Announcements 2016

26 Aug 2016

Revenues hit by lower metal basket prices

Johannesburg, Friday 26 August 2016. Northam Platinum has released its preliminary annual results for the year ended 30 June 2016. The statement which follows captures the key features for the year, and an overview of the group’s operational performance.

KEY FEATURES

  • Exemplary group safety performance
  • PGM production up 15.7% to 436 960 ounces
  • Group capital investment reaches the R1.2 billion mark
  • Healthy year-end cash balance of R3.1 billion
  • Normalised headline earnings of 87.1cps
  • US$ basket price 25% lower year on year
  • Booysendal South expansion approved

INTRODUCTION

The Northam group’s PGM production from own operations of 436 960oz (equivalent refined metal) was 15.7% higher year on year, following a solid operating performance at Zondereinde, and the Booysendal UG2 North mine reaching steady-state production in the first half of the financial year.

Financial results were negatively impacted by lower ZAR basket prices.

In line with the group strategy to diversify into shallow mechanisable operations the board approved the development of the initial phase of the Booysendal South project in June 2016.

This project includes the development of two UG2 mining modules and a Merensky mining module which will contribute an additional 240 000oz per annum of PGMs to the group’s production profile.

The construction of the new 20MW furnace at the Zondereinde mining complex is progressing well. In addition to adding smelter capacity, it will also reduce operational risk. The total cost of the project is anticipated to be R750.0 million, with commissioning by the end of the 2017 calendar year.

The expansion work follows on the extension of Northam’s strategic partnership with Heraeus Deutschland GmbH & Co. KG (Heraeus) and Heraeus South Africa Proprietary Limited in terms of which Heraeus has agreed to contribute €20.0 million to the construction of the furnace. The first €10.0 million was received in June 2016. The agreement also provides for the renewal of the current refining arrangements and guarantees a supply of refined metal to Heraeus.

Operations: Zondereinde

Zondereinde recorded five million fatality free shifts during the year, a commendable performance by both employees and management particularly at a deep-level mine.

With a focus on husbanding the Merensky reef at Zondereinde, modifications to the processing plant will allow for higher proportions of UG2 reef to be mined and processed and therefore the targeted UG2 : Merensky mining ratio has successfully been adjusted to 60 : 40.

A total of 815 167 Merensky reef tonnes (FY2015: 795 885 tonnes) were milled at a head grade of 5.9g/t. The higher UG2 contribution, with a lower grade at 4.2g/t had a predictable effect on the combined head grade, which came in at 4.9g/t.

Overall the Zondereinde mine’s performance was good, in spite of the constrained mining flexibility on the Merensky reef, and production of equivalent refined metal from own operations increased by 10.6% to 282 765oz.

Zondereinde’s total operating costs were R3 464.4 million (FY2015: R3 147.0 million), an increase of 10.1% based on the higher production. This resulted in an overall 1.0% decline in the unit cash cost per equivalent refined 3PGE + Aukg to R374 846/kg, demonstrating the success of tight cost control at the operation.

Capex to the value of R554.1 million was invested at Zondereinde as follows:

  • Expansionary capex of R291.6 million on the construction of the new 20MW furnace
  • R259.8 million on sustaining capex of which R132.7 was spent on the deepening project

These projects will continue into the next financial year, with expansionary and sustaining capex reaching R379.1 million and R303.6 million respectively in FY2017.

Zondereinde’s total resource estimate has increased to 84.1Moz (FY2015: 81.1Moz) with 11.7Moz (FY2015: 10.6Moz) in the reserve category. The life of mine is now estimated at more than 20 years.

Operations: Booysendal

The Booysendal mine recorded two million fatality free shifts during the year. The LTIIR was 0.44 (FY2015: 0.54).

With the mechanised mining method continuing to prove to be a significant safety differentiator, management believes the growth of the group will be based on shallower, mechanisable operations. During the year the Booysendal North UG2 mine achieved its steady state run rate of 160 000oz per annum. A total of 2 165 603 tonnes were milled at a head grade of 2.7g/t compared to 1 786 375 tonnes at a head grade of 2.6g/t in 2015.

Metals in concentrate produced at Booysendal grew by 31.7% to 161 300oz, resulting in a 29.3% increase in total operating costs. However, the cash cost per equivalent 3PGE + Au kg in concentrate was R298 500/kg, a 1.4% reduction from the prior year’s unit cost of R302 695/kg.

Capital expenditure incurred amounted to R616.4 million (FY2015: R798.8 million). The capex was spent as follows:

  • R55.2 million on the acquisition of the Everest mineral resource
  • R178.0 million spent on the UG2 phase 1 mine and deepening project
  • Employee accommodation of R14.3 million
  • R89.1 million on sustaining capital expenditure at the UG2 North mine
  • Expansionary capex of R63.5 million on the Booysendal South feasibility study

Management estimates that expansionary and sustaining capital expenditure will be R527.0 million and R86.9 million respectively in FY2017.

PROSPECTS

The global economic outlook remains uncertain, resulting in volatile metal markets and exchange rates. The group’s financial performance will 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. 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.

Issued by

Russell & Associates
Johannesburg
Tel +27 (0)11 880 3924

Marion Brower +27 71 493 0387
Jan Walker +27 71 493 0429
Memory Johnstone +27 72 439 5430