Northam Platinum expects currently depressed prices of the precious metal to persist, ratcheting up pressures on the platinum group metals (PGM) industry that is already battling rising costs, prompting the SA miner to focus on cost containment in the year ahead.
The company said yesterday that it will prioritise cash generation and preservation in its current operating year.
In the year to June, in which it has warned that headline earnings per share (HEPS) will likely fall by at least 76.6% to between 324.3 cents and 565 cents per share, Northam generated R3.5 billion in cash from operations.
After warning that it expects HEPS for the full year to plunge, shares in the company were trading 3.69% weaker in afternoon trade on the JSE yesterday.
Market analyst Marlie Chunger said the company was still in negative net debt although it had reduced this against expectations of the company being in a positive net cash position.
The company has, however, warned that the currently depressed pricing environment “may last” for some time, adding to “higher general inflation” which was weighing down the PGM industry. As a result of this, maintaining a strong balance sheet and keeping costs minimal had become imperative.
“Relative positioning on the industry cost curve, and the ability to retain operational flexibility and balance sheet strength, are becoming increasingly important,” the company said yesterday.
“In light of the prevailing PGM market uncertainty, Northam remains internally focused and places full emphasis on operational excellence, particularly surrounding safe, sustainable production, and efficient mining at the right cost.”
Nonetheless, costs for the year to June 2024 rose by 4.3% to R23 811 per 4E ounce. Seen by the company as minimal, the cost increase for the period has been ascribed to “disciplined cost control, increased production volumes and improved” efficiencies against the backdrop of elevated mining inflation.
“Costs are up almost across the board,” said Chunger, describing the company’s decision to only display cash costs as “dubious”.
And with challenges related to low metals prices, mining inflation, and the potential for resurgence in load shedding by Eskom, Northam expects to report a dip in earnings per share for the period under review. It reports its full-year financials later this month.
Northam’s sales revenue for the period declined by 22.2% to R30.8bn on the back of a 35.5% decrease in the 4E rand basket price of R24 178 per 4E ounce and despite the 7.3% increase in 4E sales volumes. Gross profits for the period is expected to be 68.8% lower compared to the previous contrasting period at R4.8bn.
The lower rand basket price the company recorded for the period was a result of the combined effects of a a 38.7% lower US dollar basket price of $1 295 per 4E ounce tempered by a 5.2% increase in the average ZAR/USD exchange rate under which the rand weakened.
Although challenges remain to the outlook framework, Northam’s “capital growth programmes remain on track, despite temporary pauses to specific project modules that were delayed without these having a detrimental impact” on the overall programme.
“The impact of our ongoing production growth on operational resilience continues to demonstrate the long-term contribution of our counter-cyclical investments made over the past decade in pursuit of establishing a very competitive and sustainable production base, which is able to withstand potential medium to long-term cyclical downturns,” it said.
During the full-year period under review, Northam raised refined metal from operations by 10.3% to 892 876 ounces, with strong performance from all mines. This includes a 12.9% increase in 4E metal in concentrate produced from own operations at Booysendal to 511 340 ounces and a 41.4% increase in 4E metal in concentrate produced from own operations and surface sources at Eland.
“Mining tonnages and grades across the group are expected to improve further over the coming two years as our growth and innovation projects reach completion and achieve their planned objectives, which, along with an expected increase in mineable reserves, will provide important additional operational flexibility,” it said.
BUSINESS REPORT