Northam steers course through headwinds

[miningmx.com] – NORTHAM Platinum overcame the effects of a strike, a rebuild of its Zondereinde smelter, and some corporate headwinds to produce a strong improvement in share earnings, heavily assisted by the weaker rand.

Full-year share earnings came in nearly 69% higher at 136.5 cents compared to 80.9c in the previous financial year. Metal concentrate produced was virtually flat but Northam sold 7.3% more concentrate – some 10, 700kg – for 8.9% higher prices which averaged at R365,217/kg.

As a result, revenues were a fifth higher. Operating costs per kilogram produced were reasonably well contained at 7.5%. The outcome was a 70% improvement in profit for the year of some R528m.

The weakness of the rand comes at a good time for Northam as it sets about completing the construction of its much-needed second mine, the Booysendal. The effects of the new mine build, however, are on the balance sheet.

Some R194m additional cash flowed into the company during the year taking total cash on hand to R298m, but the company decided to pass on the dividend as it shored up the balance sheet with a R1.25bn corporate bond in the year to which it added a further R120m from the domestic market. It has also drawn down R250m on its revolving credit facility.

It spent R349.7m on capital in the year under review and expected a further R350.2m would be incurred in the current year of which R55m was for the rebuild of the Zondereinde smelter. Some R4bn had been spent on Booysendal to date.

The smelter, which was rebuilt a year earlier following a run out of matte, would be completed in September, Northam said, adding that it was hopeful of a good year in the 2014 financial year, barring industrial action and general uncertainty that seemed to afflict the platinum industry in South Africa.

“The financial performance of Northam will depend largely on a combination of market circumstances and international metal prices, a peaceful and productive labour force, and regular underground mining conditions,” it said in notes to its published full-year announcement.

A rock drill operators strike, which took out production at Zondereinde, was one such event while there were some corporate headwinds too affecting the long-term strategic positioning of Northam.

This is the lapsed sale of Booysendal South to Aquarius Platinum following the failure of the Department of Mineral Resources (DMR) to approve a transfer of ownership of the property between the companies.

Northam Platinum is also waiting on the DMR to respond to proposals it has made in respect of a new empowerment structure following the sale of shares in Northam by Mvelaphanda Resources and Afripalm Resources.