Johannesburg - Listed platinum group metals producer Northam on Friday said it had reached an agreement with Glencore Operations South Africa to buy the Eland Platinum mine near Brits in the North West province for R175 million.
As a result of the transaction, Northam will take possession of Eland’s two mining rights, surface and underground infrastructure including a concentrator, a chrome spiral recovery plant, a tailings storage facility with a capacity of 100million tons, immovable property, and a mining fleet in excess of 100 vehicles which includes low profile mechanised mining equipment. Northam said the deal included the takeover of Eland’s environmental obligations and responsibilities.
In September 2015, Glencore placed Eland - which is on the western limb of the Bushveld Igneous Complex, which houses the world’s largest known reserves of platinum group metals - on care and maintenance. At the time, Glencore cited ongoing poor market conditions in the platinum sector and difficult operational conditions at the mine for the decision.
Agreement
Northam also announced a long-term chrome marketing agreement with Glencore International to exclusively market and sell chrome produced at Northam’s two primary operating assets, Zondereinde and Booysendal operations.
“The Eland transaction provides Northam with a medium-term option over a large, shallow resource with fully developed, world-class surface infrastructure. Northam will also be acquiring a sizeable mining fleet, a portion of which will be utilised at the Booysendal South operation.
“The chrome marketing agreement establishes a long-term relationship between Northam and Glencore, a leading global chrome trader, which will contribute to maximising Northam’s chrome revenue,” said Northam chief executive, Paul Dunne.
Read also: Glencore to shut Elands
Meanwhile, in the six months ended December 31 last year, Northam increased revenue by 7.9 percent from the previous R3.2 billion to R3.5 billion. In the same period, sales volumes declined by 9.8percent from 248075 ounces in the corresponding period last year to 223705 ounces.
Operating costs were up 16.8 percent to R2.8 billion. “This reflected the impact of higher labour and power costs as well as greater production volumes from the Booysendal North mine," Dunne said.
Depreciation and associated write-offs were higher and the cost of purchased concentrate dropped in line with lower third party deliveries. Higher depreciation costs are driven by the higher units of production at the Booysendal North mine which increased metal production volumes by 35.4 percent,” said Northam.
Difficult conditions
The group did not declare a dividend “given the continuing difficult conditions in the mining industry, and taking into consideration the cash requirements for the development of the group’s project pipeline and acquisition of platinum assets.”
Capital expenditure at Zondereinde and Booysendal were R425m and R330m, respectively. “Growth doesn’t occur without spend,” said Dunne. The company is readying itself for an increase in commodity prices. “We remain optimistic that a rise in prices, although gradual, cannot be avoided,” he said.
Northam shares on the JSE on Friday were down 5.46 percent to close at R50.53.