Try our mobile app
NORTHAM PLATINUM HOLDINGS LIMITED NORTHAM PLATINUM LIMITED
Incorporated in the Republic of South Africa Incorporated in the Republic of South Africa
Registration number: 2020/905346/06 Registration number: 1977/003282/06
Share code: NPH Debt issuer code: NHMI
ISIN: ZAE000298253 Bond code: NHM015 Bond ISIN: ZAG000164922
(“Northam Holdings” or, together with its subsidiaries, Bond code: NHM016 Bond ISIN: ZAG000167750
“Northam” or the “group”)
Bond code: NHM019 Bond ISIN: ZAG000168105
Bond code: NHM020 Bond ISIN: ZAG000172594
Bond code: NHM021 Bond ISIN: ZAG000181496
Bond code: NHM022 Bond ISIN: ZAG000190133
Bond code: NHM023 Bond ISIN: ZAG000190968
Bond code: NHM024 Bond ISIN: ZAG000195926
Bond code: NHM025 Bond ISIN: ZAG000195934
Bond code: NHM026 Bond ISIN: ZAG000195942
(“Northam Platinum”)
TRADING STATEMENT AND TRADING UPDATE FOR THE YEAR ENDED 30 JUNE 2023
Key metrics for the year ended 30 June 2023 and disposal of the Royal Bafokeng Platinum Limited (“RBPlat”) investment:
• 13.0% increase in equivalent refined 4E metal from own operations to 809 775 oz 4E (F2022: 716 488 oz 4E), following a
strong performance from all mines in the group, including a 21.5% increase in 4E concentrate produced by Booysendal and a
47.5% increase in 4E concentrate produced from own operations and surface sources at Eland
• 16.1% increase in sales revenue to R39.5 billion, notwithstanding a 6.9% decrease in the 4E ZAR basket price
to R37 488/oz 4E (F2022: R40 286/oz 4E)
• 3.8% increase in gross profit to R15.4 billion
• 39.1% gross profit margin, reflective of increased production against a largely fixed cost base and maintaining cost discipline and
efficiencies, notwithstanding a 12.6% increase in group cash cost per equivalent refined 4E ounce, amidst a higher inflationary
environment and ongoing Eskom load curtailment events
• 0.2% increase in EBITDA to R16.5 billion
• 2.5% - 12.5% expected decrease in headline earnings per share
• 70.0% - 80.0% expected decrease in basic earnings per share, primarily as a result of a R4.1 billion non-cash impairment cost
relating to Northam’s investment in RBPlat and a R2.7 billion non-cash impairment relating to the Eland operation as a result of a
substantial deterioration in the pricing of Platinum Group Metals (“PGM”) which will be reversed should market conditions improve in
the future
• Net debt as at 30 June 2023 (prior to the disposal of Northam’s investment in RBPlat) improved to R9.4 billion (F2022: R16.0 billion)
with a net debt to EBITDA ratio of 0.57, well within Northam’s self-imposed target ratio of 1 to 1 in pursuance of the
group’s growth strategy
• All organic growth projects are on track
• Post 30 June 2023, sale of Northam’s investment in RBPlat into the Impala Platinum Holdings Limited (“Implats”) mandatory offer
for R9.0 billion in cash and 30 065 866 Implats shares
Introduction
In terms of paragraph 3.4(b) of the JSE Limited Listings Requirements, companies are required to publish a trading statement as soon
as they are satisfied, with a reasonable degree of certainty, that the financial results for the current reporting period will differ by at least
20% from the financial results of the previous corresponding period.
Northam Holdings’ financial results for the year ended 30 June 2023 (“F2023”) are underpinned by a solid performance from all operations
within the group. Notwithstanding this, Northam Holdings expects to report a decrease in earnings per share for F2023 compared to the
previous financial year ended 30 June 2022 (“F2022”), largely as a result of the recognition of two non-cash impairments relating to:
• Northam’s investment in RBPlat (R4.1 billion), based on the consideration received by Northam from the sale of its investment
in RBPlat into the Implats mandatory offer; and
• the Eland operation (R2.7 billion), owing to a deterioration in the forecast commodity prices.
