Northam Platinum on Friday reported higher earnings as increased platinum group metal (PGM) prices lifted revenue, however, costs and capital spending also increased.
The results come days after Northam said it had received an unsolicited approach from a major South African PGM producer and would invite proposals from other credible interested parties as it considers potential transactions. Northam did not name the company behind the approach and said it had not made a decision to pursue any particular transaction.
Revenue for the year to end-June rose 64% to R54bn, while headline earnings increased to R12bn from R1.5bn. Profit for the year was R13.9bn, compared with R1.5bn in the previous year.
The increase in revenue was largely driven by higher platinum, rhodium and palladium prices, with chrome also contributing to revenue.
However, cost of sales increased to R39.9bn from R29.3bn and operating costs rose to R29bn from R24bn.
It produced record total equivalent refined PGM from its own operations of 938,754oz, up 4.4%. This takes the group within sight of its goal, which it set in 2015, of growing own production to 1-million ounces.
Chrome concentrate production increased 17.4% to a record 1.69-milllion tonnes.
Total metal sold rose by 8% to 1.087-million ounces.
The reported profit included several non-operating and one-off items. Northam received a one-off $66m payment from Heraeus Precious Metals relating to historical refining and interest.
Cash generated from operations increased to R17.6bn from R5.3bn, while cash flow from operating activities was R18.5bn, compared with R4.7bn in the previous year.
Northam also increased its minimum dividend payout policy to 40% of headline earnings from 25%. It declared a final dividend of 1,000c a share, taking the total dividend for the year to 1,700c a share, equivalent to 56.7% of headline earnings.
Capital spending was R5.9bn during the year, comprising expansionary and sustaining capital expenditure.
At Zondereinde, near Thabazimbi in Limpopo, the 3 shaft project came into operation in June. The mine also began receiving power from an 80MW solar facility during the year. The facility supplies the main shaft and smelter complex under a 20-year power purchase agreement.
Northam has estimated its renewable energy programme at R2.2bn over the next 24 months. At Eland, near Brits in North West, a hybrid power plant is being developed under an engineering, procurement and construction contract.
The company said an increase in PGM prices also resulted in a reversal of an impairment previously recognised against Eland. Northam reversed R2.5bn of the impairment after reassessing the operation using higher long-term commodity price assumptions.
The company also recognised a R1.4bn deferred tax asset relating to Eland after concluding it was probable the operation would generate sufficient taxable income to utilise the asset.
Northam had R15bn available under its domestic medium-term note programme, of which R11.1bn had been utilised at year-end. Its revolving credit and general banking facilities were undrawn. The revolving credit facility was increased to R15bn after year-end.
Northam said it had tested whether it could continue operating if commodity prices were 10% or 20% lower, and if spot prices remained at current levels for a prolonged period. It said it could respond to pressure on its finances by raising additional funding, refinancing debt, reducing or suspending dividends and cutting expansionary capital spending.
Business Day