Record R3bn operating profit for Northam
Northam and its PGM industry peers, including Anglo American Platinum and Impala Platinum, have generated significant cash on the back of extraordinary runs in rhodium and palladium and the weaker rand.
The stricter emissions legislation standards have forced car makers to use catalytic converters in vehicles, spurring demand.
Normalised headline earnings surged by 241percent to R1.9billion from R553.3million a year earlier, and headline earnings a share jumped to R36.96 in 2019 from R10.85 in 2018.
Revenue increased 57percent to R7.8bn from R5bn in 2018, driven by an increase in both sales volumes and PGM prices.
However, cost of sales increased 23.1percent as mining costs jumped by 29.7percent owing to higher wages and a 10.1percent increase in the number of employees to 15396 in 2019 from 13981 in 2018.
Concentrating costs also ballooned by 70.6percent with the commissioning of concentrators at Booysendal South and Eland. Both these concentrators are not yet operating at full capacity, but carry a high associated cost. Chief executive Paul Dunne said the group was committed to creating long-term value for its stakeholders through production growth and sustainable cost control.
“We continue to deliver on our strategy of developing low-cost, long-life assets that will position the group to yield a strong financial performance even in a subdued or potentially volatile commodities market,” said Dunne.
Northam, which operates the Booysendal, Zondereinde and Eland mines, withheld the dividend payout, unlike its peers Anglo American Platinum and Impala Platinum.
“At present, the board is of the view that the most efficient way to return value to shareholders is to purchase Zambezi Platinum (RF) Limited preference shares. However, this will be reassessed at every reporting period going forward,” Dunne said, adding that the return of value to shareholders would be facilitated through disciplined capital allocation.
The group also improved production and equivalent refined metal from own operations by 19.6percent to 306738 ounces with increased contributions from both Booysendal and Zondereinde and new production from Eland.
Chrome concentrate production increased by 27.5percent to 469642 tons on the back of increased processing of chromite-bearing product at Booysendal and Eland.
However, unit cash costs per equivalent refined platinum ounce increased by 12.6percent.
Dunne flagged Eskom as one of the risks to the group, citing that load shedding had affected the reliability and sustainability of electricity supply.
“If this situation continues without any meaningful improvement, it will be very difficult for Northam to replace this bulk supply of energy.
“Associated with this risk, given the trebling of prices over the past decade, electricity is one of the key cost drivers. This identified risk is not wholly within the control of the group,” said Dunne. Dunne also said policy uncertainty remained a serious impediment to growth in the South African mining industry.
“The government’s role in this respect is to provide enabling legislation which will encourage investment. The mining industry has the potential to create businesses with a strong economic multiplier effect and thousands of sustainable jobs with growth,” he said.