Northam raises more than expected as it restructures debt
The platinum miner gets R411m in fresh cash and eases the repayment timeline on its domestic notes
Northam Platinum raised R411m in fresh cash and at the same time eased the repayment timeline on its domestic medium-term notes as the coronavirus pandemic disrupts mining operations in SA.
Northam, which has the world’s deepest platinum mine at Zondereinde and a brand new, shallow, highly mechanised operation at Booysendal, has a R10bn medium-term notes programme. These notes are different from bonds, which are issued just once. The medium-term notes can be sold over a period of time during the programme rather than receiving a lump sum.
Northam has now completed a R2.65bn restructuring of its programme and, at the same time, raised R411m in cash, which is more than the R281m it had guided the market to expect. The exercise entailed switching out of the near-term notes into a longer-term note and the issuance of more notes to raise the R411m.
“This will assist significantly in preserving and strengthening Northam’s liquidity position during the ongoing Covid-19 pandemic,” said CEO Paul Dunne. “We believe the company is well placed to weather the ongoing Covid-19 challenges and we remain appreciative of the support of our investors.”
The exercise to swap the notes for longer-dated notes and the fundraising “completes the restructuring of the maturities and fundraising which Northam set out to achieve to preserve its medium-term liquidity in the current global economic climate after the onset of the Covid-19 pandemic”, he said.
The new notes will mature in May 2023 and May 2025. In the interim period to end-December, Northam’s net debt was R5bn. Its refinancing efforts lowered the cost of borrowings to 9.56% from 10.63%, which would reduce interest payments.
Northam has poured R10bn into its growth since 2015, spending more than R8bn on projects and nearly R2bn on acquisitions. The investment has pushed its production of refined platinum group metals up by half to 520,000oz, with an output of 1-million ounces the end target.
During the interim period, Northam increased the issuance of the notes to R5bn from R2bn and it used the money raised towards buying preference shares in the company held by Zambezi Platinum, the empowerment structure that holds a 35.4% stake in the miner.
In the interim period, Northam bought R2.4bn worth of preference shares. Northam executives argue that the purchase of these shares is the best way to return value to shareholders ahead of dividends or buying back its own shares on the JSE.
By purchasing the Zambezi preference shares, Northam reduces its spending on dividends for the shares and cuts its future exposure when the preference shares are redeemed for shares in the miner.
Northam paid an R619m dividend on the preference shares in the interim period.