Northam Platinum Holdings Limited (JSE:NPH) News - Trading statement and trading update

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 ISIN: ZAE000298253                              Debt issuer code: NHMI
(“Northam Holdings” or, together with its subsidiaries,         Bond code: NHM007       Bond ISIN: ZAG000158593
“Northam” or the “group”)                                       Bond code: NHM009       Bond ISIN: ZAG000158866
                                                                Bond code: NHM011       Bond ISIN: ZAG000159237
                                                                Bond code: NHM012       Bond ISIN: ZAG000160136
                                                                Bond code: NHM015       Bond ISIN: ZAG000164922
                                                                Bond code: NHM016       Bond ISIN: ZAG000167750
                                                                Bond code: NHM018       Bond ISIN: ZAG000168097
                                                                Bond code: NHM019       Bond ISIN: ZAG000168105
                                                                Bond code: NHM020       Bond ISIN: ZAG000172594
                                                                Bond code: NHM021       Bond ISIN: ZAG000181496
                                                                (“Northam Platinum”)

TRADING STATEMENT AND TRADING UPDATE

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 expects to report an increase in earnings per share in the range of 55.9% to 65.9% for the six months ended
31 December 2021 (“H1 F2022”) compared to the six months ended 31 December 2020 (“H1 F2021”).

As published on SENS on 20 September 2021, Northam Holdings was introduced as the new holding company for the
group by way of a share exchange implemented on a 1 for 1 basis, in terms of which Northam Platinum shareholders
exchanged their ordinary shares (net of treasury shares) in Northam Platinum (“Northam Platinum shares”) for ordinary
shares in Northam Holdings (“Northam Holdings shares”). Simultaneously, Northam Platinum became a subsidiary of
Northam Holdings and all Northam Platinum shares in issue were delisted from, and all Northam Holdings shares in issue
were listed on, the Main Board of the exchange operated by the JSE Limited, thereby ensuring the continuation of the group
listing.

In light of the above, the condensed reviewed interim financial results of Northam Holdings (H1 F2022) reflect the
arrangement that is in substance a continuation of the group. Northam Platinum is the predecessor for financial reporting
purposes (H1 F2021).

Key financial features of H1 F2022 (Northam Holdings), compared to those of H1 F2021 (Northam Platinum) were as follows:


 Metric                                                                  H1 F2022            H1 F2021          % variance

 Basic earnings per share (cents)                                   935.0 – 995.0               599.9       55.9% – 65.9%

 Headline earnings per share (cents)                                931.5 – 991.5               599.9       55.3% – 65.3%

 Normalised headline earnings per share (cents)                   943.0 – 1 007.2               641.5       47.0% – 57.0%

 Number of shares in issue including treasury shares (note 1)         396 615 878         509 781 212             (22.2%)
 
 Weighted average number of shares in issue (notes 1 and 2)           363 052 144         349 875 759                3.8%

Notes:
1. Since the consolidated financial results of Northam Holdings are in substance a continuation of the group, the shares
   used in calculating the number of issued shares and weighted average number of issued shares are based on the issued
   stated capital of the listed entity at that stage.
2. Used to determine the basic and headline earnings per share.

The number of shares in issue reduced by approximately 22.2%. This is the net outcome across both entities
(Northam Holdings and Northam Platinum) resulting from, inter alia:

    -    a reduction in Northam Platinum shares pursuant to the early maturity of the broad-based black economic
         empowerment (“BBBEE”) transaction with Zambezi Platinum (RF) Limited (“Zambezi BEE transaction”)
         (shareholders are referred to the circular dated 31 May 2021 setting out further details to this transaction); and
    -    a subsequent issue of Northam Holdings shares to Royal Bafokeng Investment Holding Company Proprietary
         Limited (“RBH”) in settlement of a portion of the purchase consideration for the acquisition of the Royal Bafokeng
         Platinum Limited (“RBPlat”) shares (“RBPlat shares”) from RBH.


Production and unit cash costs

The group’s equivalent refined metal from own operations decreased marginally to 351 359 oz 4E
(H1 F2021: 352 741 oz 4E), as a result of challenging operational circumstances experienced during the period under
review and was largely attributable to lower production at Zondereinde.

The Zondereinde and Booysendal mines experienced particularly difficult operational environments during this period.
Tragically, Zondereinde suffered two mining related fatalities, together with increased medical absences relating to the
ongoing COVID-19 pandemic. Furthermore, regional community unrest resulted in various production stoppages at
Booysendal. These factors negatively impacted the group’s metal production as well as unit cash costs.

