JOHANNESBURG (miningweekly.com) – JSE-listed Northam Platinum has reported normalised earnings a share of 108.5c for the six months ended December 31, 2018, compared with the 37.1c reported for the six months ended December 31, 2017.
This was on the back of normalised headline earnings having increased by 192% to R553-million, compared with R189-million in the prior comparable period. Headline earnings were supported by the company's strategy that was launched in 2015 with the Zambezi Platinum Limited Black Economic Empowerment transaction
The higher headline earnings was the result of higher sales volumes, an increase in the basket price of platinum-group metals (PGMs) and a weakening rand.
The company, which is headed up by CEO Paul Dunne, narrowed its loss a share to 18.2c for the period, compared with a loss a share of 81.1c for the prior comparable period. Northam declared no dividend.
Northam reported earnings before interest, taxes, depreciation and amortisation of R1.1-billion, which equated to a 21% operating profit margin. the company's reported R1-billion operating profit was an all-time high for an interim period.
CFO Alet Coetzee noted that in the current price environment, the company's main focus remained on cost control and growing its production base down the cost curve, thereby creating long-term value for shareholders.
Northam’s Zondereinde mine, in Limpopo’s western limb of the Bushveld Complex, had increased production from both the Merensky and upper group two (UG2) reefs. Merensky tonnage milled increased by 5.7% to 400 686 t, while UG2 tonnage increased by 2.8% to 606 450 t for the period.
The Merensky head grade was 6.02 g/t platinum, palladium, rhodium and gold (4E). The UG2 head grade was 4.28 g/t of 4E.
Total refined metal produced increased by 41.4% to 299 323 oz of 4E, as a result of strong operational delivery and the start of destocking excess inventory. Cash cost per equivalent refined platinum ounce for Zondereinde increased by 8.4% to R23 614/oz of platinum, compared with R21 775/oz in the prior comparable period.
The company was making good progress with ore reserve development in the western extension at Zondereinde.
“In the first raise line, two reef raises have holed with the balance between 3 and 12 levels expected to be holed by the end of the financial year. Ground conditions are generally good and the predominant reef is the higher-grade P2 subfacies,” Dunne said.
The deepening project at Zondereinde continued, with the conveyor decline halfway between 17 and 18 levels. Lateral development had started on 17 level, while stoping was in progress on 16 level.
Booysendal, in the eastern limb of the Bushveld Complex, in Mpumalanga, for the period reported metal-in-concentrate production had increased by 8.9% to 105 285 oz of 4E, compared with 96 650 oz of 4E in the prior comparable period.
The South Tailings Storage Facility (STSF) retreatment project and improved yields at the North deposit, at Booysendal, contributed to chrome concentrate production of 193 360 t, which is a 33.9% increase compared with the six months ended December 31, 2017.
The cash cost per platinum ounce in concentrate produced from Booysendal increased by 1.9% to R16 772/oz of platinum, compared with R16 459/oz of platinum in the prior comparable period.
Meanwhile, construction of Booysendal South’s central mining complex and ancillary infrastructure was well advanced and on track to reach steady-state production in the 2022 financial year, which should be around 80 000 t/m.
During the period, Northam commissioned an aerial rope conveyor and had first ore transported from the central complex to the South concentrator stockpile. The company recommissioned the PGM circuit of the South concentrator and ramped up the rate of tailings retreatment from the STSF retreatment project to produce chrome concentrate and PGMs.
Northam expects to start mining the Eland tailings dam in March, along with the recovery of chrome, following the recommissioning of a concentrator on site. According to Dunne, the Eland mine will produce around 120 000 t/m.
The recovery of PGMs is expected to start in May.
Trial mining at the Kukama shaft, to test stoping and ore transport methodologies, is expected to start before the end of the financial year. The company is also considering the treatment of third-party ore.
Northam reported that its US recycling assets were still on care and maintenance for the time being.
The average platinum price realised during the reporting period was $820/oz, which was 12.5% lower than the $937/oz achieved in the prior period. The company attributed the lacklustre performance of the price to declining demand from light-duty diesel vehicles, particularly in Western Europe, following the “dieselgate” scandal and lower Chinese jewellery demand.
Platinum demand in the autocatalyst sector was expected to increase as tighter emissions legislation is introduced in China and India.
Real driving emissions (RDE) legislation, effective from May, will become more onerous for original-equipment manufacturers, as emissions limits will need to be maintained over the lifecycle of a vehicle, and is likely to lead to increased loadings per vehicle. Industrial demand is also expected to grow in the petrochemicals sector and as support for fuel cell development increases.
On the supply side, underinvestment in the South African industry over the past decade and rationalisation of the industry going forward is likely to lead to lower production.
The deficit in the palladium market continued during the reporting period resulting in the average price received gaining 13% to $1 071/oz, compared to $948/oz in the prior comparable period.
Autocatalyst demand for palladium is expected to increase, particularly in China with the introduction of China VI legislation, and in Western Europe loadings in gasoline vehicles are expected to increase significantly owing to the strict application of RDE standards.
The palladium market remains in meaningful deficit, estimated at one-million ounces, owing to the increasing demand for autocatalysts. “It is fair to conclude that, at some point in the future, platinum will substitute palladium,” the company said.
The price received for rhodium averaged $2 427/oz during the period, which was an increase of 95.7% from the prior comparable period, which saw $1 240/oz.
The increased deficit expected in rhodium will continue as supplies contract and demand in the autocatalyst sector follows a similar trajectory to palladium, with the exception that, in the case of rhodium, there is no real substitute.
“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.
“Management is confident that the group's strong financial position, prudent financial controls and the development of shallow, mechanisable operations at Booysendal and Eland will place the group in a position to take advantage of improved market conditions going forward,” said Northam.Creamer Media Senior Deputy Editor Online