Northam well placed to face the future
Future focus on shallow, mechanisable operations
Friday 26 February 2016. Northam Platinum Limited (Northam) today posted results for the six months ended 31 December 2015. In a foreword to the results, chief executive Paul Dunne provides a review of the period, and Northam’s progress against its strategic objectives.
The first half of the 2016 financial year has been challenging for the entire platinum sector. Prices of PGMs have, along with other commodity prices, moved lower, placing enormous stress on the industry and its stakeholders. Northam has not been immune from these effects. However, by sticking to our conservative overall strategy, we believe the company is well positioned to face the future, to develop further and in the shorter term, to work through the present trough in metals prices.
Our strategy is based on sound operating performances focused on safety and on containing the costs of producing each PGM ounce. Our future focus is and will remain on developing shallow, mechanised operations. We will continue to exploit the Zondereinde mine, helped by a change in the mix of Merensky and UG2 ore, and our growth ounces will be shallow and mechanised. This was the fundamental consideration in our acquisition of the Everest property and crucially, of its processing plant located adjacent to our developing Booysendal South project. The plant will process Booysendal South’s ore and its acquisition contributes to the efficiency of the total capital spend on the mine. The fact is that we have a resource of 100Moz at Booysendal that offers superior risk-to-reward ratio.
As the half year under review progressed, we steadily ramped up production at the Booysendal North property, reaching the planned full production run rate at the end of the period.
The next stage will be the start of the development of Booysendal South, utilising the established infrastructure as a base. This approach will result in a capital efficient project while positioning the company to benefit from an upturn in the PGM market. Booysendal South is at the feasibility study stage, which is expected to be completed by the end of our financial year in June. This project will contribute to the group’s advancement down the cost curve, an essential element in our strategy for the long-term sustainability of the business.
The company’s Black Economic Empowerment (BEE) transaction with Zambezi Platinum (RF) Limited (Zambezi Platinum), delivered a R4 billion cash injection into Northam. At the end of the 10-year lock-in period, Zambezi Platinum is required to redeem the preference shares with cash or Northam shares. All amounts payable to the holders of the preference shares have been guaranteed by Northam.
We believe that we are entering the bottom of the price cycle and that it is likely that we shall remain in the trough for some time as the market adjusts to an excess of metal supply and poor macroeconomic conditions in the world’s key economies. Our capital and operating strategies are, however, founded on our understanding that we, as a company, must invest prudently throughout the cycle if we are to benefit over time.
Our emphasis on safety has contributed to another fatality free reporting period. This achievement is based on team work and perseverance.
The operational performance during the period under review was good. Zondereinde has adjusted well to a higher UG2 mining ratio which has resulted in a reduction in unit cash costs. Booysendal North mine has completed its production ramp up and the capital footprint is fully developed.
The increased level of disclosure this time around demonstrates the strong competitive cost position of both Zondereinde and Booysendal.
At the start of this financial year the three year wage agreement came into effect, promising a period of stable labour relations from which all can benefit.
We continue to progress our project pipeline, which positions Northam well in this difficult market environment for future growth.
The H1 results for F2016 are disclosed in greater detail than has been the case previously, including segmental analyses, a breakdown of sales and costs, amongst other metrics. These appear in the results booklet, which is made available on the company’s website at www.northam.co.za.
Russell & Associates
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