Shares in Northam Platinum plunged by 9.28% on the JSE on Friday after the company confirmed a plunge in earnings despite raising production and sales volumes for the full year to the end of June.
Northam traded at R105.43 on Friday, extending its 13.98%, 22.66% and 24.92% weekly, monthly and year to date dip in value on the local bourse.
Northam, which raised production by 10.3% and bumped up operating profits to R4.8 billion, has reached an agreement to increase its revolving credit facility to R11.3bn, although basic and headline earnings for the period were softer.
The credit facility was previously capped at R10bn and the company’s chief finance officer Alet Coetzee says the new agreement to extend it to R11.3bn provides the company with balance sheet flexibility.
“The revolving credit facility increase provides Northam with additional liquidity and balance sheet flexibility in line with the group’s continued focus on proactively and prudently managing these aspects during the current depressed PGM pricing environment. Northam remains appreciative of the continued support and additional commitment from its consortium of lenders,” said Coetzee.
As at the end of the company’s June 2024 full year, net debt amounted to R3.1bn with cash on hand standing at R7.5bn.
Northam’s new facility matures in August 2027 and brings up the company’s total available banking facilities to R12.3bn as the company also has existing general banking facilities worth R1bn.
“Northam has proactively implemented the RCF increase to further enhance its liquidity position and balance sheet flexibility in light of the current depressed platinum group metals (PGM) pricing environment and in the event that these circumstances prevail for a sustained period of time,” the company said.
In the year to June, Northam raised own production by 10.3% to 892 876 ounces of 4E platinum. Its sales volumes for the period also firmed up by 7.3% to 950 251 ounces to earn the company R30.8bn in sales revenue, representing an increase of 22.2% over the prior year.
After operating profit for the year leaped 15.7% to R15.4bn, Northam has declared a final dividend of 70 cents per share, taking the total payout to shareholders for the year to 170 cents per share.
This was despite basic earnings for the period softening by 29.6% to R4.61 per share, while headline earnings fell 81.6% compared to the previous year R4.45 per share.
Capital expenditure for the year however declined by 16.9% to R4.6bn, although the company said all capital projects are on track.
Nonetheless, Northam Platinum chief executive Paul Dunne on Friday echoed sentiments from Impala Platinum chief executive Nico Muller that there are unlikely to be new PGM mines in South Africa owing to depressed prices and rising costs.
“Current prices remove the incentive price for new mines, which will see a depletion of South Africa’s resource base. The damage has been done and depletion is inevitable,” said Dunne during presentation of the company’s financials on Friday.
Northam recently said positioning on the industry cost curve, and the ability to retain operational flexibility and balance sheet strength were increasingly important factors.
It said that in light of the prevailing PGM market uncertainty, Northam remained internally focused and placed “full emphasis on operational excellence, particularly surrounding safe, sustainable production and efficient mining at the right cost”.
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