JSE-listed Northam Platinum expects to report a 55.9% to 65.9% year-on-year increase in earnings a share for the six months ended December 31, 2021.

For the period, the number of shares in issue reduced by about 22.2% year-on-year.

The group’s equivalent refined metal from own operations decreased marginally to 351 359 oz of platinum, palladium, rhodium and gold (4E) as a result of challenging operational circumstances experienced during the period under review, and was largely attributable to lower production at the Zondereinde mine.

The Zondereinde and Booysendal mines experienced particularly difficult operational environments during the period under review, Northam notes.

Zondereinde suffered two mining-related fatalities, together with increased medical absences relating to the ongoing Covid‑19 pandemic.

Moreover, regional community unrest resulted in various production stoppages at Booysendal. These factors negatively impacted on the group’s metal production, as well as unit cash costs.

Group unit cash costs per equivalent refined platinum ounce increased by 18.6% to R32 814 as a result of cost increases at all operations.

Despite the challenging operating environment, Northam notes that its expansionary projects remain on track.

Development of the western extension at Zondereinde has progressed well. At Booysendal, good progress has been made on South mine, while recording seven-million fatality-free shifts and remaining fatality-free since inception.

The Eland mine continues to ramp up and the addition of the recently acquired Maroelabult section, transferred in January, provides flexibility which will positively impact the overall mine build programme, the group notes.

Volumes of bought material increased by 34.2% to 25 188 oz of 4E.

The cost of bought material is determined by applying the ruling commodity prices to the prill split of the purchased material. During the period under review, third-party material bought contained more platinum, with a lower cost, and less palladium, with a higher cost, than the previous corresponding period which impacted on the cost of the material bought, resulting in a cost increase of 21.7%.

Equivalent refined production from own operations for the full financial year ending June 30 is forecast to be between 680 000 oz and 710 000 oz of 4E.

This will result in an estimated unit cash cost per platinum ounce of between R33 000 and R34 000, assuming no further adverse inflationary pressure during the remainder of the current financial year.

SALES

Sales volumes were impacted by the planned rebuild and upgrade of Furnace 1 at the Zondereinde Metallurgical complex, which started during May 2021 and was successfully completed at the end of October 2021.

Sales revenue for the period amounted to R13.9-billion, an increase of 16.8% from the previous corresponding period.

This increase was the combined result of softer platinum group metal (PGM) sales volumes in light of the Furnace 1 rebuild and upgrade and higher dollar basket prices, which were somewhat offset by a stronger rand to the dollar.

The average dollar basket price achieved increased by 22.5% to $2 647/oz of 4E, from $2 160/oz of 4E in the previous year. This benefitted from an 8% increase in the average platinum price to $1 009/oz, together with a 15.7% increase in the average rhodium price to $15 385/oz.

The price of minor metals, iridium and ruthenium, continue to perform well, having increased by an average of 147.8% and 127.5% respectively, during the period under review.

It is expected that iridium and ruthenium, which are critical to the growing hydrogen economy, will become increasingly significant contributors to the group’s revenue, Northam notes.

The average rand:dollar exchange rate strengthened by 6.2% over the same period to R15.04.

Total revenue increased by 14.4% to R70 140/oz of platinum, from R61 307/oz of platinum in the previous year, resulting in a cash profit margin per platinum ounce in excess of 50%.

Sales volumes are expected to increase during the second half of the 2022 financial year as inventory built up ahead of the smelter is being processed.

Sales guidance for the full financial year is between 720 000 oz and 740 000 oz of 4E, with 770 000 oz to 800 000 oz of 4E expected to be delivered to the group’s refiners.

As a result of the planned rebuild and upgrade of Furnace 1 during the period under review, total refined volumes for the six months decreased by 7.3% to 298 797 oz of 4E.

Concentrate sold to a third party in order to honour legacy offtake agreements relating to the Everest and Maroelabult operations contained 19 758 oz of 4E. Refined metal sold to the group’s customers totalled 289 497 oz of 4E.

The group engaged the services of a second precious metal refiner during the period under review to cater for the group’s medium- to long-term production growth profile. As a result, the precious metal pipeline increased by about 40 000 oz of 4E, reducing metal available for sale during the period.

FINANCIAL RESULTS

Despite the operational and inflationary challenges experienced, operating profit increased by 12.7%.

The key contributor to this increase was a 16.8% increase in revenue, which was partially offset by a corresponding 20% increase in the cost of sales, resulting in an operating profit of R5.9-billion for the period under review.  

Earnings before interest, taxes, depreciation and amortisation increased by 19.1% to R6.4-billion.

During the period under review, the group generated cash flow from operations amounting to R2.9-billion.

Cash generated was applied towards the composite transaction and the concomitant repurchase of almost 30% of the shares in issue, resulting in a one-off outflow of cash in excess of R6.6-billion, together with the acquisition of RBPlat shares amounting to a further outflow of R4.1-billion during the period.

Capital expenditure increased to R2.3-billion as a result of the restart of capital projects that had been curtailed following the onset of the Covid-19 pandemic, partially offset by capital projects having either been completed or being near completion at Booysendal mine.

Group capital expenditure for the full financial year is projected at about R4.6-billion.

The potential for further disruption to operations and the metal markets as a result of the Covid-19 pandemic, as well as market disruptions following Russia’s invasion of Ukraine, remain risks to production and sales.

Moreover, Northam says the risk of regional community unrest on the eastern limb of the Bushveld remains.

The reviewed consolidated results for Northam for the period are expected to be published on or about March 31.