Northam to spend R3.05bn on Booysendal

[] –MID-TIER platinum producer Northam Platinum has confirmed that it is planning to spend R3.05bn on the development of its company-transforming Booysendal project.

Northam CEO Glyn Lewis said that the board had approved R340m in capital expenditure (capex) to fund an early works programme at the project on the eastern limb of the Bushveld Complex.

This will entail the construction of roads, pipelines and other infrastructural facilities ahead of mine construction, which is expected to start in July 2010 pending the approval of amendments to the environmental management programme.

The initial capital expenditure will be funded from the comGlyn Lewispany’s internal cash retentions although the company said it would keep shareholders informed of further
funding arrangements in tandem with the unfolding of Mvelaphanda Resources’ unbundling strategy.

Mvelaphanda Resources, Northam’s largest shareholder, announced in June last year its intention to unbundle its stake in Northam Platinum, divest of its remaining stake in Gold Fields, and dispose of a 20.7% (fully diluted) holding in diamond company Trans Hex.

The group expected to delist from the JSE in the first quarter of 2010 but a 19% decline in the value of Gold Fields stock over the past year could hold up the process.

Mvelaphanda Resources may not be actively seeking a buyer for its Gold Fields shares at current levels and the rights issue cannot go ahead until the stake has been realised.

In the interim, Northam has some room.

“At current consensus metal prices, the group is cash positive at an operating level, has no debt and should be able to commence with the development of Booysendal from internal retentions,” the company said in its interim results commentary.

But while it is not immediately necessary to push ahead with the rights issue, Lewis said he suspects that Northam may eventually have to go to the market for funding given the projects capex requirements.

“I certainly think in time to come we will have to come back to the market,” Lewis said at a presentation of the company’s results.

“It depends when the unbundling takes place,” he said.

Northam manager projects Rene Rautenbach said the company expects capex to peak at just over R1.2bn in 2012.

Start of construction is dependent on the approval of amendments to the environmental management programme, which is expected to come through in June this year.

The concentrator is scheduled to be commissioned in May 2013 with the mine reaching steady state production of 130 000 ounces a year by 2014/5.

A second phase could increase the mine’s production to by a further 115 000 ounces per annum to a total of 245 000 ounces a year.

At 13:05 shares in Northam were trading 10 cents firmer at R48.90 on the JSE. The stock has lost 2.31% or R1.15 this month to date.