The table below provides key earnings per share information for F2023, compared to that of F2022:
F2023 F2022 Variance
Basic earnings per share (cents) 523.0 – 784.4 2 614.9 (80.0%) – (70.0%)
Headline earnings per share (cents) 2 284.6 – 2 545.6 2 611.1 (12.5%) – (2.5%)
Number of shares in issue including treasury shares 396 615 878 396 615 878 0.0%
Weighted average number of shares in issue* 390 237 523 376 533 113 3.6%
*The weighted average number of shares in issue have been used to determine the basic and headline earnings per share.
Production
The group’s equivalent refined metal from own operations increased by 13.0% to 809 775 oz 4E (F2022: 716 488 oz 4E) as a result of
focused execution of the group’s growth strategy, which continues to deliver against set targets. A key feature for F2023 has been the
strong production performance from both the Zondereinde and Booysendal mines, and a significant step forward by Eland.
Challenges remain, particularly in respect of high mining inflation and the potential for further and possibly more severe
Eskom load curtailment events. However, our growth and operational diversification programmes remain on track and continue to
demonstrate the value of our counter-cyclical investments and execution capacity across the group, as well as our flexibility in
dealing with these challenges.
Development of the Western extension at Zondereinde has progressed well. Despite Zondereinde tragically suffering three fatalities, the
benefits of focused Merensky stoping in the Western extension, together with logistical decongestion resulting from the ongoing shift of
UG2 stoping from the western to the eastern portions of the mine, are starting to show in mining productivity.
Booysendal is delivering strong growth on the back of solid production from North mine, as well as the ongoing ramp-up of South mine.
Booysendal achieved a record 8 million fatality free shifts, remaining fatality free since inception.
Eland surpassed a maiden 1 million fatality free shifts during November 2022, and continues to ramp-up mineable reserves.
All operations have been subject to numerous Eskom load curtailment events. However, the combination of our comprehensive
load management protocols, as well as on-demand self-generation capacity, have limited consequential production losses. A programme
to increase self-generation capacity is well advanced and this will further mitigate potential production losses arising from
load curtailment events.
Key production metrics for F2023, compared to F2022, are as follows (in oz 4E):
F2023 F2022 Variance
Equivalent refined production from own operations at Zondereinde 321 901 321 962 (0.0%)
Concentrate produced from own operations at Booysendal 452 903 372 623 21.5%
Concentrate produced from own operations and surface sources at Eland 48 800 33 086 47.5%
Total equivalent refined metal production from own operations 809 775 716 488 13.0%
Equivalent refined metal purchased from third parties 119 820 61 961 93.4%
Total equivalent refined metal production from own operations including
metal purchased from third parties 929 595 778 449 19.4%
Unit cash costs
Unit cash costs were negatively impacted by higher mining inflation, as well as slightly depressed concentrator feed grades at
Zondereinde (due to the Western extension expansion) and at Booysendal (due to an area of lower grade reef at the North UG2 mine,
together with elevated development in the newer modules of the South mine). Grades at Zondereinde and Booysendal will improve over
the coming two years as these growth projects reach maturity.
Unit cash costs per 4E ounce for the group, and per operation, for F2023 compared to F2022, are as follows (in R/4E oz):
F2023 F2022 Variance
Zondereinde cash cost per equivalent refined 4E ounce 23 620 20 766 (13.7%)
Booysendal cash cost per 4E ounce in concentrate produced 16 789 14 765 (13.7%)
Eland cash cost per 4E ounce in concentrate produced 36 319 36 962 1.7%
Group cash cost per equivalent refined 4E ounce 22 824 20 278 (12.6%)
The total cost of purchased concentrates and recycling material increased by 51.5% to R4.0 billion (F2022: R2.6 billion),
with 4E ounce volumes purchased increasing by 93.4%. The cost of purchased material is based on ruling commodity prices as well as
the prill split of the purchased material.
Sales revenue
Sales revenue for F2023 amounted to R39.5 billion, an increase of 16.1% (F2022: R34.1 billion).
