Northam’s interim earnings down 30% as tax and finance costs rise

Dineo Faku

JUNIOR platinum producer Northam Platinum reported a 30 percent drop in headline earnings on Friday amid soaring tax and finance charges in the six months to December 2012.

Headline earnings a share in the company’s first half declined to 36c from 51c in the first half of its previous year.

However, the weakening of the rand against the dollar aided the increase of the rand basket price and boosted revenue, with operating profit improving 21 percent year on year to R266 million.

Northam reported a 6.5 percent increase in production of precious metals in concentrate to 157 183 ounces and precious metals sales grew 4.4 percent to 177 655 ounces.

“Relative to its peers, we consider these results as the best of the current reporting season,” SBG Securities said.

SBG Securities added that the result was below its expectation because of a 44 percent tax charge (compared to its 28 percent forecast) on debt financing for the Booysendal mine. The tax charge becomes claimable when the operation reaches production levels in the next financial year.

JSE-listed Northam, which managed to escape last year’s illegal strikes in the mining sector unharmed, said it was concerned about the uncertain outlook for mining in South Africa and the global economy.

“The directors therefore believe that, assuming uninterrupted production, the company remains a going concern based on available borrowing facilities and anticipated operational cash flows,” the company said in a Stock Exchange News Service statement on Friday.

South African platinum producers, which were hit by wildcat strikes last year, have been reporting substantial losses amid increasing costs.

Northam said with the intensive capital expenditure programme ahead of the commissioning of the Booysendal mine and the drawdown of cash, investment revenue declined by 47.3 percent to R17.4m.

Cash flows utilised in investing activities increased 6.7 percent to R959.1m from the previous interim period because of the higher capital expenditure at the Zondereinde mine.

The capital expenditure included the smelter rebuild and ongoing spending on 15 level to improve accessibility to the Merensky ore reserves.

Cash flows from operating activities improved by 17.8 percent during the period under review to R249.4m, mainly as a result of a higher operating profit, the company reported.

Total operating costs rose 10.3 percent year on year to R1.4 billion reflecting the higher volumes and the effects of mining inflation, in particular increases in labour and power costs, the company said.

The operating and cash cost per ton milled decreased by 3.8 to R1 339 and 2.1 percent to R1 232, respectively, reflecting the higher production volumes. A substantial rise in refining costs resulted from the temporary outsourcing of smelting and refining to a third party.

Northam rose 0.98 percent to close at R38.22 on Friday.