NORTHAM Platinum is set to report record full-year earnings, with sharply higher PGM prices providing much of the lift.
The PGM producer is due to publish audited results for the year ended June on 28 August, following a trading statement released earlier this month.
The update indicated a 64% rise in sales revenue and more than a sevenfold increase in headline earnings.
But the key earnings driver was the 57% increase in the rand basket price of PGMs, says Aeysha Samsodien, portfolio manager at M&G Investments.
“While operational performance was positive – with production exceeding guidance and unit cost increases coming in below guidance – production growth was relatively modest by comparison,” she says.
Northam’s own refined production increased 4.4% to about 939,000 oz 4E, while metal sales increased 8% to 1.09Moz 4E.
Northam said sales revenue for the year reached a record R54bn – from R32.9bn in the same period last year – while operating profit jumped 293.8% to R14.2bn, from R3.6bn.
The full-year results are due Friday, which should provide more detail on the underlying financial drivers and the sustainability of the earnings improvement, Samsodien says.
Production metrics
The group’s own PGM production reached a record 938,754 oz 4E.
Zondereinde, Northam’s deep-level, conventional PGM mine near Thabazimbi in Limpopo, produced 333,050 oz 4E – up 0.7%, while Booysendal, which extends across the Limpopo-Mpumalanga border, increased production 3.8% to 531,668 oz 4E.
Eland, near Brits in North West, was the strongest source of growth, increasing production 25.9% to 91,205 oz 4E.
Samsodien says Northam appears “well positioned to reach 1Moz of annual own production in the relatively near term”, although this would depend on Eland continuing to ramp up, with Booysendal and Zondereinde maintaining their current performance as the benefits of Zondereinde’s newly commissioned 3 Shaft come into effect.
“Production materially above 1Moz would require further investment, including potential development of [Zondereinde] 4 Shaft and additional processing capacity,” she says.
Northam began its strategy of growing own production to one million oz 4E in 2015.
The company said mining tonnages and grades were expected to improve further over the next few years with a combination of “incremental brownfield enhancements” as well as the expansion of its third-party businesses.
Eland ramp-up
Eland is likely to be an important component of that growth.
Northam acquired the mothballed Eland mine from Glencore in February 2017 and announced the restart of mining operations at the Kukama shaft in June 2019, with operations resuming during its 2020 financial year
According to Northam, the mine was operating at 60% of steady-state production during the review period and had generated its maiden operating profit during FY26.
However, its unit cash costs remained substantially higher than Northam’s other operations.
“Eland is still being developed and is therefore not yet operating at optimal costs, which currently weighs on margins,” according to Samsodien.
“As the mine approaches steady-state production, we would expect an improvement in margins as fixed costs are spread over higher production volumes, mining efficiencies improve, and capital intensity declines relative to output.”
She expects Eland’s margin contribution to become more meaningful as the operation ramps up through FY27 and FY28.
Vision 2031
Attention at the results presentation is also likely to fall on Northam’s Vision 2031 strategy, which targets PGM sales of more than 1.5Moz and chrome concentrate sales of more than 2Mt over the next five years.
“The target is ambitious but potentially achievable,” says Samsodien.
Northam sold approximately 1.09Moz in FY26, meaning the Vision 2031 target represented around 40% growth over five years.
“Importantly, the target is not dependent on a single project,” she points out.
Potential growth sources identified by Samsodien included Eland’s ramp-up, benefits from Zondereinde 3 Shaft, development of Zondereinde’s Western Extension and deeper mining areas, potential development of Zondereinde 4 Shaft, optimisation at Booysendal, and increased processing and chrome throughput.
Northam’s stronger earnings have meanwhile translated into substantial cash generation.
Operations generated R18.5bn before cash capital expenditure of R5.9bn. The company finished June with gross cash of R13.7bn and a net cash position of R2.7bn, while its R16bn in available banking facilities remained undrawn.