The increase in sales revenue was the combined result of a 20.0% increase in 4E sales volumes to 885 347 oz 4E (F2022: 737 923 oz 4E)
and a 6.9% decrease in the 4E ZAR basket price to R37 488/oz 4E (F2022: R40 286/oz 4E). The lower ZAR basket price is the
combined result of a lower 4E US dollar (“USD”) basket price of USD 2 112/oz 4E (F2022: USD 2 640/oz 4E) and an increase in the
average ZAR/USD exchange rate achieved (i.e. a weaker Rand) being R17.75/USD (F2022: R15.26/USD).
Total revenue per equivalent refined 4E ounce sold decreased by 3.2% to R44 670/4E oz (F2022: R46 162/4E oz). This, combined with
the unit cash cost increasing by 12.6% from R20 278/4E oz to R22 824/4E oz in F2023, led to a decrease in the
cash profit margin per 4E ounce to 48.9% (F2022: 56.1%).
The table below summarises dispatched metal volumes to the group’s precious metal refiners, compared to metal volumes refined and
sold together with the average USD sales prices achieved per metal.
Total
equivalent
refined metal
sold
Total refined (including the Average
metal sale of sales prices
Dispatched produced concentrate) achieved
oz oz oz USD/oz
Platinum 507 008 515 379 537 341 973
Palladium 241 238 246 753 257 542 1 737
Rhodium 76 092 74 626 80 176 10 988
Gold 9 867 9 732 10 288 1 850
Total 4E 834 205 846 490 885 347 2 112
Included in the third figures column in the table above is concentrate sold to a third party to honour legacy offtake agreements relating to
the Everest and Maroelabult operations, which contained 54 220 oz 4E in concentrate (F2022: 37 334 oz 4E). Refined metal sold to the
group’s customers totalled 832 602 oz 4E (F2022: 701 618 oz 4E).
Financial results
Sales revenue increased by 16.1% compared to an increase in cost of sales of 25.7%. This resulted in a
gross profit of R15.4 billion (F2022: R14.9 billion), and a gross profit margin of 39.1% (F2022: 43.7%).
We operate a largely fixed cost business and consider increasing production, and doing so efficiently, to be our best defence against
current global inflationary pressures. Our capital allocation and treasury decisions have been guided by our growth strategy and
our financial results have benefited from our consistent approach to growing our production base down the industry cost curve.
Earnings before interest, taxation, depreciation and amortisation, and also excluding impairments, (“EBITDA”) amounted to
R16.5 billion (F2022: R16.5 billion).
As at 30 June 2023, inventory on hand amounted to 397 387 oz 4E, valued at R13.7 billion when applying the 4E basket price and
exchange rate at 30 June 2023.
For F2023, our operations generated cash to the value of R14.0 billion (before capital expenditure) and free cash flow of R8.5 billion
(after capital expenditure). During F2023, Northam settled the last instalment of the Deferred Acquisition Consideration (as defined in the
SENS announcement published by Northam on 9 November 2021) to the Royal Bafokeng Holdings Proprietary Limited group,
of R1.8 billion (including escalation at the Escalation Rate (as defined in the SENS announcement published by Northam on
9 November 2021)), relating to Northam’s initial investment in RBPlat. Northam received R781.7 million in dividends from
RBPlat during F2023.
During F2023, Northam successfully concluded and implemented an agreement to restructure the group’s existing banking facilities,
whereby (i) the R2.4 billion term loan facility (“Term Loan”) has been fully settled and cancelled, and (ii) the existing R7.2 billion five-year
revolving credit facility (“RCF”) has been increased by R2.8 billion to R10.0 billion (“Facility Restructure”). As a result of the
Facility Restructure, Northam’s total available banking facilities now amount to R11.0 billion, comprising the increased RCF of
R10.0 billion and existing general banking facilities of R1.0 billion.
At year end, and prior to the disposal of Northam’s investment in RBPlat (the proceeds of which were received on 24 July 2023), net debt
improved to R9.4 billion (F2022: R16.0 billion), with the net debt to EBITDA ratio at 0.57.
