Announcements 2019

Key features:

• Record operating profit of R2.4 billion
• Record production from own operations of 519 954 oz 4E
• Normalised headline earnings of 270.1 cents per share, up 226.6%
• Execution of growth strategy remains firmly in place, with R2.6 billion spent on its execution during the period under review
• Net debt of R3 billion
• Commendable safety performance LTIIR of 0.93

Financial results

Northam achieved a record operating profit of R2.4 billion for the financial year ended 30 June 2019 (F2018: R823.3 million), representing a 192.7% increase from the previous corresponding period, underpinned by a solid operating performance at both operations, well contained unit cash costs and a higher basket price received. This translates to an operating profit margin of 22.6% (F2018: 10.9%).

The group achieved a record production from own operations amounting to 519 954 oz 4E (F2018: 483 941 oz 4E), representing a 7.4% increase from the previous corresponding period, with increased contributions from both Booysendal and Zondereinde. Group chrome concentrate production increased by 17.6% to 764 528 tonnes on the back of growth at Booysendal and Zondereinde, as well as first production from Eland (F2018: 650 091 tonnes).

The total comprehensive income for the period was R71.4 million (F2018: loss of R705.4 million). Included in the income for the period is the impact of the black economic empowerment ("BEE") transaction relating to the Zambezi Platinum (RF) Limited preference shares, which are consolidated into the group results and accrued a cumulative variable dividend (accrued dividends) amounting to R1.3 billion (F2018: R1.1 billion). This negatively impacted the consolidated group results for the period under review. Shareholders are reminded that this is a non-cash item.

Normalised headline earnings per share for the period were 226.6% higher at 270.1 cents (F2018: 82.7 cents) per share. Normalised headline earnings, which is Northam's main measure of performance, has been calculated taking into account the headline earnings/loss per share adjusted for non-cash items relating to the BEE transaction. These include the preference share dividends associated with the BEE transaction, as detailed above.

Total group capital expenditure reduced year on year to R2.9 billion as major project milestones were completed. R2.6 billion was spent on expansionary capex and R221.8 million on sustaining capex.

Despite the difficult economic circumstances prevailing during the period under review, both of Northam's mining operations posted an operating profit. Zondereinde achieved an operating profit of R1.3 billion (F2018: R355.4 million) and Booysendal achieved an operating profit of R985.7 million (F2018: R525.4 million).

The group continues to deliver on its strategy of developing low-cost, long-life assets in order to position itself at the lower end of the industry cost curve.

Highlights

Dividends

Given the company's current capital structure, project commitments and economic operating environment, the Northam board of directors (the "board") are of the view that the most efficient way to return value to investors precludes the payment of a cash dividend. The board has therefore resolved not to declare a dividend for the financial year ended 30 June 2019 (F2018: R Nil).

NOTICE OF ANNUAL GENERAL MEETING

The annual general meeting ("AGM") of Northam shareholders ("shareholders") will be held at Northam, Building 4, 1st Floor, Maxwell Office Park, Magwa Crescent West, Waterfall City, Jukskei View, Midrand, South Africa on Thursday, 7 November 2019 at 12:00 to transact the business as stated in the notice of AGM and abridged annual report 2019 ("notice and abridged annual report 2019").

Shareholders are advised that the notice and abridged annual report 2019, containing the condensed audited financial statements for the year ended 30 June 2019, will be distributed to all shareholders by no later than Friday, 30 August 2019.

The annual integrated report 2019, the complete consolidated audited annual financial statements which incorporates the external auditors' report in which Ernst & Young Inc. expressed an unmodified audit opinion and the notice and abridged annual report 2019 are available on the following link:
https://www.northam.co.za/investors-and-media/publications/annual-reports or can be obtained from the company's registered office on request.

The salient dates for the AGM are as follows:

* Any forms of proxy not lodged by this date and time must be delivered to the chairperson of the AGM before the appointed proxy may exercise any rights of the shareholder at the AGM.

This short-form announcement is the responsibility of the directors and is only a summary of the information in the full announcement and does not contain full or complete details.

Any investment decision should be based on the full results announcement accessible via the JSE link at https://senspdf.jse.co.za/documents/2019/JSE/ISSE/NHM/AFS_2019.pdf and the full audited annual financial statements available on our website at https://www.northam.co.za/investors-and-media/publications/annual-reports

The full results announcement and the full audited annual financial statements, incorporating the Ernst & Young Inc. auditors' report, are also available at our registered office and at the office of our sponsor for inspection, at no charge, during office hours.

On behalf of the board at Johannesburg on 20 August 2019.

