oz 4E in H1 F2021) in light of the furnace 1 rebuild and upgrade and higher USD basket prices, which prices were somewhat offset by a stronger ZAR/USD exchange rate.

The average USD basket price achieved increased by 22.5% to USD2 647/4E oz, from USD2 160/4E oz in H1 F2021. This benefitted from an 8.0% increase in the average platinum price to USD1 009/oz (H1 F2021: USD934/oz), together with a 15.7% increase in the average rhodium price to USD15 385/oz (H1 F2021: USD13 296/oz). The price of minor metals, iridium and ruthenium, continue to perform well, increasing by an average of 147.8% and 127.5% respectively, during the period under review. It is expected that iridium and ruthenium, which are critical to the growing hydrogen economy, will become increasingly significant contributors to the group’s revenue.

The average ZAR/USD exchange rate strengthened by 6.2% over the same period, to R15.04/USD (H1 F2021: R16.04/USD).

Total revenue per platinum ounce sold increased by 14.4% to R70 140/Pt oz, from R61 307/Pt oz in H1 F2021, resulting in a cash profit margin per platinum ounce in excess of 50%.

Sales volumes are expected to increase during the second half of the 2022 financial year as inventory built up ahead of the smelter is being processed. Sales guidance for the full financial year is between 720 000 and 740 000 oz 4E, with 770 000 to 800 000 oz 4E expected to be delivered to the group’s refiners.

The table below summarises dispatched metal volumes to the group’s precious metal refiners, compared to metal volumes refined and sold, together with the average achieved USD sales prices per metal.

Metal Dispatched Refined Total metal sold (including the sale of concentrate) Average sales prices achieved
oz oz oz USD/oz
Platinum 215 230 192 573 197 911 1 009
Palladium 87 932 76 389 79 182 2 149
Rhodium 27 049 26 445 28 785 15 385
Gold 3 622 3 390 3 377 1 798
Total 4E 333 833 298 797 309 255 2 647

The above table does not include attributable ounces relating to Northam’s investment in RBPlat.

As a result of the planned rebuild and upgrade of furnace 1 during the period under review, total refined volumes for the 6 months decreased by 7.3% to 298 797 oz 4E (H1 F2021: 322 170 oz 4E).

Concentrate sold to a third party in order to honour legacy offtake agreements relating to the Everest and Maroelabult operations contained 19 758 oz 4E. Refined metal sold to the group’s customers totalled 289 497 oz 4E.

The group engaged the services of a second precious metal refiner during the period under review to cater for the group’s medium to long-term production growth profile. As a result, the precious metal pipeline increased by approximately 40 000 oz 4E, reducing metal available for sales during H1 F2022.

Financial results

Despite the operational and inflationary challenges experienced, operating profit increased by 12.7%. The key contributor to this increase was a 16.8% increase in revenue which was partially offset by a corresponding 20.0% increase in cost of sales, resulting in an operating profit of R5.9 billion for the period under review (H1 F2021: R5.2 billion).  

Earnings before interest, taxation, depreciation and amortisation (“EBITDA”) increased by 19.1% to R6.4 billion (H1 F2021: R5.4 billion).

During the period under review the group generated cash flow from operations amounting to R2.9 billion (H1 F2021: R3.1 billion). Cash generated was impacted by marginally lower sales volumes and higher than inflation cost increases. Sales volumes were impacted by higher inventory levels arising from the planned rebuild and upgrade of furnace 1 during the period, together with the increased pipeline as a result of the introduction of a second precious metal refiner. As at 31 December 2021, inventory on hand amounted to approximately 380 000 oz 4E. Applying the average basket price realised during the period under review, inventory on hand is valued at c. R18.7 billion as at 31 December 2021.

Cash generated was applied towards the composite transaction (as contemplated in the circular to shareholders dated 31 May 2021) and the concomitant repurchase of almost 30% of the shares in issue, resulting in a once-off outflow of cash in excess of R6.6 billion, together with the acquisition of RBPlat shares amounting to a further outflow of R4.1 billion during the period.

