Northam beefs up operations in turnaround

NORTHAM Platinum turned its cash flow into a positive and grew normalised earnings in the year to June as it beefed up production at its operating assets.

Northam said recently that it hoped its strategy to diversify into shallow mechanisable operations after the approval of the development of the Booysendal South project in June would help improve its growth prospects.

The project, which included the development of two Upper Group 2 mining modules and a Merensky mining module, was expected to contribute an additional 240 000 ounces a year to the group’s production profile.

Cash flow generated from operating activities increased to R839.1 million in the year to June from R341m on improved production at the Zondereinde and Booysendal mines.

Normalised headline earnings a share increased 5 percent to 87c a share.

No dividend was declared for the period.

Healthy results

Northam’s chief executive, Paul Dunne, said going forward, the group’s financial performance would depend on achieving higher metal sales prices and a stable operating performance.

“Cost saving and productivity improvement initiatives are in place at both Zondereinde and Booysendal,” Dunne said.

“Management is confident that the group’s strong financial position, prudent financial controls and the development of shallow, mechanisable operations at Booysendal will place the group in a position to take advantage of improved market conditions going forward,” he said.

Rene Hochreiter, a mining analyst at NOAH Capital Markets, said Northam’s financial results were healthy compared with its peers.

“(Northam is) the only company that is going to expand, while everyone else is cutting back on production.

“Also they’re cutting their costs and are making money from their operations,” Hochreiter said.

He noted that Northam had low-cost operations.

“If you look… Booysendal is one of the lowest cost mines in the industry,” Hochrieter added.

The financial performance came as Northam said it would review its options in Pandora in the North West, which it operates with the world’s third-largest platinum producer, Lonmin, after reporting a share earnings decline in the year to June, Dunne said.

Share earnings from associates and joint ventures had plummeted 212percent to a loss of R32m in the year to June from a profit of R28.8m.

Joint venture

The company said its share in the Pandora joint venture had amounted to R12.6m in the year to June from R10.7m last year, and its share of losses in Trans Hex Group was R20m from a profit of R39.5m.

“The Pandora joint venture also required a number of cash injections, with the group’s share of cash calls amounting to R10.6m from R9.7m with further cash calls expected in the new financial year,” Dunne said.

Trans Hex disposed of its 20.3 percent stake in Trans Hex, a JSE-listed diamond producer in the year under review for R81m.

Northam shares increased 1.3 percent on the JSE on Friday to close at R48.35.