Picture: SOWETAN
Picture: SOWETAN

Northam Platinum has more than R2bn worth of metal waiting to be processed and sold as its mining volumes exceeded the capacity at its smelter, a short-term problem that will be addressed with its newly commissioned furnace.

In the 2018 financial year to end-June, Northam notched up record capital expenditure of R3.8bn as it laid the building blocks for growth, most notably a R1bn deal with Anglo American Platinum for a block of land next to its deep-level Zondereinde mine, the R175m purchase of the whole of Eland Platinum from Glencore, and buying a US platinum group metals (PGM) recycling business.

Northam is one of the few platinum miners doing deals in SA in the prevailing market of weak and uncertain platinum prices. Impala Platinum and Lonmin, two of the world’s largest sources of the mined metal, are both closing their old and unprofitable mines, with the combined number of job losses set at a projected 25,600 people.

Financial structure

Northam has an empowerment financial structure in place that skews bottom-line profit 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 when it reports results on September 7 compared to 181.8c and 181.9c respectively the year before. There is a noncash 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 Septem-ber 7, up from the previous year’s R398m. At an earnings before interest, taxation, depreciation and amortisation (ebitda) level, which is basically an operating profit number, Northam said it would report R1.1bn compared to R967m.

"Owing to the group’s mining capacity exceeding its processing capacity before and during the current financial period, there has been an inventory build-up," Northam said.

Northam has about 170,000oz of PGMs, which it has yet to push through its smelting complex, and 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.

It pointed out there would be 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%.