The combined impact on cash flows, including an increase in capital expenditure and the significant cash outlay in respect of the accelerated maturity of the Zambezi BEE transaction and concomitant share repurchase, resulted in net debt increasing to R14.3 billion, excluding the deferred portion of the purchase consideration relating to the acquisition of the RBPlat shares, amounting to R5.7 billion as at 31 December 2021 (“outstanding consideration”). As previously communicated to shareholders, Northam is comfortable with a self-imposed long-term net debt to EBITDA ratio of 1 to 1 (“debt ratio”) in the pursuance of the group’s growth strategy. Excluding the outstanding consideration, which relates to a corresponding cash generative underlying asset with no net debt, the debt ratio as at 31 December 2021 (expressed on a rolling twelve month basis) amounted to 0.81. Inclusive of the outstanding consideration, the debt ratio was 1.13. The ongoing release of metal built up ahead of the smelter following the recommissioning of furnace 1, as well as a normalisation of the metal pipeline following the introduction of a second precious metal refiner, combined with the strong current metal price environment and the receipt by Northam of the dividend declared by RBPlat subsequent to the period end (refer below), will contribute to normalising the debt ratio (post settlement of the outstanding consideration) by 31 December 2022.

For the period under review, the group’s share of earnings from RBPlat amounted to R128.4 million (included in EBITDA and calculated for the period from 19 November 2021 until 31 December 2021, adjusted for additional RBPlat shares purchased on-market by Northam during December 2021, as announced on SENS on 7 December 2021). A dividend of R536.2 million was declared in respect of Northam’s shareholding in RBPlat subsequent to the period end and is excluded from the above. As at 31 December 2021, RBPlat reported net cash on hand (after taking into account the RBPlat dividend declaration in respect of this period) of R3.4 billion. This equates to c. R11.60 per RBPlat share currently in issue. 

Investment in RBPlat

During the period under review, Northam made a strategic investment by acquiring a significant shareholding in RBPlat, as published on SENS on 9 November 2021. Further acquisitions of RBPlat shares were announced on 7 December 2021. Shareholders are referred to these announcements for details regarding the investment in RBPlat.

As at 31 December 2021, Northam held 100 219 552 RBPlat shares. As set out in more detail in the 7 December 2021 announcement, Northam has the option to increase its shareholding in RBPlat by purchasing up to a further 6 145 798 RBPlat shares (“option shares”) at R131.56 per share (calculated as at 31 December 2021, including escalation and after taking into account the dividend to be received by RBPlat shareholders).

As at 31 December 2021 and assuming:

  • all option shares have been acquired by Northam (as at 31 December 2021, for illustrative purposes); and
  • the dividend declared by RBPlat for the period ended 31 December 2021 has been received,

the illustrative net cost per RBPlat share acquired by Northam amounts to R171.58 per share. RBPlat’s reported net cash on hand as at 31 December 2021 (after taking into account the RBPlat dividend declaration in respect of this period) amounted to c. R11.60 per RBPlat share.

Northam believes that its investment in RBPlat holds the potential for substantial long‑term value creation. It provides inherent optionality and its complementary metal mix, with a higher relative platinum contribution, fits well within the broader Northam basket. The RBPlat assets are young, shallow, well-capitalised and occupy a strategically important position in the Western Bushveld.

Capital expenditure

Capital expenditure increased to R2.3 billion (H1 F2021: R1.3 billion). This is the result of the restart of capital projects that had been curtailed following the onset of the COVID-19 pandemic, partially offset by capital projects having either been completed, or being near completion at Booysendal mine. R1.5 billion (H1 F2021: R918.1 million) was spent on expansionary capital expenditure and R776.9 million (H1 F2021: R380.5 million) on sustaining capital expenditure.

The significant increase in sustaining capital expenditure was a result of the planned rebuild and upgrade of furnace 1 together with a number of extensions to strike belts and the first significant fleet replacements at Booysendal.

Expansionary projects that had previously been temporarily scaled back included: the Central Merensky and BS4 modules at Booysendal mine; aspects of the Western extension number 3 shaft project at Zondereinde mine; and the stoping build-up at Eland mine.

Following improved market certainty, all COVID-19 related curtailed growth projects were re-initiated and the majority of workflow impacts resulting from the stoppage were clawed back. As such, the overall impact on the group’s growth strategy has been minimal.

Group capital expenditure for the full financial year is forecasted to amount to approximately R4.6 billion. The potential for further disruption to operations and the metal markets as a result of the COVID-19 pandemic, as well as market disruptions following the invasion of Ukraine by Russia, remain as risks to production and sales. In addition, a risk of regional community unrest on the eastern limb of the Bushveld remains. We continue to monitor the market and will amend the group’s capital program when and where prudent. 

The group continues to execute on its strategy of developing low-cost, long-life assets in order to position itself at the lower end of the industry cost curve. We believe that the development of the group’s project pipeline, which builds on the group’s pre-existing and acquired asset base, is bearing fruit and will continue to position Northam to deliver strong operational performance and financial results.

