Northam Platinum released a trading statement and update for the six months ended December 2021.

The result at HEPS level reflects the joys of being at a favourable point in the cycle, with earnings up between 55.3% and 65.3%. Normalised HEPS is 47% to 57% higher. This was helped by a reduction of shares in issue of around 22.2% as the net result of the B-BBEE transaction restructure and the issuance of shares to Royal Bafokeng Investment Holding Company as payment for the stake in Royal Bafokeng Platinum.

The production result wasn’t great, with a marginal decrease in oz 4E production. Production at Zondereinde was lower due to the operation suffering two tragic fatalities and increased medical absences relating to the pandemic. The Booysendal operation was negatively impacted by production stoppages from regional community unrest.

When production goes in one direction and inflation goes in the other, the cash cost per unit of production can only increase. Group unit cash costs per equivalent refined platinum ounce increased by 18.6%, a combination of Zondereinde’s increase of 21.3% and Booysendal’s 19.1%. The Eland operation helped mitigate the impact, with an increase of only 7.9%.

Purchased material volumes increased by 34.2% and the cost of the materials increased by 21.7%, the net result of the mix of platinum and palladium in the materials and price movements in those metals.

The cost per refined ounce over the six months was R32,814. Full year guidance is a cost of between R33,000 and R34,000 per refined ounce, so further upward pressure is expected.

Despite all the pressures on production, sales revenue increased by 16.8%. With sales volumes lower than in the comparable period, basket prices (despite the stronger rand) saved the day. Average US basket prices increased by 22.5%. Iridium and ruthenium are minor metals but increased by 147.8% and 127.5% respectively, as both metals are important in the growing hydrogen economy.

Thanks to the commodity tailwind, the cash profit margin per platinum ounce is over 50%.
Northam sold 309,255 4E ounces in the six-month period and expects full-year sales volumes of between 720,000 and 740,000 4E ounces.

The net impact of the revenue and cost results was an increasing in operating profit of 12.7%. EBITDA increased by 19.1%. Despite this, cash from operations fell by around 6.5%.

Northam is comfortable with a net debt to EBITDA ratio of 1x and is currently running at 1.13x with deferred consideration on the Royal Bafokeng Platinum shares included. The company expects the ratio to normalise by December 2022, assisted by a juicy dividend from Royal Bafokeng.

After capital expenditure of just R1.3 billion in the comparable period during the pandemic, the restart of projects drove an increase to R2.3 billion. Full year guidance is R4.6 billion.

The SENS makes no mention of the Takeover Regulation Panel’s investigation into whether Northam will be required to make a mandatory offer to the other shareholders in Royal Bafokeng Platinum. The market is waiting patiently for a final ruling on that matter.

Northam’s share price closed 5.8% lower.