Northam shares slide after it warns about PGM market

Northam Platinum shares fell 7% on Monday, the most since mid-March, after the mid-tier platinum group metals (PGM) producer said its full-year profit is likely to decline by up to 12.5% and reiterated that the downward cycle in the PGM market could be protracted. 

Northam, like its peer group, is beholden to the vagaries of notoriously unpredictable commodity markets, as well as the rand-dollar exchange rate. 

Its headline earnings per share, the main profit measure stripping out one-off items, likely declined to between R22.85 and R25.46 in the year ended June from R26.11 recorded in the prior comparable period.

However, refined PGM production rose 13% to 809,775oz, boosted by three main mines despite the electricity-related disruptions which have become a common feature in the industry in recent months. Northam has in recent years invested to beef up production at its Zondereinde deep-level mine near Thabazimbi, its Booysendal mine near Steelpoort, and the Eland mine close to Brits.  

The higher output and weaker rand helped push Northam’s sales revenue up 16.1% during the reporting period. 

However, cash costs per refined ounce increased 12.6%, while the dollar basket price for Northam’s four PGMs was down 20% compared with 2022. 

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

As energy-intensive users, miners have an arrangement with power utility Eskom to reduce consumption as one way of relieving pressure on the national grid. 

Capital expenditure rose to R5.6bn from R4.6bn, of which R87m was used to mitigate the effect of load curtailment and to invest in renewable energy. 

Capex increased partly due to activity relating to the western extension project at Zondereinde, together with the ongoing ramp-up at Eland.  

Northam reiterated that it will assess the PGM market, as well as its operational and cash flow requirements, before deciding on the way forward after selling its 34.5% stake in Royal Bafokeng Platinum (RBPlat). 

In mid-July, CEO Paul Dunne said the R13.1bn deal provides the company with a potential buffer against the uncertain outlook in the industry. But Northam is also exploring other scenarios such as paying a maiden dividend or a share buyback. 

The PGMs market is in flux amid growing sales of electric vehicles (EVs) and their potential impact on demand for autocatalysts, which use platinum or palladium to curb harmful emissions in internal combustion engines. The PGM industry feeds off the automotive sector, particularly in Europe, US and Asia, where EV penetration is now gaining traction. 

Northam shares were down 7% to R127 on the JSE in midafternoon trade. Other players were down on the day, with Anglo American Platinum tumbling 8.5% to R724.92 and Impala Platinum losing 9% to R103.

With Reuters

mahlangua@businesslive.co.za