GLOBAL Credit Rating (GCR) upgraded Northam Platinum’s long term credit rating owing to its “strengthened earnings profile” and expectations of “robust” free cash flow, the platinum group metal producer said in an announcement today.
Other factors behind the upgrade were “… the positive manner in which Northam managed and recovered from the impact of Covid-19, the group’s globally competitive cost position and Northam’s track record of maintaining conservative financial policies,” it said.
Northam’s national scale long term credit rating is now A(ZA) which compares to a previous rating of A-(ZA). The firm’s short term credit rating has been upgraded to A1(ZA) from the previous rating of A2(ZA), with a stable outlook.
“The stable outlook reflects GCR’s view that the group will pursue a conservative financial profile and will continue to benefit from its ongoing production ramp up against supportive pricing levels, which should translate into robust margins and cash flows to sustain strong credit metrics over the next 12 to 18 months,” Northam said.
Having de-risked its financial exposure to a black economic empowerment structure over the last 18 months, Northam said it would consider other firms of shareholder returns.
Speaking at the firm’s year-end results presentation in August, Northam CEO, Paul Dunne, said that “… all options for returning value to shareholders are now open to us and the board will continue to review this over time”.
Previously, Northam has used any free cash to buy preference shares in Zambezi Platinum, a JSE-listed company it helped create as part of its empowerment obligations.
Post the year-end, Northam held a 46.7% stake in Zambezi Platinum whose preference shares are backed by Northam shares. In buying Zambezi preference shares, Northam reduces its shares in issue and boosts share earnings.
The preference shares, issued to empowerment groupings, carry a 10-year lock-in which ends in 2025. At that point, preference share holders can make redemptions in cash or in Northam shares. Northam also undertook to fund any shortfall should there be a difference in the value payable to preference shareholders and Northam shares held.