Northam expects to post loss that hides its operational strength
In a financial year in which mining production exceeded processing capacity, Northam Platinum expects to post a loss that masks the underlying operational strength of the business.
Northam has an empowerment financial structure in place that skews the bottom line each year and the 12 months to end-June were no different, with the company forecasting a loss and headline loss of between 185.9c and 216c compared to 181.8c and 181.9c respectively the year before.
There is a non-cash preference share dividend that is accounted for by the Zambezi Platinum empowerment structure.
However, on a normalised headline earnings basis, which excludes Zambezi, Northam expects to report R420m when it releases results on September 7, up from the previous year’s R398m.
At an earnings before interest, taxation, depreciation and amortisation (ebitda) level, which is almost an operating profit number, Northam said it would report R1.1bn compared to R967m.
Northam has about 170,000oz of platinum group metals (PGMs), which it has yet to push through its smelting complex and the value of this metal, which is expected to be processed during financial 2019, has an estimated sales value of R2.5bn.
Northam commissioned a new 20MW furnace at its Zondereinde smelting complex during the 2018 financial year to handle increased levels of concentrate coming from its new Booysendal mine.
Northam operates the Zondereinde deep-level mine and the new, shallow and mechanised Booysendal mines. Both operations delivered "strong cash flows", the company said, pointing out there would been a work stoppage at Booysendal when the operating model switched from contract mining to owner mining.
"Both Zondereinde and Booysendal recorded healthy cash margins despite difficult market conditions and higher operating costs."
In all, Northam generated 4.5% more refined metal for the year, with output of 571,843oz of the six PGMs it produces.
The Zondereinde mine increased production by 7% while Booysendal’s output fell by 4.3%.