Conclusion

In summary, whilst the operating environment has been particularly challenging, we believe that the period under review has been important for Northam, given:

  • the significant progress made in respect of the group’s organic growth projects;
  • the successful acceleration of the maturity of the Zambezi BEE transaction and value unlock for BBBEE;
  • the c. 30% share repurchase;
  • the establishment of a new group structure and the listing of Northam Holdings; and
  • a significant strategic investment in RBPlat, coinciding with the introduction of RBH as an important empowerment shareholder of Northam.

The financial information contained in this announcement is the responsibility of the board of directors of Northam Holdings and has not been reviewed or reported on by Northam’s auditors. The reviewed consolidated results for Northam Holdings for the six months ended 31 December 2021 are expected to be published on or about 31 March 2022.

Johannesburg
24 March 2022

Interest payments notification – NHM012 and NHM015

Northam bondholders are advised of the following interest payments due on Monday, 14 March 2022:


Northam bondholders are advised of the following interest payments due on Monday, 14 March 2022:

Bond Code: NHM012
ISIN: ZAG000160136
Coupon: 7.625%
Interest Period: 13 December 2021 to 13 March 2022
Interest Amount Due: R38 020.55
Payment Date: 14 March 2022
Date Convention: Following Business Day

Bond Code: NHM015
ISIN: ZAG000164922
Coupon: 7.175%
Interest Period: 13 December 2021 to 13 March 2022
Interest Amount Due: R8 944 178.08
Payment Date: 14 March 2022
Date Convention: Following Business Day

Johannesburg
9 March 2022

Debt Sponsor
One Capital

Interest payment notification - NHM021

Northam bondholders are advised of the following interest payment due on Monday, 28 February 2022:


Northam bondholders are advised of the following interest payment due on Monday, 28 February 2022:

Bond Code: NHM021
ISIN: ZAG000181496
Coupon: 8.1%
Interest Period: 26 November 2021 to 27 February 2022
Interest Amount Due: R5 110 767.12
Payment Date: 28 February 2022
Date Convention: Following Business Day

Johannesburg
23 February 2022

Debt Sponsor
One Capital

Interest payment notifications - NHM018, NHM019 AND NHM020

Northam bondholders are advised of the following interest payments due on Friday, 25 February 2022:


Northam bondholders are advised of the following interest payments due on Friday, 25 February 2022:

Bond Code: NHM018
ISIN: ZAG000168097
Coupon: 7.608%
Interest Period: 25 November 2021 to 24 February 2022
Interest Amount Due: R16 462 878.25
Payment Date: 25 February 2022
Date Convention: Following Business Day

Bond Code: NHM019
ISIN: ZAG000168105
Coupon: 7.858%
Interest Period: 25 November 2021 to 24 February 2022
Interest Amount Due: R51 713 394.66
Payment Date: 25 February 2022
Date Convention: Following Business Day
Bond Code: NHM020

ISIN: ZAG000172594
Coupon: 7.608%
Interest Period: 25 November 2021 to 24 February 2022
Interest Amount Due: R4 448 908.27
Payment Date: 25 February 2022
Date Convention: Following Business Day

Johannesburg
22 February 2022

Debt Sponsor
One Capital

Interest payment notification - NHM011

Northam bondholders are advised of the following interest payment due on Thursday, 24 February 2022:


Northam bondholders are advised of the following interest payment due on Thursday, 24 February 2022:

Bond Code: NHM011
ISIN: ZAG000159237
Coupon: 7.6%
Interest Period: 24 November 2021 to 23 February 2022
Interest Amount Due: R10 880 701.37
Payment Date: 24 February 2022
Date Convention: Following Business Day

Johannesburg
21 February 2022

Debt Sponsor
One Capital

Dealing in securities

Shareholders are advised of the following dealing by a director of the company:


Shareholders are advised of the following dealing by a director of the company:

Name of director: Tebogo Emily Kgosi
Nature of transaction and class of securities: Transfer of ordinary shares in Northam Holdings (“Shares”) from Zambezi Platinum
Women’s SPV (RF) Proprietary Limited to Ms Kgosi
Nature and extent of interest: Direct beneficial
Date of transaction: 28 December 2021 (settlement took place on 31 December 2021)
Total number of Shares: 43 798
Price per Share: R203.69 (being the prevailing market price as at 24 December 2021)
Value of the transaction: R8 921 214.62
Transaction completed on-market: No
Clearance obtained in terms of paragraph 3.66 of the JSE Limited Listings Requirements: No (Ms Kgosi only became aware of the transaction
after implementation thereof)

Johannesburg
21 February 2022