Record R3 bil­lion op­er­at­ing profit for Northam

But com­pany flags load shed­ding as risk

Pretoria News - - BUSINESS REPORT - DINEO FAKU [email protected]

NORTHAM Plat­inum, one of the world’s low­est-cost plat­inum group met­als (PGM) pro­duc­ers, posted a record R3 bil­lion op­er­at­ing profit dur­ing the half-year ended De­cem­ber on stronger rev­enues, un­der­pinned by ro­bust metal prices, as it warned Eskom was a risk to the com­pany.

Northam and its PGM in­dus­try peers, in­clud­ing An­glo Amer­i­can Plat­inum and Im­pala Plat­inum, have gen­er­ated sig­nif­i­cant cash on the back of ex­tra­or­di­nary runs in rhodium and pal­la­dium and the weaker rand.

The stricter emis­sions leg­is­la­tion stan­dards have forced car mak­ers to use cat­alytic con­vert­ers in ve­hi­cles, spurring de­mand.

Nor­malised head­line earn­ings surged by 241 per­cent to R1.9 bil­lion from R553.3 mil­lion a year ear­lier, and head­line earn­ings a share jumped to R36.96 in 2019 from R10.85 in 2018.

Rev­enue in­creased 57 per­cent to R7.8bn from R5bn in 2018, driven by an in­crease in both sales vol­umes and PGM prices.

How­ever, cost of sales in­creased 23.1 per­cent as min­ing costs jumped by 29.7 per­cent ow­ing to higher wages and a 10.1 per­cent in­crease in the num­ber of em­ploy­ees to 15 396 in 2019 from 13 981 in 2018.

Con­cen­trat­ing costs also bal­looned by 70.6 per­cent with the com­mis­sion­ing of con­cen­tra­tors at Booy­sendal South and Eland. Both these con­cen­tra­tors are not yet op­er­at­ing at full ca­pac­ity, but carry a high as­so­ci­ated cost. Chief ex­ec­u­tive Paul Dunne said the group was com­mit­ted to cre­at­ing long-term value for its stake­hold­ers through pro­duc­tion growth and sus­tain­able cost con­trol.

“We con­tinue to de­liver on our strat­egy of de­vel­op­ing low-cost, longlife as­sets that will po­si­tion the group to yield a strong fi­nan­cial per­for­mance even in a sub­dued or po­ten­tially volatile com­modi­ties mar­ket,” said Dunne.

Northam, which op­er­ates the Booy­sendal, Zon­dereinde and Eland mines, with­held the div­i­dend pay­out, un­like its peers An­glo Amer­i­can Plat­inum and Im­pala Plat­inum.

“At present, the board is of the view that the most ef­fi­cient way to re­turn value to share­hold­ers is to pur­chase Zam­bezi Plat­inum (RF) Lim­ited pref­er­ence shares. How­ever, this will be re­assessed at ev­ery re­port­ing pe­riod go­ing for­ward,” Dunne said, adding that the re­turn of value to share­hold­ers would be fa­cil­i­tated through dis­ci­plined cap­i­tal al­lo­ca­tion.

The group also im­proved pro­duc­tion and equiv­a­lent re­fined metal from own op­er­a­tions by 19.6 per­cent to 306 738 ounces with in­creased con­tri­bu­tions from both Booy­sendal and Zon­dereinde and new pro­duc­tion from Eland.

Chrome con­cen­trate pro­duc­tion in­creased by 27.5 per­cent to 469 642 tons on the back of in­creased pro­cess­ing of chromite-bear­ing prod­uct at Booy­sendal and Eland.

How­ever, unit cash costs per equiv­a­lent re­fined plat­inum ounce in­creased by 12.6 per­cent.

Dunne flagged Eskom as one of the risks to the group, cit­ing that load shed­ding had af­fected the re­li­a­bil­ity and sus­tain­abil­ity of elec­tric­ity sup­ply.

“If this sit­u­a­tion con­tin­ues with­out any mean­ing­ful im­prove­ment, it will be very dif­fi­cult for Northam to re­place this bulk sup­ply of en­ergy.

“As­so­ci­ated with this risk, given the tre­bling of prices over the past decade, elec­tric­ity is one of the key cost driv­ers. This iden­ti­fied risk is not wholly within the con­trol of the group,” said Dunne. Dunne also said pol­icy un­cer­tainty re­mained a se­ri­ous im­ped­i­ment to growth in the South African min­ing in­dus­try.

“The gov­ern­ment’s role in this re­spect is to pro­vide en­abling leg­is­la­tion which will en­cour­age in­vest­ment. The min­ing in­dus­try has the po­ten­tial to cre­ate busi­nesses with a strong eco­nomic mul­ti­plier ef­fect and thou­sands of sus­tain­able jobs with growth,” he said.

| Sup­plied

NORTHAM Plat­inum and its peers in the plat­inum group met­als sec­tor – in­clud­ing An­glo Amer­i­can Plat­inum and Im­pala Plat­inum – have gen­er­ated sig­nif­i­cant cash on the back of ex­tra­or­di­nary runs in rhodium and pal­la­dium, and the weaker rand.

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