Group unit cash costs per equivalent refined platinum ounce increased by 18.6% to R32 814/Pt oz
(H1 F2021: R27 660/Pt oz) as a result of cost increases at all operations. Zondereinde’s unit cash costs escalated by 21.3%
to R34 544/Pt oz (H1 F2021: R28 473/Pt oz), with a corresponding increase of 19.1% at Booysendal to R24 158/Pt oz
(H1 F2021: R20 288/Pt oz), and a 7.9% increase at Eland to R42 583/Pt oz (H1 F2021: R39 476/Pt oz). These increases
were the result of higher input costs and lower than anticipated production volumes. Higher input costs were the result of
an increase in the number of employees in service as the group continues to grow the labour component to enable the
planned expanded production profile, as well as higher than normal inflation relating to, in particular, electricity tariffs and
consumables such as diesel, steel and chemicals.

Despite the challenging operating environment, the group’s expansionary projects remain on track. Development of the
Western extension at Zondereinde has progressed well. Booysendal has made good progress on South mine, whilst
recording seven million fatality free shifts and remaining fatality free since inception. Eland mine continues to ramp-up and
the addition of the recently acquired Maroelabult section, transferred in January 2022, provides flexibility which will positively
impact the overall mine build programme.

Unit cash costs for the group and per operation for H1 F2022 compared to H1 F2021 were as follows:


                                                                                  Unit cash cost
                                                                                     R/Pt oz                   % variance

                                                                               H1 F2022          H1 F2021

 Group cash cost per equivalent refined platinum ounce                           32 814            27 660         (18.6%)

 Zondereinde cash cost per equivalent refined platinum ounce                     34 544            28 473         (21.3%)

 Booysendal cash cost per platinum ounce in concentrate produced                 24 158            20 288         (19.1%)

 Eland cash cost per platinum ounce in concentrate produced                      42 583            39 476          (7.9%)



Key production metrics for H1 F2022 compared to H1 F2021 were as follows:


                                                                          Equivalent refined production
                                                                                      oz 4E                    % variance

                                                                               H1 F2022          H1 F2021

 Own production from Zondereinde                                                156 688           166 773          (6.0%)

 Own production from Booysendal                                                 173 606           165 864            4.7%

 Own production from Eland                                                       21 065            20 104            4.8%

 Total production from own operations                                           351 359           352 741          (0.4%)

 Purchased material                                                              25 188            18 772           34.2%

 Total production                                                               376 547           371 513            1.4%


Volumes of purchased material increased by 34.2% to 25 188 oz 4E (H1 F2021: 18 772 oz 4E). The cost of purchased
material is determined by applying the ruling commodity prices to the prill split of the purchased material. During the period
under review third party material purchased contained more platinum, with a lower cost, and less palladium, with a higher
cost, than the previous corresponding period which impacted the cost of the material purchased, resulting in a cost increase
of 21.7%.

Equivalent refined production from own operations for the full financial year ending 30 June 2022 is forecast to be between
680 000 and 710 000 oz 4E. This will result in an estimated unit cash cost per platinum ounce of between R33 000 and
R34 000, assuming no further adverse inflationary pressure during the remainder of the current financial year.


Sales

Sales volumes were impacted by the planned rebuild and upgrade of smelter furnace 1 at the Zondereinde Metallurgical
complex (“furnace 1”) which commenced during May 2021 and was successfully completed at the end of October 2021.

Sales revenue for the period amounted to R13.9 billion, an increase of 16.8% from the previous corresponding period
(H1 F2021: R11.9 billion). This increase was the combined result of softer PGM sales volumes (309 255 oz 4E versus
315 320 oz 4E in H1 F2021) in light of the furnace 1 rebuild and upgrade and higher USD basket prices, which prices were
somewhat offset by a stronger ZAR/USD exchange rate.

The average USD basket price achieved increased by 22.5% to USD2 647/4E oz, from USD2 160/4E oz in H1 F2021. This
benefitted from an 8.0% increase in the average platinum price to USD1 009/oz (H1 F2021: USD934/oz), together with a
15.7% increase in the average rhodium price to USD15 385/oz (H1 F2021: USD13 296/oz). The price of minor metals,
iridium and ruthenium, continue to perform well, increasing by an average of 147.8% and 127.5% respectively, during the
period under review. It is expected that iridium and ruthenium, which are critical to the growing hydrogen economy, will
become increasingly significant contributors to the group’s revenue.

The average ZAR/USD exchange rate strengthened by 6.2% over the same period, toR15.04/USD (H1 F2021: R16.04/USD).

Total revenue per platinum ounce sold increased by 14.4% to R70 140/Pt oz, from R61 307/Pt oz in H1 F2021, resulting in
a cash profit margin per platinum ounce in excess of 50%.

