Northam hasn’t abandoned M&A with Amplats’ Amandelbult a future target

NORTHAM Platinum CEO Paul Dunne said that while the platinum group metals (PGMs) producer would be “inward looking” amid a trough in metal prices it remained interested in adding to production through mergers and acquisitions.

“There are assets in other people’s hands” that interested the company “as this is a heavily concentrated industry,” said Dunne when asked about deals post its decision to withdraw a takeover offer for Royal Bafokeng Platinum (RBPlat) in April.

“The valued assets are Amandelbult and Der Brochen but we understand that they are not for sale – although that may change,” he said. Amandelbult and Der Brochen are owned by Anglo American Platinum (Amplats) which is 80% owned by Anglo American.

Amplats was quizzed about the long-term future of Amandelbult specifically during its interim results presentation after another reporting period of interruptions and operational problems. UBS analyst Steven Friedman said recently that the mine’s “position in the (Amplats) portfolio looks uncertain, especially in a lower PGM basket price environment”.

Asked about Amandelbult, Natascha Viljoen, Amplats outgoing CEO said in July Amandelbult was strategically important while its operational problems were “known” and were being resolved.

Dunne told Miningmx during a later media conference today that his company would “be very careful”, adding that a complication to dealmaking with Amplats was leadership changes (incoming CEO Craig Miller) as well as “at the parent” (Anglo American CEO Duncan Wanblad).

Yet Dunne is also convinced that were the current basket price of PGMs to continue there would be pressure felt by companies leading to reductions in primary supply from South Africa. “If prices continue palladium (dominant) producers will struggle,” he said during the presentation of Northam’s full year results ended June 30.

Northam reported a 7.5% decline in headline earnings to R24.14/share for the period. Including R6.8bn in impairments, earnings fell 75% year-on-year to 654 cents/share.

Dunne also said it would be “very difficult” to see greenfields projects being developed in the current price environment.

A liquidation of rhodium holdings by a Chinese fibre glass manufacturer as well as the substitution of palladium with platinum in autocatalyst production, exacerbated by interest rate hikes and a “stuttering” Chinese economy, had flattened PGM prices. Over the 12 months under review, Northam saw the PGM rand basket price fall to R67,000 per platinum oz from R80,000 per Pt oz.

Since year-end, the basket price has fallen further to R53,000 per Pt oz. “I see early closures of marginal mines and suspended projects,” said Dunne. Mature orebodies on the Western Bushveld mining UG2 ore with a prill split bias to palladium were especially vulnerable with an estimated 1.5 million oz in platinum substitution.

Consequently, the platinum price had performed relatively well but a recovery in rhodium specifically was not expected for another year, said Dunne. Broadly speaking, he wanted to see an improvement in China’s economy and for surface stocks of metals to “wash” out of the market before the basket price would meaningfully revive.

The decline in PGM prices also supported his view it was correct for Northam to have withdrawn its bid for RBPlat. “Nobody realised what would happen with rhodium,” he said. The metal, which comprised more than 50% of South African PGM profit-making lost about 80% of its price value