Northam reports full-year loss as prices fall

NORTHAM Platinum reported a full-year loss yesterday due to charges relating to a black economic empowerment (BEE) deal and worsened by softer commodity prices.

South African mining companies are required to reach at least 26 percent black ownership under the government’s policy of BEE.

Unlike many BEE deals, in which black investors acquire their stakes via loans, Northam’s investors funded their side of the deal by issuing preference shares for cash to two of Northam’s own shareholders.

Northam raised black ownership in the company to more than 35 percent in a R6.6 billion deal that also injected R4.6bn of cash into its balance sheet.

The mining industry, still reeling from a five-month platinum strike last year, is contending with rising costs and falling metal prices.

Platinum has fallen about 20 percent from its January peak and, given current prices of less than $1 100 (R1 481) an ounce, many shafts in South Africa – the world’s top platinum producer – are losing money.

Chief executive Paul Dunne said Northam would use the capital raised to continue to ramp up its Booysendaal mine and ready itself for a possible acquisition of a new mine.

“There are some assets in the platinum industry that are distressed and we are looking at those,” he said, adding that the mines would have to be “shallow, mechanisable mines at the right price”.

Northam postponed spending on certain projects at its flagship Zondereinde mine due to lower platinum prices and higher operating costs.

“We cannot, however, defer capital projects indefinitely and we shall persist with projects that are of strategic importance to the business,” the company said.

Shares in Northam jumped by 10.25 percent to close at R41.95 on the JSE yesterday as prices for the metal hit fiveweek highs.

Northam, South Africa’s third-largest platinum producer by value, said the headline loss came in at 203c a share in the year to the end of June, compared with headline earnings a share of 2.2c a year earlier.

Headline earnings a share strip out certain one-off items.

The number of shares issued reached 509 million from 390 million at the end of June last year. – Reuters