Northam bucks the trend
• Company invests in increasing production and creating thousands of jobs despite softness in PGM prices and other companies shedding workers
Northam Platinum, which owns the Zondereinde and Booysendal mines, will create about 6,500 permanent and contractor jobs over the next four to five years as it invests in bringing production of platinum group metals up to a million ounces a year.
Northam Platinum, which owns the Zondereinde and Booysendal mines, will create about 6,500 permanent and contractor jobs over the next four to five years as it invests in bringing production of platinum group metals (PGMs) up to a million ounces a year.
Northam’s investment presents a stark contrast to the rest of the platinum industry, which has shed tens of thousands of jobs in the past eight years as the platinum price has remained weak and mines are getting older and more costly to operate.
CEO Paul Dunne said on Friday the group, which spent R2.6bn on capital projects and acquisitions in the six months to December, will spend R3.8bn in total for the current financial year. In Northam’s 2019 financial year, capex would be about R1.9bn and it would fall to R1.5bn in 2020.
In the past few months, Northam has completed the acquisitions of the Tumela block of ground from Anglo American Platinum, which increases Zondereinde’s resources. It bought Eland Platinum from Glencore and bought a small recycling plant in Pennsylvania, US. It has also completed a second furnace at Zondereinde, which more than doubles its processing capacity.
Revenue in this period was almost flat at R3.35bn compared with that of the matching period in 2016. Though PGM mine production grew 4.7% to 246,473oz, lower volumes were sold as inventory was stockpiled to put through the new furnace.
Weakness in the platinum price more than offset strength in palladium and rhodium so the group achieved an average increase of only 4.1% in rand for its basket of PGMs.
Northam was R562.7m cash flow negative because a significant amount of working capital was absorbed in inventory. Inventories were about 220,000oz of PGMs at the end of December, about 140,000oz above normal levels. The excess stock will be processed and sold over the next year. Northam will still be R500m cash negative by the end of June.
Normalised headline earnings fell 28.8% to 37.1c a share. No dividend was declared.
While platinum prices, which are 60% of Northam’s basket of metals, were flat, prices of palladium and rhodium have surged over the past year.
Dunne said Northam believed in the future of PGMs because they were rare and strategic and its confidence was reflected in the amount it is investing in its operations. China has passed stringent environmental legislation and was implementing these measures rapidly, favouring PGMs in vehicle autocatalysts and fuel cells.
Northam’s shares were 1.43% lower at R43.37 by mid-afternoon trade on Friday, about midway between the high of R54.90 and the low of R36.27 that was seen in the past six months.