Northam’s 19.9% PGM production increase underlines resilience

Paul Dunne, CEO Northam Platinum

NORTHAM Platinum Holdings increased total equivalent refined metal production from own operations 10.6% for the six months ended December.

Commenting in a production update on Monday evening, the platinum group metals producer said production for the period came in at 434,977 ounces, an increase year-on-year of 10.6%. Including third party metal purchases, total production for the period increased 19.9% to 518,084 oz.

“Production growth has been achieved due to the continued focussed execution of the group’s growth strategy,” said Northam Platinum CEO Paul Dunne.

“We have targeted increased mechanisation to grow production whilst lowering operational risk and improving our relative position on the industry cost curve,” he said. “This protects our operations against subdued or volatile commodity markets.”

The increase in production is a major fillip for Northam as it helps offset the impact of lower PGM prices, which declined heavily last year, as well as inflation.

Analysts tipped Northam as the best of South Africa’s PGM producers. “Compared with peers, Northam is most able to sustain earnings at spot prices and will continue to improve its balance sheet,” said Adrian Hammond, an analyst for SBG Securities in a report last year. “For these reasons, we reiterate Northam as our top pick.”

For financial 2024, guidance for Northam’s refined metal sales is as much as 990,000 oz, against 738,000 oz in financial 2022.

Northam is also best placed to benefit from the recent improvement in the price of chrome, which is produced as a by-product of PGM mining. Chrome this year will account for 12% of Northam’s top line but 6% for Sibanye-Stillwater, and far less for Implats and Amplats.

According to a report by RMB Morgan Stanley, chrome will contribute R4bn-R5.3bn in revenue for Northam’s financial 2024 at its current spot price, rivalling rhodium which will contribute R6.5bn at current prices.

Northam’s decision to bail out of its 34.5% stake in Royal Bafokeng Platinum last year had benefits, analysts said. Though it sold at a loss, Northam still walked away with R13bn in cash and shares. This enabled it to declare a maiden dividend, launch a share buyback programme, and commit to a dividend policy for which investors had been clamouring.