Sales volumes are expected to increase during the second half of the 2022 financial year as inventory built up ahead of the
smelter is being processed. Sales guidance for the full financial year is between 720 000 and 740 000 oz 4E, with 770 000
to 800 000 oz 4E expected to be delivered to the group’s refiners.

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 achieved USD sales prices per metal.

                                                                                     Total metal sold        Average sales
                                                Dispatched              Refined   (including the sale      prices achieved
 Metal                                                                                of concentrate)

                                                        oz                   oz                    oz               USD/oz
 Platinum                                          215 230              192 573               197 911                1 009

 Palladium                                          87 932               76 389                79 182                2 149

 Rhodium                                            27 049               26 445                28 785               15 385

 Gold                                                3 622                3 390                 3 377                1 798

 Total 4E                                          333 833              298 797               309 255                2 647


The above table does not include attributable ounces relating to Northam’s investment in RBPlat.

As a result of the planned rebuild and upgrade of furnace 1 during the period under review, total refined volumes for the 6
months decreased by 7.3% to 298 797 oz 4E (H1 F2021: 322 170 oz 4E).

Concentrate sold to a third party in order to honour legacy offtake agreements relating to the Everest and Maroelabult
operations contained 19 758 oz 4E. Refined metal sold to the group’s customers totalled 289 497 oz 4E.

The group engaged the services of a second precious metal refiner during the period under review to cater for the group’s
medium to long-term production growth profile. As a result, the precious metal pipeline increased by approximately 40 000
oz 4E, reducing metal available for sales during H1 F2022.


Financial results

Despite the operational and inflationary challenges experienced, operating profit increased by 12.7%. The key contributor
to this increase was a 16.8% increase in revenue which was partially offset by a corresponding 20.0% increase in cost of
sales, resulting in an operating profit of R5.9 billion for the period under review (H1 F2021: R5.2 billion).

Earnings before interest, taxation, depreciation and amortisation (“EBITDA”) increased by 19.1% to R6.4 billion (H1 F2021:
R5.4 billion).

During the period under review the group generated cash flow from operations amounting to R2.9 billion (H1 F2021:
R3.1 billion). Cash generated was impacted by marginally lower sales volumes and higher than inflation cost increases.
Sales volumes were impacted by higher inventory levels arising from the planned rebuild and upgrade of furnace 1 during
the period, together with the increased pipeline as a result of the introduction of a second precious metal refiner. As at
31 December 2021, inventory on hand amounted to approximately 380 000 oz 4E. Applying the average basket price
realised during the period under review, inventory on hand is valued at c. R18.7 billion as at 31 December 2021.

Cash generated was applied towards the composite transaction (as contemplated in the circular to shareholders dated
31 May 2021) and the concomitant repurchase of almost 30% of the shares in issue, resulting in a once-off outflow of cash
in excess of R6.6 billion, together with the acquisition of RBPlat shares amounting to a further outflow of R4.1 billion during
the period.

The combined impact on cash flows, including an increase in capital expenditure and the significant cash outlay in respect
of the accelerated maturity of the Zambezi BEE transaction and concomitant share repurchase, resulted in net debt
increasing to R14.3 billion, excluding the deferred portion of the purchase consideration relating to the acquisition of the
RBPlat shares, amounting to R5.7 billion as at 31 December 2021 (“outstanding consideration”). As previously
communicated to shareholders, Northam is comfortable with a self-imposed long-term net debt to EBITDA ratio of 1 to 1
(“debt ratio”) in the pursuance of the group’s growth strategy. Excluding the outstanding consideration, which relates to a
corresponding cash generative underlying asset with no net debt, the debt ratio as at 31 December 2021 (expressed on a
rolling twelve month basis) amounted to 0.81. Inclusive of the outstanding consideration, the debt ratio was 1.13. The
ongoing release of metal built up ahead of the smelter following the recommissioning of furnace 1, as well as a normalisation
of the metal pipeline following the introduction of a second precious metal refiner, combined with the strong current metal
price environment and the receipt by Northam of the dividend declared by RBPlat subsequent to the period end (refer
below), will contribute to normalising the debt ratio (post settlement of the outstanding consideration) by 31 December 2022.

For the period under review, the group’s share of earnings from RBPlat amounted to R128.4 million (included in EBITDA
and calculated for the period from 19 November 2021 until 31 December 2021, adjusted for additional RBPlat shares
purchased on-market by Northam during December 2021, as announced on SENS on 7 December 2021). A dividend of
R536.2 million was declared in respect of Northam’s shareholding in RBPlat subsequent to the period end and is excluded
from the above. As at 31 December 2021, RBPlat reported net cash on hand (after taking into account the RBPlat dividend
declaration in respect of this period) of R3.4 billion. This equates to c. R11.60 per RBPlat share currently in issue.


