Northam posts R1bn operating profit in six months to December

SOUTH African platinum junior Northam Platinum posted a record R1 billion operating profit in the halfyear ended December 2018 as the bumper platinum group metals (PGM) price environment and the weak rand helped platinum producers to reclaim their fortunes.

JSE-listed Northam, which posted a R338.8 million operating profit in the corresponding period last year, on Friday reported a R5bn sales revenue, a 48.6 percent improvement from R3.4bn in the prior period last year.

The rand, which has been a boost for the platinum producers, was down 5.7 percent in the period under review, helping mining firms lower their costs, which are rand-based.

Northam said the combination of a 40.5 percent increase in the volumes of 4E ounces sold, and the 4.2 percent improvement on the basket price to $1 013 (R14 148) per 4E ounce had helped to offset the platinum price environment, which remain subdued.

The rhodium price rallied 95.7 percent to $2 427 an ounce during period under review, from $1 240 an ounce in the previous period, while palladium increased by 13 percent to $1 071 an ounce from $948 an ounce in the prior period.

Palladium is used in the exhaust systems in cars to help turn toxic pollutants into less-harmful carbon dioxide. The demand for palladium is expected to increase, particularly in China, with the introduction of China VI legislation. “The palladium market remains in a meaningful deficit estimated at 1 million ounces due to the increasing demand for car catalysts. It is fair to conclude that, at some point in the future, platinum will substitute palladium,” it said.

Northam also said an increased rhodium deficit was expected, as demand in the car catalyst sector followed a similar trajectory to palladium and supplies contract.

“Rhodium is the most effective metal for the control of nitrogen oxides and cannot easily be substituted,” it added.

The prices boosted Anglo American Platinum, which posted a 95 percent increase in headline earnings on higher rhodium prices, last week.

The price hike is expected to help mining firms, such as Impala Platinum (Implats), grow their fortunes.

Implats, the world’s second-largest platinum producer, said last week that it expected both headline earnings and basic earnings to be at least R2.1bn for the half-year to December from a R150m loss during the corresponding period last year.

Implats last year announced plans to cut 13 000 jobs at its marginal mines in Rustenburg in an effort to reduce costs in a low-price environment.

Northam, which has been punching above its weight, said normalised headline earnings increased by 192.6 percent to R553.3m from R189.1m in the previous period last year.

Incoming chief financial officer Alet Coetzee said capex of R1.5bn was spent in the execution of the group’s growth strategy as project delivery was accelerated. “In the current price environment, our main focus remains on cost control and growing our production base down the cost curve, and hereby creating long term value for all out stakeholders.”

Northam shares closed 0.58 percent lower on the JSE on Friday at R51.85.