[miningmx.com] – NORTHAM Platinum said revenue losses from a wage related strike at its Zondereinde mine, led by the National Union of Mineworkers (NUM), had totalled about R200m, in excess of the R192m it lost in a strike earlier this year that lasted for three weeks.
Northam Platinum said employees had lost R30m in wages to date from the current strike, now into its fourteenth day. On average, Zondereinde produces about 1,000 ounces of 3PGE (platinum group elements) and gold on a daily basis.
However, the company was financed sufficiently to withstand a strike for a prolonged period, said Neill Young, an analyst for Coronation Asset Managers which recently acted as guarantor for Northam Platinum’s R600m rights issue.
Said Young: “The rights issue was a proactive, pragmatic step by management. They realised the potential for a strike’. He added that Northam had also needed working capital following a R55m smelter rebuild and to cover the expense of a lock-up of metal inventory during the downtime and rebuild.
In terms of the rights issue, investors have been offered about 15 million new shares in Northam – just over 3% of total issued share capital – at a price of about R40/share, or a premium to the 60-day volume weighted average price as of September 18.
The rights offer was opened to Northam shareholders on November 18 and is due to close on December 6. It’s thought that investors will see past the short-term effects of the strike and focus on the recovery underway at Zondereinde, and the growth prospects of Northam’s Booysendal project.
The R600m claw-back rights offer was part of a broader refinancing of the platinum firm’s balance sheet announced on September 20 in terms of which it negotiated a new revolving credit facility (RCF) for R400m, and a ‘covenant holiday’ on Northam’s existing as wel as the new RCF.
In terms of bank convenants, lenders establish comfort over loan agreements by making sure borrowers are able to cover the debt several times in pretax earnings. If this ratio falls below an agreed level, the borrower is in breach of its covenant.
However, Northam Platinum has secured a ‘holiday’ over the next three measuring periods which means its new and existing RCF will not be tested for the next 18 months.
Northam adamant
Northam Platinum said it would stick by its latest 9% wage increase offer for core employees and a 8% increase for non-core employees.
The NUM is demanding an increase for non-core employees of R2,000 on basic wages (equivalent to 22% – 42% at the lowest levels) and an increase for core employees of R2,100 on basic wages (equivalent to 23% – 43% at the lowest level).
“The company cannot accede to the NUM’s demands, which would significantly raise the cost base of the business and jeopardise the sustainability of the company and jobs, in the longer term,’ the company said in an announcement to the JSE.
Northam spokesperson Rene Rautenbach told Miningmx on November 13 that if it were to agree to R12,500 per month in basic minimum wages it would take the company 50% longer each month to cover the cost of labour; that is, 12 days instead of six days currently. One month of no production would delay positive cash flows by up to six months, he said.