* British

Registered office
Building 4, 1st Floor,
Maxwell Office Park
Magwa Crescent West
Waterfall City
Jukskei View, 2090
South Africa

PO Box 412694
Craighall, 2024
South Africa

Telephone +27 11 759 6000
www.northam.co.za

Company secretary
PB Beale
Building 4, 1st Floor,
Maxwell Office Park
Magwa Crescent West
Waterfall City
Jukskei View, 2090
South Africa

PO Box 412694
Craighall, 2024
South Africa

e-mail: trish.beale@norplats.co.za

Transfer secretaries
Computershare Investor Services Proprietary Limited
Rosebank Towers
15 Biermann Avenue
Rosebank, 2196
South Africa

PO Box 61051
Marshalltown, 2017
South Africa

Sponsor and debt sponsor
One Capital
17 Fricker Road
Illovo, 2196
Johannesburg
South Africa

PO Box 784573
Sandton, 2146
South Africa

Johannesburg
23 August 2019

Northam bondholders are advised of the following interest payments due on Monday, 26 August 2019:

Johannesburg
21 August 2019

Debt Sponsor
One Capital

1. Introduction

Northam shareholders (“shareholders”) are referred to the announcement dated 1 November 2016 (“previous announcement”) pertaining to the acquisition by Northam of 4 043 018 preference shares in Zambezi Platinum (RF) Limited (“Zambezi”), (“Zambezi preference shares”) for a purchase consideration equal to the issue price plus accumulated preference share dividends (“face value”).

Northam is pleased to announce that, since the date of the previous announcement, Northam has acquired additional Zambezi preference shares and has reached agreement to acquire further Zambezi preference shares, as detailed in paragraph 3 below. As a result of these acquisitions, Northam will hold 5 708 458 Zambezi preference shares (“Northam owned prefs”), representing approximately 3.6% of all Zambezi preference shares in issue. The face value of the Northam owned prefs, calculated as at 6 August 2019, amounts to approximately R403.5 million.

All the Northam owned prefs have been purchased at, or below, face value (as calculated on the date of acquisition).

2. Rationale for the acquisition of Zambezi preference shares

Northam’s acquisition of Zambezi preference shares will reduce the preference share dividend expense and liability included in Northam’s consolidated financial statements, as well as Northam’s potential financial exposure under the guarantee it provided to holders of Zambezi preference shares, should the guarantee be called upon. Furthermore, should Zambezi elect to redeem the Zambezi preference shares through a distribution of ordinary shares in Northam (“Northam shares”) held by Zambezi, then the redemption of the Zambezi preference shares held by Northam at such time will result in a distribution of Northam shares to Northam, thereby reducing the number of Northam shares in issue.

3. Small related party transaction and fairness opinion

Northam has reached agreement with Coronation Asset Management Proprietary Limited, acting as an investment manager on behalf of its clients (“Coronation”), pursuant to which Northam will acquire 341 455 Zambezi preference shares from Coronation on Tuesday, 6 August 2019, at a price of R70.69 per Zambezi preference share, representing the face value of such shares, for a total cash consideration of approximately R24.1 million (“further transaction”).

The further transaction is not subject to any conditions precedent and will be funded from Northam’s cash reserves.

Coronation is a material shareholder of Northam, in that it is able to exercise voting control, on behalf of its clients, in excess of 10% of all Northam shares in issue. Accordingly, Coronation is a related party to Northam as contemplated in paragraph 10.1(b)(i) of the JSE Limited Listings Requirements (“Listings Requirements”).

Over the course of the past 12 months, Northam has acquired Zambezi preference shares from Coronation at face value. As a result of the aggregation provision contemplated in paragraph 10.8 of the Listings Requirements, the further transaction is categorised as a “small related party transaction” in terms of paragraph 10.7 of the Listings Requirements.

The further transaction is not subject to shareholder approval, provided an independent professional expert has confirmed that the terms of the further transaction are fair to shareholders. Northam has appointed BDO Corporate Finance Proprietary Limited (“BDO”) as the independent expert for purposes of providing an opinion in respect of the fairness of the further transaction (“fairness opinion”). 

BDO has considered the terms and conditions of the further transaction and is of the opinion that the further transaction is fair to shareholders. A copy of the fairness opinion is available for inspection for a period of 28 days from the date of this announcement, at Northam’s registered office being, Building 4, 1st Floor, Maxwell Office Park, Magwa Crescent West, Waterfall City, Jukskei View.

4. Details of the Zambezi preference shares

The Zambezi preference shares are cumulative, non-participating redeemable preference shares which accrue dividends at a nominal rate equal to the South African prime interest rate plus 3.5%, calculated on a daily basis, based on a 365-day year, compounded annually. The Zambezi preference shares were listed on the securities exchange operated by the JSE Limited on 11 May 2015.

