NORTHAM Platinum declared a record R2.8bn interim dividend following a strong recovery in headline earnings for the six months to end-December.
The year-on-year improvement was driven by vastly improved metal prices from last year partly related to “speculative froth”, according to Paul Dunne, Northam CEO.
Northam will pay shareholders R7 per share after posting headline earnings of R15,24/share for the six month period compared to 61 South African cents per share in the corresponding period of the previous financial year.
Dunne, who expressed a note of caution in August last year when the recovery in platinum group metal prices was underway, said today that: “Despite some recent speculative froth, due to geopolitical turmoil, our view remains that the underlying market factors driving pricing are fundamental”.
“While this should support the much-needed development of new operations, the extended timelines for mining development mean that primary supply of PGMs will continue to fall, and thus current prices are likely to remain firm in the medium-term,” he added.
Northam previously announced in a trading statement this month that metal sales increased 13.7% to 519,192 ounces in the half year period, while refined PGM production from own operations grew 3.7% to 467,818 oz.
Chrome concentrate output climbed 14.8% to 822,759 tonnes partly owing to the ramp up in Eland operations, a mine acquired from Glencore in 2017 for R175m. The group reversed a R2.5bn impairment charge at its Eland mine following improved long-term price forecasts.
The group ended the six months with net debt of R2.6bn.
The group has targeted production of just over one million ounces of PGMs predominantly from own operations with the balance comprised of third party concentrate.
The record payout is quite the statement from Northam, especially given the conservatism of its CEO. Dunne, commenting in the group’s capital allocation methodology today said certain decisions on spending money, while “unpopular” with shareholders, were necessary to the long term sustainability of a mining business.
But in his market outlook he identified a raft of positive drivers in the PGM market including the boost to petrol and diesel car engines, including hybrid electric models, after the European Union allowed more time for the adoption of battery electric vehicles, a relaxation followed by Canada earlier this month.
Dunne also highlighted the growth of grey hydrogen technology in China and artificial intelligence “requiring ever increasing data storage capacity which is driving demand for platinum, palladium and ruthenium”.
Against this, Dunne stuck to his long-held belief that PGM supply would take many years to respond owing the past undercapitalisation of orebodies, especially in South Africa.
Shares in Northam gained just over 5% in early Johannesburg trade.
