[miningmx.com] – NORTHAM Platinum’s newly anointed CEO, Paul Dunne, said the company had set about a strategic review aimed at doubling platinum output to one million ounces a year in six years.
Commenting in the group’s full-year results announcement, in which total comprehensive income plummeted to R18.3m (2013: R524m), Dunne said growth in the company would be organic and by acquisition.
He added that despite the difficulties during the 2014 financial year – in which 48,000 oz of platinum group metal (PGM) production was lost in a strike, equating to R740m in revenue – the company was “in good shape”.
It had been “completely changed” by Booysendal, the R4.3bn, 160,000 oz a year project due to reach nameplate capacity in October 2015. Dunne also alluded to Northam’s unexploited strategic advantage in processing and refining which centre on extending the relationship with Heraeus, the 150-year old family-owned business which refines platinum supplied by Northam.
Dunne’s comments come against a backdrop of difficult platinum market conditions which he said were only likely to improve from 2018, although signs of improvement were already present.
“The process entails a thorough sifting of PGM opportunities in order to come up with a priority list of expansion possibilities, both domestically and globally, and to recalibrate the business based on the presumption of much higher metal prices by 2018,” said Dunne in comments to the results.
Northam’s growth ambitions would be conducted simultaneously in two discrete parts of two phases each of which the first part involves “… the identification of development aspects within the life-of-mine plan”.
This would be followed by possible “… expansion opportunities in close contiguity to the Zondereinde and Booysendal operations,” said Dunne.
In the second part, the group would weigh “… other non-contiguous and global expansion opportunities within the PGM sector”.
Speaking at the presentation of the firm’s results, Dunne added: “Northam is strategically well-positioned in a changing industry. It is not a small opportunity; we have the intent, ambition and aspiration”.
Present strategic difficulties persist, however.
Dunne acknowledged that Northam would be unable to meet its mining charter obligations in respect of housing in the current financial year. A R3.4bn empowerment deal, currently under negotiation, was also outstanding.
“I am under cautionary, but we do believe an empowerment transaction is imminent,” said Dunne. “The conceptual work is complete, the construct of deal is also complete. It will be a broad-based arrangement which includes employees, communities and strategic investors,” he said.
BOOYSENDAL
Share earnings for the year came in at 2.4 South African cents, some 98% lower year-on-year owing mostly to the 11-week strike at Northam’s Zondereinde mine that forced Northam into third party concentrate purchases.
Downtime from the smelter rebuild, which followed a leak in the 2013 financial year, meant the company suffered a 65.3% increase in toll refining costs, while an additional R130m in Booysendal operating costs was also incurred.
For all these headwinds, Dunne said Northam was well positioned.
“My first review to shareholders and stakeholders comes after having had a fair period to establish that this company, its people and its assets, are in good shape,” he said.
While costs were higher owing to concentrate purchases and toll refining, the addition of Booysendal production helped offset lower output from Zondereinde. The weaker rand/dollar exchange rate also added 10% to platinum sales. As a result revenue was 20.8% higher year-on-year.
The balance sheet was also in good condition relatively-speaking. Northam raised R1bn in a rights issue and revolving credit facility which, after the strike, put cash on hand at R666m and some R704m in net debt.
“We do believe we have good support from institutional shareholders and all shareholders,” said Dunne in response to questions about Northam’s funding ability.
One area of potential concern is that wage negotiations with the National Union of Mineworkers (NUM) will kick in again from April. Dunne also said some employees were members of the Association of Mineworkers & Construction Union (AMCU), although insufficient numbers to warrant a recognition agreement.
Dunne warned further strike action would be ruinous to the industry. “Any further
industrial action in the near to medium term will have a severely damaging impact on the company, on the PGM sector as a whole, and will further harm South Africa’s rankings as an investment destination,” he said.
