Announcements 2018

23 Feb 2018

Johannesburg, Friday, 23 February 2018. Northam Platinum today issued results for the first half-year of the 2018 financial year.

KEY FEATURES

  • Group LTIIR improved by 15.8% to 1.01
  • Steady operational progress
  • Equivalent 4E refined metal from own operations up 4.7%% to 246 473oz
  • Revenue increased by 3.1% to R26 516/Pt oz sold
  • Unit cash costs well contained at R20 851/Pt oz
  • Execution of growth strategy on track – capex at R2.6 billion
  • New 20MW furnace commissioned
  • Booysendal South absorbed R940 million capex
  • Tumela transaction concluded for consideration of R1.0 billion

Financial overview

Refined metal production from group operations increased to 246 473oz (H1 F2017: 235 375oz), pointing to a sound operational effort at the group’s operations.

Sales volumes in the period were lower, reflecting the continued build-up of inventory ahead of the commissioning of the new furnace at the Zondereinde metallurgical complex. The lower volumes, along with a stronger South African currency (ZAR13.43/USD cf to H1 F2017: R13.99/USD) over the period, had a predictable effect on sales revenues, which dropped marginally to R3.4 billion (H1 F2017: R3.5 billion).

Despite significant US dollar price increases for palladium and rhodium, revenue from platinum, which constitutes approximately 60% of the production basket, dropped by 17.8%, resulting in a lower average market price achieved.

Operating costs for mining and concentrating increased by 10.6% to R2.4 billion (H1 F2017: R2.2 billion) and 12.1% to R347.0 million (H1 F2017: R309.6 million) respectively, owing to labour and power cost increases and the expenditure associated with commissioning the dense media separation (DMS) plant at Booysendal mine.

The group operating profit was down by 3.8% to R338.8 million, with the operating margin largely unchanged from the previous period at 10.1% (H1 F2017: 10.2%).

Operating cash flows were negative to the value of R562.7 million (H1 F2017: positive R216.4 million) owing to the high inventory levels and prepayments resulting in higher working capital requirements. The high level of inventory is expected to normalise during H2 F2018 given the recent commissioning of the new furnace as concentrate is processed through this new facility.

Cash utilised in investing activities rose by 181.6% to R2.2 billion (H1 F2017: R778.0 million) reflecting the intensity of the group’s capital expenditure programme as production is expanded in line with the growth strategy. The major spend has been on the new 20MW furnace at Zondereinde, which is now complete and commissioned, the acquisition of the Tumela block and the development of Booysendal South mine.

Group performance

Milled tonnages from the combined operations increased by 3.7% to 2.3 million tonnes. Both Zondereinde and Booysendal contributed to the increase and the 4.7% improvement in PGM production to 246 000 ounces. Purchased metal also picked up year on year to 30 000 ounces with two additional long term customers secured. “We intend to grow our third party smelting business over the next year or two,” said CEO Paul Dunne, “thereby taking advantage of the increase in furnace capacity.”

The smelter constraints continued to impact refined metal production, which was lower by 9% at 212 000oz. Refined metal production is expected to increase significantly in the second half.

The production of chrome concentrate increased by 10% to 311 000 tonnes in line with the higher UG2 tonnages milled at both operations. This is an important revenue stream for Northam.

Zondereinde operations

Year-on-year tonnages at Zondereinde were largely unchanged at 1 136 541 tonnes with the UG2’s contribution 10.2% higher at 673 042 tonnes, and the Merensky tonnages 9.6% lower at 463 499 tonnes. With the increase in the higher grade P2 reef mined, the Merensky head grade increased to 6.1g/t. Equivalent refined metal production was 5.7% higher at 152 487oz. Third party concentrate added 4E equivalent metal of 27 561oz (H1 F2017: 14 179oz) to on-mine production.

Zondereinde continues to be impacted by the constrained availability of Merensky reef. The Tumela block is expected to improve the availability of Merensky mining face over the next two years as new reserves are established.

With plans being put in place to access and develop the Tumela block, the permanent workforce has been increased by 6%. The combination of higher costs and volumes translated into a 9.0% increase in unit cash costs per equivalent refined platinum ounce to R21 775/oz (H1: F2017 R19 980/oz).

With a significant increase in metal inventory Zondereinde’s operating profit fell to R155 million. “We believe,” commented Northam’s Dunne, “that Zondereinde remains in a competitive cost position.”

The on-mine capital expenditure for the year was R1.4 billion which included the R1.0 billion payment for the Tumela resource. R94 million was spent on sustaining capex. Forecast capex for the remainder of the financial year is R162 million for expansion capex and R205 million for sustaining capex.

Zondereinde’s total resource estimate increased to 102.59 million oz (Moz) (F2017: 83.98Moz), owing to the inclusion of the Tumela block resources acquired.

Booysendal operations

Tonnages from the UG2 mine declined by 1.8% to 1 190 215 tonnes milled (H1 F2017: 1 212 281 tonnes) at a constant head grade of 2.7 g/t. Given some teething problems associated with the start-up of the DMS plant, the overall plant recovery declined. Operating the DMS will enable the processing of higher mined tonnages with a marginal overall recovery sacrifice.

Chrome produced for the current period was 144 382 tonnes (H1 F2017: 138 635 tonnes), a 4.1% increase, while metal in concentrate dropped marginally to 98 900oz.

Booysendal operating costs increased by 5.8% to R1.0 billion (H1 F2017: R948.8 million). The cash cost per equivalent 4Eoz in concentrate is R9 938 (H1 F2017: R9 218). This equates to a cash cost per platinum oz of R16 459/oz (H1 F2017: R15 271/oz), an increase of 7.8%.

Capital expenditure at Booysendal reached R1.2 billion for the period (H1 F2017: R330.0 million) with R1.1 billion on project expenditure and R25.2 million on sustaining expenditure. In addition, R140.2 million was prepaid for the construction of the aerial rope conveyor system. The estimated expansionary and sustaining capital expenditure for the remainder of F2018 will be R690.7 million and R72.0 million respectively.

Issued by
R&A Strategic Communications
Johannesburg
Tel +27 (0)11 880 3924
Marion Brower +27 71 493 0387
Jan Walker +27 71 493 0429