Subject to certain exceptions, the Zambezi preference shares are redeemable on 17 May 2025 and will be redeemed, at Zambezi’s election, in cash and / or through the distribution of Northam shares held by Zambezi. The redemption of the Zambezi preference shares is secured through a guarantee provided by Northam in favour of the holders of Zambezi preference shares. If the guarantee is exercised, Northam will, at its election, settle the associated liability using cash and / or through the issue of new Northam shares.

As reported in the reviewed condensed consolidated interim results of Northam for the six months ended 31 December 2018 (“Northam results”), the Zambezi preference share liability amounted to approximately R10.1 billion and the accumulated preference share dividends for the period amounted to R611.8 million. The acquisition by Northam of Zambezi preference shares will reduce the Zambezi preference share liability and accumulated preference share dividends recognised in Northam’s consolidated financial statements. The accounting policies adopted by Northam in the preparation of its consolidated financial statements, including the Northam results, are in accordance with the International Financial Reporting Standards.

Johannesburg
6 August 2019

Corporate Advisor, Sponsor and Debt Sponsor to Northam
One Capital

Independent Expert to Northam
BDO Corporate Finance Proprietary Limited

Attorneys to Northam
Cliffe Dekker Hofmeyr Inc.

Northam bondholders are advised of the following interest payments due on Tuesday, 16 July 2019:

Johannesburg
11 July 2019

Debt Sponsor
One Capital

Thumbs-up for Kukama project

Johannesburg, 26 June 2019. Northam is pleased to advise its shareholders that mining operations at the Kukama shaft situated at its Eland mine complex will recommence in the new financial year (F2020).

This significant development comes after the successful conclusion of a feasibility study for the Kukama project.

Background

Northam purchased a 100% interest in the Eland mine from Glencore Operations South Africa Proprietary Limited in February 2017 for a cash consideration of R175 million. Eland mine was placed on care and maintenance in 2015 and Northam continued to manage it as such whilst undertaking the feasibility study for the Kukama shaft.

In terms of the transaction, Northam acquired all of Eland mine’s assets which included:

• Eland’s two mining rights with a resource currently estimated at 19.3 Moz 4E at an average in situ grade of 3.95 g/t;
• surface and underground infrastructure including a concentrator with a nameplate capacity of 250 ktpm; a chrome spiral recovery plant; a tailings storage facility; two decline systems; and surface support infrastructure;
• immovable property; and
• a mining fleet in excess of 100 vehicles, which includes low profile mechanised mining equipment.

Key conclusions from the Kukama shaft feasibility study

• Steady state production of 150Koz pa 4E, at unit costs in the lower half of the industry cost curve.
• Forecast investment returns comfortably in excess of Northam’s current weighted average cost of capital.
• Forecast positive free cash flow generated from year 4 onwards.
• Creation of 2 800 permanent jobs.
• Life of mine in excess of 30 years.

Current status of Eland mine

To date, Northam has continued to manage the Eland mine on care and maintenance whilst undertaking the feasibility study for the Kukama shaft.

Whilst completing the feasibility study for Kukama shaft and following positive feedback from the study, Northam commenced early work in preparation for its recommissioning. This includes refurbishing underground fixed and mobile equipment, as well as certain sections of the concentrator. Processing of the tailings storage facility at Eland mine has also commenced, which facilitated recommissioning of the surface plant and associated infrastructure.

The next steps

Conversion of the Kukama decline shaft into a footwall array will start in F2020, along with limited early stoping. Strike development and stoping build-up is scheduled to commence in F2021. Production is forecast to reach 100Koz pa 4E by 2025 and steady state production of 150Koz pa 4E is forecast from 2029.

Capital expenditure

Total developmental capital expenditure is estimated at R2.2 billion over a five-year period, in nominal terms (F2019 terms: R1.9 billion), which includes a provision for working capital requirements during the development phase. The project will be fully funded from Northam’s own resources.

Conclusion

Northam chief executive Paul Dunne points to the positive investment return demonstrated by the Kukama project, which comfortably exceeds the company’s weighted average cost of capital. “In addition,” says Dunne, “the project further diversifies the group’s operations and production capacity and does so efficiently by utilising an extensive existing capital footprint. Kukama is a project that lends itself to scaling up or down and will form the production base for the broader Eland complex.The mining method to be implemented at Kukama is well-known and well proven.  Our focus will be on safe, quality, long-life production, whilst creating sustainable long-term employment in the platinum industry.”

Presentation

Paul Dunne and the Northam team will be presenting to members of the investment community today, Wednesday 26 June in Johannesburg on latest growth developments in the group. The presentation will be webcast at 11:00 and will be accessible on the Northam website at www.northam.co.za.

Issued by

R&A Strategic Communications, Johannesburg,
Tel +27 (0)11 880 3924;
Marion Brower +27 71 493 0387
Edith Leeson +27 79 527 6882