Moving down the cost curve

Northam positioning for an upturn

Johannesburg, 26 February 2016. Northam Platinum Limited (Northam) released its results for the half-year ended 31 December 2015 today, Friday 26 February 2016.


  • Steady state production reached at Booysendal
  • Solid performance from Zondereinde
  • Three-year wage settlement reached
  • Costs well contained
  • Difficult market conditions persist
  • Expansion strategy crystallised
  • Strong cash position maintained
  • Dividend withheld in line with the group’s cash requirements


The group reported normalised earnings¹ of R197.4 million for the period under review. This amounted to normalised earnings per share of 38.7 cents per share, based on the 509 781 212 shares in issue.

With a solid performance from Northam’s Zondereinde operation, combined with Booysendal’s steady state production levels, the group posted sales revenues of R3.2 billion, 5.4% higher year on year.

Given the lower US dollar metal basket price, which was only partially offset by a 23.6% weakening of the ZAR value against the dollar, this was a creditable outcome for the half-year.

Costs were well contained, with unit cash costs for the group only 0.3% higher year on year at R340 274/kg or R17 756/Pt oz.  The higher sales volumes however drove the cost of sales higher by 17.8%, in line with the increase of 19.3% in volumes sold. The significant contributors to cost increases were labour, electricity and general mining inflation.  Group operating profit was R93.4 million (H1 F2015: R399.0 million) with Zondereinde and Booysendal recording operating profits of R50.0 million (H1 F2015 R279.4 million) and R43.3 million (H1 F2015: R119.4 million) respectively.

¹Normalised earnings are calculated by eliminating unusual items such as the impairment of non-core assets (R40.0 million) as well as the non-cash preference share dividends (R430.3 million) associated with the BEE structure, represented by Zambezi, from the group’s reported loss for the period of R273.0 million.



The move to increasing the UG2 component in the mining mix at Zondereinde has been progressing successfully. The rebalancing of the Merensky/UG2 mining mix to a 35:65 ratio has resulted in the life of Zondereinde increasing to 21 years.

Production of metals in concentrate was 15.4% higher at 4 823kg (155 063oz). Third party purchases were marginally lower at 609kg.

Mining flexibility on the Merensky reef horizon remains constrained. Increased production from the UG2 horizon is expected to compensate for the Merensky constraints until the deepening section is completed.

Zondereinde’s good safety run has continued, with another fatality-free reporting period.  Operational management remains focused on reducing both the number and severity of injuries through interventions involving employees, their representatives and operational structures.

Increased production volumes at Zondereinde have helped reduce unit cash costs to R342 288/kg, an improvement of 4.4% year on year.  The total operating costs for the period were R1.7 billion.

Management has adopted a cautious approach to capital expenditure in order to preserve cash resources.  This is not, however, at the expense of essential and strategic development.  The total capital expenditure for the period was R161.9 million, with a further R570.0 million budgeted for the remainder of the year which will include project expenditure on a new furnace.


The construction of the new furnace at Zondereinde is in progress, in line with the objective of adding smelting capacity and reducing operational risk. The project is anticipated to come in at a total R750 million in capex and it is expected to be commissioned by December 2017.  This expansion work follows on the extension of Northam’s strategic partnership with Heraeus Deutschland GmbH & Co. KG (Heraeus) and Heraeus South Africa Proprietary Limited in terms of which Heraeus has agreed to contribute €20.0 million to the construction of a new furnace.

The agreement also provides for the renewal of the current toll refining agreements and guarantees supply of material to Heraeus.


Booysendal’s milled tonnages reached 985 727 tonnes in the period, and the operation also reported an improvement in head grade from 2.6 to 2.7g/t.   Steady state production levels of 160 000oz per annum were reached during the reporting period.

The Merensky project at Booysendal North advanced satisfactorily with the development of the access decline and the extraction of a bulk sample for metallurgical test work. This test work is expected to be completed early in the second half of this financial year.

Booysendal’s good safety record was maintained in the period, with an improvement in the lost time injury rate.

Total operating costs at Booysendal for the period were R667.4 million, attributable mainly to the higher production volumes and mining contract rates. The rand per tonne milled cost for the period was in line with expectations at R661/t.

The unit cash cost of metal in concentrate at R291 772/kg (H1 F2015: R251 914/kg) is now a more realistic reflection of the operating costs at Booysendal following the completion of the ramp-up to steady state levels.


The outlook for the PGM industry remains challenging with persistent weak metal prices and poor economic fundamentals in developed economies. The group’s financial performance will depend on achieving higher metal prices and a stable operating performance. Despite the adverse market conditions, Northam’s strong balance sheet and prudent financial controls will enable the company to continue with strategic project development which will position the company for greater benefits from improving market conditions in the future.

The H1 results for F2016 are disclosed in greater detail than has been the case previously, including segmental analyses, breakdown of sales and costs, amongst other metrics. These appear in the results booklet, which is made available on the company’s website at

Issued by

Russell & Associates
Tel +27 (0)11 880 3924

Marion Brower +27 (0) 71 493 0387
Memory Johnstone +27 (0)82 719 3081