Subsequent to year end, Northam disposed of its investment in RBPlat into the Implats mandatory offer (details of which are contained
in the offer circular issued by Implats dated 17 January 2022). The offer consideration receivable per RBPlat share tendered into the
Implats mandatory offer amounted to R90.00 in cash and 0.3 new ordinary shares in Implats. Northam Holdings therefore received, in
aggregate, R9.0 billion in cash and 30 065 866 Implats shares (JSE share code: IMP), (collectively, the
“Aggregate Offer Consideration”). The Aggregate Offer Consideration was used to determine the recoverable amount relating to
Northam’s investment in RBPlat as at 30 June 2023 and resulted in a non-cash impairment being recognised amounting to R4.1 billion.
Recent adverse market developments have also resulted in a material contraction in profit margins and cash generation capacity across
the PGM industry. As a consequence, the forecast commodity price assumptions have been adjusted downward from those used in
F2022. Based on the impairment assessments performed by management, the recoverable values for all cash generating units within the
group were higher than their respective carrying values, except for assets under construction relating to the Eland operation.
Consequently, the assets included in Eland were impaired by R2.7 billion, which impairment is a non-cash adjustment and will be reversed
should market conditions improve in the future.
Acceptance of the Implats mandatory offer
On 9 November 2021, Northam Holdings announced its initial acquisition of a 32.8% interest in RBPlat (“Announcement Date”).
Subsequent to the Announcement Date, the PGM market strengthened significantly. The ZAR 4E basket price, based on the average
prill split across RBPlat's operations (“Basket Price”), remained strong throughout 2022, with a net increase of approximately 10% from
the Announcement Date to the date of Northam Holdings announcing its firm intention to make a voluntary, conditional offer to
RBPlat shareholders to acquire the remaining RBPlat shares not already held by Northam Holdings (“Northam Offer”) on
9 November 2022 (“Northam FIA”).
However, subsequent to the Northam FIA, PGM prices declined substantially, signalling a possible protracted cyclical downturn in the
PGM market. The Basket Price declined by approximately 35.0% from the Northam FIA date to 18 July 2023, resulting in a decrease of
almost 30% between the Announcement Date and 18 July 2023. These adverse market developments resulted in a material contraction
in profit margins and cash generation capacity across the entire PGM industry (including at RBPlat). As a consequence, equity valuations
across the entire PGM sector have declined substantially.
Against this backdrop, Northam’s wholly-owned operations continued to perform well, as reflected in the production performance detailed
above.
Following the occurrence of the material adverse changes in PGM prices, Northam Holdings terminated the Northam Offer, further details
of which are set out in the SENS announcement published by Northam Holdings on 5 April 2023 (“Termination Announcement”). From
the date of the Termination Announcement to 18 July 2023, the Basket Price deteriorated further by almost 18%.
The Implats mandatory offer provided Northam with full investment and strategic optionality since December 2021. On 20 July 2023,
Northam Holdings submitted its acceptance of the Implats mandatory offer in respect of all 100 219 552 RBPlat shares held by
Northam Holdings (representing 34.5% of RBPlat shares in issue).
In light of the prevailing market conditions and negative medium-term outlook, the Implats mandatory offer presented a unique and
attractive opportunity for Northam to lock in substantial value in relation to the RBPlat shares held by Northam, with a strong cash underpin
that was not adversely affected by the steep decline in PGM equity valuations across the sector. This also presented Northam with an
opportunity to significantly strengthen our balance sheet and liquidity position, which in turn provides additional flexibility and optionality
for Northam Holdings to, subject to the relevant regulatory requirements and approvals necessary, inter alia, potentially (i) consider the
declaration of a maiden dividend; (ii) introduce a formal dividend policy; (iii) implement share buy-backs; and/or
(iv) reduce Northam’s third party debt.