Investment in RBPlat

During the period under review, Northam made a strategic investment by acquiring a significant shareholding in RBPlat, as
published on SENS on 9 November 2021. Further acquisitions of RBPlat shares were announced on 7 December 2021.
Shareholders are referred to these announcements for details regarding the investment in RBPlat.

As at 31 December 2021, Northam held 100 219 552 RBPlat shares. As set out in more detail in the 7 December 2021
announcement, Northam has the option to increase its shareholding in RBPlat by purchasing up to a further 6 145 798
RBPlat shares (“option shares”) at R131.56 per share (calculated as at 31 December 2021, including escalation and after
taking into account the dividend to be received by RBPlat shareholders).

As at 31 December 2021 and assuming:
    -   all option shares have been acquired by Northam (as at 31 December 2021, for illustrative purposes); and
    -   the dividend declared by RBPlat for the period ended 31 December 2021 has been received,

the illustrative net cost per RBPlat share acquired by Northam amounts to R171.58 per share. RBPlat’s reported net cash
on hand as at 31 December 2021 (after taking into account the RBPlat dividend declaration in respect of this period)
amounted to c. R11.60 per RBPlat share.

Northam believes that its investment in RBPlat holds the potential for substantial long-term value creation. It provides
inherent optionality and its complementary metal mix, with a higher relative platinum contribution, fits well within the broader
Northam basket. The RBPlat assets are young, shallow, well-capitalised and occupy a strategically important position in the
Western Bushveld.


Capital expenditure

Capital expenditure increased to R2.3 billion (H1 F2021: R1.3 billion). This is the result of the restart of capital projects that
had been curtailed following the onset of the COVID-19 pandemic, partially offset by capital projects having either been
completed, or being near completion at Booysendal mine. R1.5 billion (H1 F2021: R918.1 million) was spent on
expansionary capital expenditure and R776.9 million (H1 F2021: R380.5 million) on sustaining capital expenditure.

The significant increase in sustaining capital expenditure was a result of the planned rebuild and upgrade of furnace 1
together with a number of extensions to strike belts and the first significant fleet replacements at Booysendal.

Expansionary projects that had previously been temporarily scaled back included: the Central Merensky and BS4 modules
at Booysendal mine; aspects of the Western extension number 3 shaft project at Zondereinde mine; and the stoping build-up
at Eland mine.

Following improved market certainty, all COVID-19 related curtailed growth projects were re-initiated and the majority of
workflow impacts resulting from the stoppage were clawed back. As such, the overall impact on the group’s growth strategy
has been minimal.

Group capital expenditure for the full financial year is forecasted to amount to approximately R4.6 billion. The potential for
further disruption to operations and the metal markets as a result of the COVID-19 pandemic, as well as market disruptions
following the invasion of Ukraine by Russia, remain as risks to production and sales. In addition, a risk of regional community
unrest on the eastern limb of the Bushveld remains. We continue to monitor the market and will amend the group’s capital
program when and where prudent.

The group continues to execute on its strategy of developing low-cost, long-life assets in order to position itself at the lower
end of the industry cost curve. We believe that the development of the group’s project pipeline, which builds on the group’s
pre-existing and acquired asset base, is bearing fruit and will continue to position Northam to deliver strong operational
performance and financial results.


Conclusion

In summary, whilst the operating environment has been particularly challenging, we believe that the period under review
has been important for Northam, given:

    -    the significant progress made in respect of the group’s organic growth projects;
    -    the successful acceleration of the maturity of the Zambezi BEE transaction and value unlock for BBBEE;
    -    the c. 30% share repurchase;
    -    the establishment of a new group structure and the listing of Northam Holdings; and
    -    a significant strategic investment in RBPlat, coinciding with the introduction of RBH as an important empowerment
         shareholder of Northam.

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’s auditors. The reviewed consolidated results for Northam Holdings
for the six months ended 31 December 2021 are expected to be published on or about 31 March 2022.


Johannesburg
24 March 2022

Corporate Advisor and Sponsor to Northam Holdings             
One Capital    

Attorneys to Northam Holdings and Northam Platinum                                             
Webber Wentzel

Corporate Advisor and Debt Sponsor to Northam Platinum
One Capital

Date: 24-03-2022 07:05:00
Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE'). 
The JSE does not, whether expressly, tacitly or implicitly, represent, warrant or in any way guarantee the truth, accuracy or completeness of
 the information published on SENS. The JSE, their officers, employees and agents accept no liability for (or in respect of) any direct, 
indirect, incidental or consequential loss or damage of any kind or nature, howsoever arising, from the use of SENS or the use of, or reliance on,
 information disseminated through SENS.