Platinum group metals (PGMs) miner Northam Holdings expects to report a 70% to 80% year-on-year decrease in basic earnings a share to between R5.23 and R7.84 for the financial year ended June 30, compared with the earnings a share of R26.15 reported for the prior financial year.

Headline earnings a share are likely to be between 2.5% and 12.5% lower year-on-year at R22.85 and R25.46, compared with the R26.11 reported for the prior year.

Northam notes that the group’s results have been underpinned by a solid performance from all operations within the group, but that the decrease is mainly the result of two noncash impairments.

A R4.1-billion impairment was recognised on Northam’s investment in local PGMs miner Royal Bafokeng Platinum (RBPlat), based on the consideration received by Northam from the sale of its investment into RBPlat into the Impala Platinum (Implats) mandatory offer, as well as a R2.7-billion impairment at the Eland operation owing to a deterioration in the forecast commodity prices.

Meanwhile, Northam’s earnings before interest, taxes, depreciation and amortisation for the financial year increased marginally to R16.5-billion.

Revenue increased by 6.9% year-on-year to R39.5-billion.

Net debt decreased to R9.4-billion, from R16-billion in the prior year.

PRODUCTION

The group’s equivalent refined metal from own operations increased by 13% to 809 775 oz of platinum, palladium, rhodium and gold (4E) as a result of focused execution of the group’s growth strategy, which continues to deliver against set targets.

A key feature of the financial year under review has been the strong production performance from both the Zondereinde and Booysendal mines, and a significant step forward by Eland.

“Challenges remain, particularly in respect of high mining inflation and the potential for further and possibly more severe Eskom load curtailment events.

“Our growth and operational diversification programmes, however, remain on track and continue to demonstrate the value of our counter-cyclical investments and execution capacity across the group, as well as our flexibility in dealing with these challenges,” states the company.

Development of the western extension at Zondereinde has progressed well, the company adds.

Despite Zondereinde tragically suffering three fatalities, the benefits of focused Merensky stoping in the Western extension – together with logistical decongestion resulting from the ongoing shift of UG2 stoping from the western to the eastern portions of the mine – are starting to show in mining productivity. 

“Booysendal is delivering strong growth on the back of solid production from the North mine, as well as the ongoing ramp-up of the South mine. Booysendal achieved a record eight-million fatality-free shifts, remaining fatality-free since inception. Eland surpassed a maiden one-million fatality-free shifts during November last year, and continues to ramp up mineable reserves.”

Northam notes that all operations have been subject to numerous Eskom load curtailment events.

“The combination of the company’s comprehensive load management protocols, however, as well as on-demand self-generation capacity, have limited consequential production losses. A programme to increase self-generation capacity is well advanced, and this will further mitigate potential production losses arising from load curtailment events.”

Northam notes that the global economic outlook remains uncertain, resulting in volatile metal markets and exchange rates.

“Prevailing PGM market conditions and the material decline in the South African rand 4E basket price may signal a potentially protracted cyclical downturn. The group’s financial performance is influenced by the exchange rate and commodity prices together with the stability of Northam’s broader operating environment,” it comments. 

Northam states that the Implats mandatory offer, with a substantial cash underpin, presented a well-timed opportunity in the prevailing PGMs market for Northam to secure a significant cash injection that materially strengthens Northam’s balance sheet and liquidity position.

“The facility restructure further strengthened our liquidity position,” it notes.

Northam adds that relative positioning on the industry cost curve, and the ability to retain operational flexibility and balance sheet strength, will become increasingly important over time. 

Northam will continue to assess the PGMs market, as well as its operational and cash flow requirements, and will evaluate its options in relation to the application of the consideration received pursuant to the disposal of Northam’s investment in RBPlat in due course.

“Northam has always maintained inherent optionality and flexibility in executing its growth strategy and these considerations remain key drivers to all our decisions.”