NORTHAM PLATINUM: margin pressures and lower 4E metal prices

Johannesburg – As published on 20 September 2021, Northam Holdings was introduced as the new holding company for the group. Consequently, Northam Platinum became a subsidiary of Northam Holdings, thereby ensuring the seamless continuation of the group’s listing.

Northam Holdings expects to deliver satisfactory financial results for F2022, despite significant inflationary pressures and a decrease in the average 4E dollar price achieved.

Notwithstanding the array of challenges faced in F2022, Northam operations collectively achieved a steady increase in production and its growth projects remain on track.

A key feature has been the difficult operational environments at the Zondereinde and Booysendal mines. During the first half of F2022, Zondereinde tragically suffered two mining-related fatalities, together with increased medical absences relating to the COVID-19 pandemic.

Booysendal was affected by regional community unrest, which impacted the entire eastern Bushveld region, throughout the financial year, which resulted in lost production shifts, and was also affected by the intersection of a lower grade reef package in the upper southern portion of the North UG2 mine, which led to a decrease in concentrator feed grade. These challenges and external events negatively impacted the group’s metal production and unit cash costs during the period.
Despite the aforementioned challenges, the group’s equivalent refined metal from own operations increased to 716 488 oz 4E (F2021: 690 867 oz 4E). Zondereinde recorded improved production during the second half of F2022, whilst production growth from Booysendal was lower than forecast as a result of lower grade mined at Booysendal North.

In respect of Northam’s current expansionary projects, development of the Western extension at Zondereinde has progressed well; Booysendal has made good progress on South mine, whilst recording 7 million fatality-free shifts and remaining fatality free since inception; and Eland continues its ramp-up, with the addition of the recently acquired Maroelabult section adding considerable synergistic benefits.
Group unit cash costs per equivalent refined platinum ounce increased by 18.9% to R34 069/Pt oz (F2021: R28 662/Pt oz) on the back of cost increases at all of the operations. Cash costs per equivalent refined platinum ounce increased by 14.8% at Zondereinde to R34 828/Pt oz (F2021: R30 350/Pt oz), 21.9% at Booysendal to R25 321/Pt oz (F2021: R20 780/Pt oz), and 29.5% at Eland to R55 594/Pt oz (F2021: R42 928/Pt oz).

These increases were primarily driven by (i) above-inflationary increases in chemicals, steel components, emulsions and fuel, (ii) an increase in the number of employees in service as the group continues to grow the labour complement to enable the planned expanded production profile together with the negotiated wage increase for our employees and (iii) lower concentrator feed grades from the Booysendal North UG2 mine.

A large portion of Eland mine’s production is currently being derived from surface sources in order to ensure appropriate start-up volume throughput levels and purchased at prevailing metal prices. This impacted the unit cash cost for Eland, as well as that of the group.

The cost of purchased concentrates and recycling material decreased by 9.4%, despite 4E volumes purchased increasing by 11.2%. This was a result of changes in the ruling commodity prices as well as the prill split of the purchased material, which contained more platinum and rhodium and less palladium in the year under review, compared to the previous corresponding period.