Capital expenditure
Capital expenditure for F2023 amounted to R5.6 billion (F2022: R4.6 billion), which includes an investment of R86.6 million to mitigate
the effects of load curtailment events and to further our renewable energy strategy. Capital expenditure increased as a result of significant
activity relating to the Western extension project at Zondereinde, together with the ongoing ramp-up at Eland. Capital expenditure at
Booysendal related to a number of extensions to strike belts and the first significant fleet replacements.
A raft of global geopolitical issues holds the potential for further disruption to PGM markets, whilst the risk for further and more severe
Eskom load curtailment events could lead to operational disruption. We continue to monitor the market and are investing in additional on-
demand self-generation capacity at all of our operations, which will result in additional capital expenditure for the coming financial year.
We will adjust our capital programme when and where prudent, taking into account the changing landscape.
At Zondereinde mine, stoping is ramping-up within the Western extension section and further progress has been made on the deepening
project. Equipping of Number 3 shaft is in progress. Pilot drilling of 3a ventilation shaft was completed and reaming has commenced.
Both shafts are scheduled to be commissioned during the 2024 calendar year. We have also commenced pilot drilling of
the 3b rock hoisting shaft, which has a scheduled commissioning date in the 2028 calendar year. The construction of the headgear and
winder for Number 3 shaft was also completed with shaft equipping commencing.
At the group’s metallurgical facilities, upgrades to the base metal removal plant are progressing well, and we have commenced the
expansion and upgrade of our furnace slag concentrator, which will be commissioned during the first half of the
2024 financial year (“F2024”).
The development of Booysendal South mine is on track. The full complement of stoping crews is in place at the Central UG2 modules
and production will reach steady-state during the course of the coming financial year. Decline development is continuing in order to
increase mineable reserves and operational flexibility. Progress of the South Merensky module is on target, with focus remaining on
development of the decline system, with limited stoping in the upper mining levels. Stoping is continuing at the BS4 UG2 module and will
ramp-up during the remainder of F2024. Commissioning of the North aerial rope conveyor during F2022 has enabled the ramp-up of the
North Merensky module to its phase two steady-state production rate.
At Eland mine, processing of ore from surface sources continues, whilst underground and open pit feed are being batch treated.
Development of the Kukama and Maroelabult decline systems is progressing well, as has strike and raise development.
This is increasing mineable reserves. Strike development has connected the two mining sections, which is enhancing the provision of
underground services. Underground stoping ramp-up is in progress.
Conclusion
The group has delivered a strong set of results for F2023, whilst achieving significant strategic advancements, including:
• continued progress in respect of the group’s organic growth projects, which remain on track;
• strengthening our balance sheet and liquidity position; and
• positioning Northam to withstand a possible protracted cyclical downturn in the PGM market.
The global economic outlook remains uncertain, resulting in volatile metal markets and exchange rates. Prevailing PGM market conditions
and the material decline in the ZAR 4E basket price may signal a potentially protracted cyclical downturn.
The group’s financial performance is influenced by the exchange rate and commodity prices together with the stability of Northam’s
broader operating environment.
The Implats mandatory offer, with a substantial cash underpin, presented a well-timed opportunity in the prevailing PGM market for
Northam to secure a very significant cash injection that materially strengthens Northam’s balance sheet and liquidity position.
The Facility Restructure further strengthened our liquidity position.
Relative positioning on the industry cost curve, and the ability to retain operational flexibility and balance sheet strength, will become
increasingly important over time.
We will continue to assess the PGM market, as well as our operational and cash flow requirements, and will evaluate our options in
relation to the application of the consideration received pursuant to the disposal of our investment in RBPlat, in due course.
Northam has always maintained inherent optionality and flexibility in executing its growth strategy and these considerations remain
key drivers to all our decisions.
The financial information contained in this announcement is the responsibility of the board of directors of Northam Holdings and has not
been reviewed or reported on by Northam Holdings’ auditors, PricewaterhouseCoopers Incorporated. The audited results
for Northam Holdings for F2023 are expected to be published on or about 25 August 2023.
Johannesburg
14 August 2023
Corporate Advisor and Sponsor to Corporate Advisor and Debt Sponsor to
Northam Holdings Northam Platinum
One Capital One Capital
