+34After spending R5.6bn buying Zambezi shares, the PGM miner raises the prospect of alternative returns to shareholders
Northam Platinum is considering options to reward shareholders after reporting record annual financial results despite missing all-time high production because of the severe impact of SA’s Covid-19 lockdown.
Northam lost 108,685oz of platinum, palladium, rhodium and gold production during its 2020 financial year to end-June to the lockdown ordered by the government at the end of March. Mining was one of the few sectors allowed a gradual return to full production from June. Higher rand prices for the metals Northam produces — notably palladium and rhodium increasing by 52% and 170% respectively during the 12 months — meant revenue shot to a record high of R17.8bn from R10.6bn a year earlier.“Prior to the onset of the Covid-19 pandemic, the group was on track for a record production year,” said CEO Paul Dunne. Year on year, refined metal output was nearly steady, falling by slightly less than 1% to 515,370oz for the four metals. Of the worst affected operations, was Zondereinde, which is the world’s deepest platinum mine, and where output fell by a fifth against targeted production. The mechanised operations at Booysendal and Eland were less disrupted.Production for 2021 is pegged at 670,000oz of the four metals. For investors, Northam raised the prospect of dividends or some other form of return, having spent R5.6bn buying JSE-listed Zambezi preference shares, which underpin its 2015 empowerment deal, and reducing its financial exposure when the shares are redeemed in 2025. “With the acquisition of 46.7% of all Zambezi preference shares, consideration can now be given to other mechanisms for returning value to shareholders in the future,” Dunne said.“Due to the significant amounts of capital incurred in the execution of the group’s growth strategy, this year marks the first time since 2015 that the group has generated meaningful free cash flow after funding capital expenditure,” Dunne said. Northam has spent R12.9bn since launching its growth strategy in 2015 to reach annual output of 1-million ounces of the four metals. Its net debt of R3.3bn gave it a net debt to earnings before interest, tax, depreciation and amortisation ratio of 0.56 times.Northam reiterated its medium-term production target remained 1-million ounces of platinum, palladium, rhodium and gold, but that there could be a delay. “A temporary pullback of specific capital growth projects in these uncertain times will result in a short delay to achieving this target,” Dunne said. “The extent of this delay depends upon the extent and nature of disruption related to Covid-19, which has an impact on both demand and primary supply,” he said.
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