Northam achieves record profit despite production losses
Northam expects to achieve a record operating profit for the year ended 30 June 2020, underpinned by a solid performance at all operations and higher prices realised for our basket of PGM metals.
This is despite significant production losses associated with the national lockdown and phased restart of mining activities following the onset of the COVID-19 pandemic in South Africa.
The group achieved production from own operations of 515 370 4E oz, representing a marginal 0.9% decrease from the year ended 30 June 2019 (F2019: 519 954 4E oz). Purchased material increased by 212.9% to 72 443 4E oz (F2019: 23 154 4E oz).
Sales volumes amounted to 582 686 4E oz, which included ore sales (F2019: 583 069 4E oz.), whilst total revenue per platinum ounce sold increased by 78.8% to R53 009/Pt oz (F2019: R29 640/Pt oz), resulting in a cash margin per platinum ounce in excess of 40%.
The group achieved record sales revenue, record operating profit and record earnings before interest, tax, depreciation and amortisation (EBITDA) for the year. These record outcomes were achieved notwithstanding the impact of mine and production stoppages which occurred as a result of the COVID-19 induced Lockdown. Prior and up to the commencement of the Lockdown period, the group was on track to achieve record production from own operations during F2020.
However, the Lockdown resulting from COVID-19 and consequential production stoppages have been disruptive, and Northam’s proactive and positive response measures minimised the impact on production to an equivalent estimated loss of 108 685 4E oz.
All growth projects progressed well during F2020. Booysendal South has advanced into production ramp-up, Zondereinde Western extension is ahead of schedule and on reef development of Eland mine continued whilst simultaneously increasing mineable reserve.
Despite significant logistical hurdles associated with COVID-19, including border closures that made the distribution of refined metal challenging, the group maintained robust refined metal sales of 560 238 4E oz.
This highlights the strong relationships that we have developed and maintained with our industrial customer base over many years.
In addition to direct production and revenue losses associated with COVID-19, the group incurred once-off costs directly related to the COVID-19 pandemic and the Lockdown period of R977.2 million (the bulk of which relates to employee costs).
Total group capital expenditure reduced year on year to R2.4 billion as a result of capital intensive programs at Booysendal mine either having been completed or nearing completion and thus tapering down in terms of total annual expenditure.
R2.0 billion was incurred on expansionary capital expenditure and R382.2 million on sustaining capital expenditure. A decision to temporarily scale back on specific growth projects in the interest of liquidity preservation was made after the onset of COVID-19 and the concomitant Lockdown period.
However, the group remains committed to its strategy of developing low-cost, long-life assets in order to position itself at the lower end of the industry cost curve and the group envisages no lasting effects in this regard. In summary, whilst F2020 has been a challenging year in the face of the global COVID-19 pandemic and its wide-ranging knock-on effects, the company has performed well. Northam has efficiently managed the impact of the COVID-19 pandemic and has not wavered from its strategy of pursuing production growth and asset diversification.
