On Friday the firm posted a record R2.4billion operating profit for the year to end June 2019.
Northam chief executive, Paul Dunne, said on Friday that group capex had been significantly lower this year at R2.9bn and was likely to taper further next year after the company completed key milestones.
Dunne projected for example that capex at the Zondereinde project would likely be R595million in 2020 from R674m in the current financial year. Capex at the mine was R1.5bn in the 2018 financial year.
He said capex had peaked last year at R3.8bn mainly on expenditure at Booysendal South, the completion of the second furnace at Zondereinde and the purchase of the western extension.
“Now that we’re over the peak funding requirements for our project pipeline, we’re turning our attention to returning value to shareholders either by repurchasing our ordinary shares or the Zambezi preference shares or a combination of the two. Any free cash over and above our targeted debt level will be used for this purpose,” said Dunne. The company resolved not to declare a dividend for the 2019 financial year citing its current capital structure, project commitments and economic operating environment.
“The board is of the view that the most efficient way to return value to investors precludes the payment of a cash dividend,” Dunne said. No dividend was paid in 2018.
Profit was R2.4bn from R800m in 2018, while revenue had hit a record R10.6bn in the year thanks to higher PGM volumes, combined with a higher US dollar basket (4E) price and a weaker rand. Normalised headline earnings a share (normalised Heps) rose by 226.7 percent to 270.1cents a share. Heps were 15.8c a share and earnings a share jumped to 17.2c a share. Commenting on the results, Seleho Tsatsi, an investment analyst at Anchor Capital, said at face value the share looked expensive at a high multiple of trailing normalised Heps, which were adjusted for the black economic empowerment transaction.
“It’s important to note, however, that Northam is growing its volumes from 583000 4E ounces in 2019 to just under 1million 4E ounces over the next five years, with volume growth of 11percent a year,” Tsatsi said.
The group’s equivalent refined metal output was up 7.4percent in the period under review to 519954 4E ounces with increased production at Booysendal and Zondereinde. Chrome output was 17.6percent to 764528 tons on growth at Booysendal and Zondereinde as well as the maiden contribution from Eland.
“Our operations are performing well and we expect to deliver further production growth in the new year. We’ll continue to focus on costs in order to grow our margins and maintain our relative cost production,” Dunne said.
The company said it had started wage talks with the Association of Mineworkers and Construction Union (Amcu), the majority union at Booysendal.