Northam Platinum to join JSE Top 40 as palladium, rhodium deficits lift value 100% in a year

ONCE considered a bottomless money pit for former owner Gold Fields of South Africa (GFSA), Northam Platinum is set to become a member of FTSE/JSE Top 40 index “entering the charts” at an impressive ranking of 32.

The company announced today – on the 33rd anniversary of its Johannesburg Stock Exchange debut – that admission to the prestigious Top 40 would be on March 23. It was capitalised at R60bn as of close of business on March 4.

During the the Nineties, Northam Platinum – then 78%-owned by GFSA – was the recipient of several rights issues owing to the cost of mining at its then relatively deep levels.

The company’s fortunes gradually revived, however. Its transformation began with the development of the Booysendal South project – a strategy first driven by former MD, Glyn Lewis, and since continued by its current CEO, Paul Dunne.

Dunne also recapitalised Northam by dint of its second black economic empowerment transaction, developing Booysendal South, and adding other projects and mineral rights to the firm’s overall portfolio. The company is now positioned to produce 600,000 4E ounces in its current financial year.

However, the kicker to the firm’s recent performance has been the improvement in palladium and rhodium prices which saw it generate R695.8m of free cash in the six months to December, and treble normalised headline earnings which came in at R1.88bn.

Dunne said pricing for palladium and rhodium would remain robust for the foreseeable future. The market deficit in rhodium, 90% of which is sourced from South Africa, was rising by about 20% a year as a result of legislation requiring lower NOx emissions from autocatalysts in Europe, China and India, he said.

The palladium price is also expected to continue rising from its current level of about $2 650/oz. “We can see a three in front of that number,” Dunne added.

Shares in the company are just over 101% higher on the 12-month basis although there has been weakness in the last since February 21, down about a fifth.