Surging PGM prices give Northam Platinum hope for monumental rise in profit
JOHANNESBURG – Northam Platinum said on Wednesday that it expected its annual earnings to jump by up to 3 459 percent on the back of a surge in platinum group metal (PGM) prices, which cushioned the impact of production disruptions due to Covid-19.
Northam, which operates the Zondereinde, Booysendal and Elands mines, reported that for the year ended June headline earnings would jump monumentally to between 562.40 cents, or 3 459 percent, and 621.60c, or 3 834 percent, from 15.8c a year earlier.
Northam said total revenue per platinum ounce sold increased by 78.8 percent to R53 009 per platinum ounce from R29 640 per platinum ounce a year prior, resulting in a cash margin per platinum ounce in excess of 40 percent.
“This is despite significant production losses associated with the national lockdown and phased restart of mining activities following the onset of the Covid-19 pandemic in South Africa,” said the company.
Northam lost an estimated 108 685 4E ounces because of production disruptions and incurred once-off costs of R977.2 million, the bulk of which related to employee costs as a result of the lockdown.
Normalised production is expected to resume at Zondereinde by the second half of the current financial year ending June 30, 2021
However, the group was able to swiftly restart the Eland mine, together with streamlined operations at the mechanised Booysendal mine.
It said that by the end of the financial year, the Booysendal mine and Eland mine were again operating at full complement, while Zondereinde mine was operating at 80 percent capacity.
“Normalised production is expected to resume at Zondereinde by the second half of the current financial year ending June 30, 2021, with a corresponding reduction to our 2021 financial year production estimate,” said the company.
Despite significant logistical hurdles associated with Covid-19, including border closures that made the distribution of refined metal challenging, the group maintained robust refined metal sales of 560 238 4E ounces.
“This highlights the strong relationships that we have developed and maintained with our industrial customer base over many years,” said the group. Northam said its strategy of returning value to shareholders remained unchanged and could be implemented through the payment of dividends, a share buyback or a purchase of Zambezi preference shares.
Northam believed that, to date, the most efficient mechanism to return value shareholders had been through the purchase of Zambezi preference shares.
“The acquisition of the Zambezi preference shares reduces the preference share dividend expense and liability included in the consolidated financial statements, as well as Northam’s potential financial exposure under the guarantee provided to holders of Zambezi preference shares, should the guarantee be called upon,” it said.
Northam said it had continued to purchase Zambezi preference shares and held 53 million preference shares at June 30, 2020, representing 33.5 percent of all Zambezi preference shares in issue.
Subsequent to the financial year-end, the group had acquired an additional 11.4 million Zambezi preference shares and currently held 65 million preference shares, representing 40.7 percent of all Zambezi preference shares in issue.