Glyn Lewis, CEO of Northam Pt
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Northam might sell 50,000oz less PGM in FY08
Allan Seccombe
Posted: Tue, 12 Feb 2008

[miningmx.com] -- NORTHAM Platinum's full year precious metals sales are likely to be around 50,000 oz less than in the previous year, with tough mining conditions playing a more important role than the power problems afflicting other mining companies.

Northam’s precious metals sales in the interim period to end-December 2007 fell nearly 24% because of a lengthy safety-related shutdown and mining conditions.

Northam sold 134,165 oz of precious metals, including platinum and palladium, in the six-month period, down from the 175,382 oz sold in the same period a year earlier. Production was down 16% to 150,755 oz of precious metals in concentrate.
not a consequence of the power situation
Since the end of December, Northam has had a new problem to deal with at its single mining operation. State power utility Eskom declared force majeure on 25 January, causing mining companies across the industry to temporarily cease production to keep workers safe.

Underground mines were unable to produce any minerals for at least a week. Eskom and the mining industry have agreed to reduce power consumption in the sector by 10%, prompting gold and platinum producers to warn of lower production and potential job losses.

“Provided that Eskom can supply the company with not less than 90% of its normal average power consumption, production and sales of metal in the second half of the year should correspond to those in the first half,” CEO Glyn Lewis said in a statement accompanying Northam’s results.

Northam produced 324,296 oz of metals in concentrate in the year to end-June 2007 and sold 344,101 oz, including nearly 13,000 oz it purchased. No purchases were made in the first half of the current financial year and none are likely in the remainder of the year.

Production in the second half of the 2008 financial year is likely to be between 310,000 and 314,000 oz, Lewis said, stressing these were provisional best estimates.

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Full-year sales were estimated by Lewis to be slightly more than 280,000 oz -- about 49,000 oz less than the 331,000 oz of in-house production for 2007 -- something which is likely to add impetus to the upward trajectory of the platinum price.

The platinum market has already shot to all-time highs above $1,950/oz because of concerns about platinum supplies from South Africa, the world’s largest source of the metal, to an extremely tight market.

Anglo Platinum on Monday forecast reduced 2008 production of 2.4 million oz, down from the previous year’s 2.47 million oz and well shy of the 2.8 million oz forecast it made in the middle of last year. The reduction is a direct result of the power shortage and the flooding of Amandelbult.

Platinum is used predominantly to make autocatalysts and jewellery. Anglo Platinum executives on Monday expressed concern that these very high prices could damage jewellery demand, which is price sensitive.

Analysts reckon the platinum deficit could widen to more than 400,000 ounces by the end of 2008, compared with about 265,000 ounces in 2007, Reuters reported. The market had a surplus of 65,000 ounces in 2006 following seven successive years of deficits, it said.

News of reduced production forecasts is likely to be echoed by Impala Platinum, which reports its interim results on Thursday.

Northam’s mine was shut down after the death of three underground workers, costing the mine 23 days of lost production in the first half.

Difficult mining conditions, which are common at the Northam mine, meant about a quarter less Merensky was mined. Northam increased UG2 production, which offset the decline in Merensky by some eight percentage points.

The grade for Merensky is 5.6 grams/tonne against 4.4 g/T for UG2, where recovery is some seven percentage points lower at 80% than Merensky ore.

“The reduction (in production) we are expecting is not a consequence of the power situation, but the mix of reef we have. We are mining more UG2 because of difficult underground conditions,” Lewis told Miningmx.

Looking at the financial effects of mining more UG2, historical data from Northam shows there's almost twice the amount of rhodium in the prill split compared to Merensky, which should go some way to offsetting the decreased tonnages of the reef.

Interim profit fell by almost 30% to R473m, with revenue dropping 17% to R1.5bn. Operating costs increased by 15% to R800m.