Northam Platinum holds up well amid PGM downturn
Northam Platinum appears to have navigated the choppy waters in the platinum group metals (PGMs) space reasonably well relative to its larger peers, which in some instances have resorted to potential job cuts to manage their cost base.
The mid-tier PGM producer said total equivalent refined metal production from its own operations rose 11% in the six months to end-December year on year. Total production, including purchased material, rose 20% over the same period.
“It seems PGM miners can still absorb plenty of PGM price downside before losses and accompanying mothballing are needed, in which case share prices can easily halve,” Gryphon Asset Management portfolio manager Casparus Treurnicht said. However, he said Northam has a brownfields operation and a new Booysendal South mine, which will produce more ounces in the future.
“It would be an interesting dynamic to keep an eye on it should the PGM basket price come down further. However, if prices rise significantly, this counter would be the one you want to own.”
The share price ended just shy of 0.8% to R126.93 on the JSE, but is down 37% on a oneyear view, in line with its rivals.
CEO Paul Dunne said that Northam targeted increased mechanisation to grow production while lowering operational risk and improving its relative position on the industry cost curve. “This protects our operations against subdued or volatile commodity markets.”
Northam has in recent years invested to beef up production at its Zondereinde deep-level mine near Thabazimbi, its Booysendal mine near Steelpoort and the Eland mine close to Brits.
PGM prices remain volatile amid uncertainty regarding the trajectory of global interest rates, particularly in the US and Europe, which are key export markets. They picked up in December in line with market optimism that the US Federal Reserve might lead the way in cutting interest rates in 2024.
PGMs are used by vehicle makers to curb harmful emissions in internal combustion engines. The rise in batteryelectric vehicles has raised concern about the potential drop-off in demand for PGMs at a time when the industry is potentially still dealing with excess supply.
To fend off the rising cost pressures, Sibanye-Stillwater and Impala Platinum announced potential job cuts late in 2023. Sibanye said it was looking to lay off up to 4,000 employees.
“Northam’s volume growth continues to be the strongest among the major PGM miners,” said Seleho Tsatsi, investment analyst at Anchor Capital.
“In a period of declining PGM prices, strong sales volume growth should help to offset cost inflation. The company has previously guided sales volumes to grow 7%-12% in the 2024 financial year. Decent volume growth should help in what continues to be a challenging market.”