Wrap Text
Reviewed Preliminary results for the year ended 30 June 2014
Northam Platinum Limited
(Incorporated in the Republic of South Africa)
(Registration number 1977/003282/06)
Share code: NHM, ISIN: ZAE 000030912, Debt issuer code: NHMI
("Northam" or "the group")
REVIEWED PRELIMINARY RESULTS FOR THE YEAR ENDED 30 JUNE 2014
KEY FEATURES OF THE YEAR
- Booysendal ramp-up continues
- R1 billion successfully raised to strengthen balance sheet
- Smelter recommissioned in October 2013 following rebuild
- Wage deal of 7.5% to 9.5% reached after Zondereinde strike
- Change in executive leadership
CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND
OTHER COMPREHENSIVE INCOME
Reviewed Audited
year ended year ended
Change 30 June 2014 30 June 2013
% R'000 R'000
Sales revenue 20.8 5 339 397 4 420 977
Cost of sales 38.4 5 277 915 3 813 301
Operating costs 25.1 3 536 002 2 826 094
Concentrates purchased 39.7 918 605 657 540
Refining and other costs 65.3 267 117 161 591
Depreciation and write-offs 90.0 445 875 234 690
Change in metal inventories 110 316 (66 614)
Operating profit (89.9) 61 482 607 676
Share of earnings from associate and joint venture (74.9) 3 464 13 783
Investment revenue 79.4 59 963 33 434
Finance charges 881.4 (176 124) (17 946)
Sundry expenditure (5.4) (26 724) (28 254)
Sundry income 40.0 123 735 88 362
Profit before tax (93.4) 45 796 697 055
Taxation 26 199 169 054
Profit for the year (96.3) 19 597 528 001
Other comprehensive income (1 327) (4 145)
Items that will not be subsequently reclassified to profit
and loss 418 –
Share of associate's remeasurements of post-employment
benefit obligations 418 –
Items that may be subsequently reclassified to profit or loss (1 745) (4 145)
Share of associate's exchange differences on translating
foreign operations (1 738) (4 105)
Share of associate's fair value adjustment on available-for-sale
financial assets (7) (40)
Total comprehensive income for the year 18 270 523 856
Profit attributable to:
Owners of the parent 9 486 504 907
Non-controlling interests 10 111 23 094
Profit for the year 19 597 528 001
Total comprehensive income attributable to:
Owners of the parent 8 159 500 762
Non-controlling interests 10 111 23 094
Total comprehensive income for the year 18 270 523 856
Reconciliation of headline earnings and per share information
Profit attributable to shareholders 9 486 504 907
Loss/(profit) on sale of property, plant and equipment 1 118 (1 769)
Profit on sale of associate's property, plant and equipment (2 347) (2 102)
Profit on sale of associate's listed investment – (16)
Property, plant and equipment written-off – 33 000
Insurance claim – (4 318)
Tax effect on above 344 (7 520)
Headline earnings (98.4) 8 601 522 182
Earnings per share – cents (98.2) 2.4 132.0
Fully diluted earnings per share – cents (98.2) 2.4 132.0
Headline earnings per share – cents (98.4) 2.2 136.5
Fully diluted headline earnings per share – cents (98.4) 2.2 136.5
Dividends per share – cents – – –
Weighted average number of shares in issue 390 969 652 382 560 902
Fully diluted number of shares in issue 390 969 652 382 560 902
Number of shares in issue 397 586 090 382 586 090
CONSOLIDATED STATEMENT OF CASH FLOWS
Reviewed Audited
30 June 2014 30 June 2013
R'000 R'000
Cash flows from operating activites 885 490 524 200
Profit before taxation 45 796 697 055
Depreciation and write-offs 445 875 234 690
Change in working capital 270 562 (281 104)
Change in short-term provisions 14 285 8 204
Share-based payment expense 61 228 (2 290)
Taxation paid (131 392) (139 303)
Interest paid 176 124 123 703
Other 3 012 (116 755)
Cash flows utilised in investing activities (766 056) (1 703 238)
Property, plant, equipment and mining properties and mineral reserves
Additions to maintain operations (358 200) (363 914)
Additions to expand operations (539 645) (1 383 200)
Proceeds from sale of development ounces 137 687 –
Disposal proceeds 3 398 4 497
Investment in associate – cash distributed 69 16 740
Land and township development
Additions (2 825) (17 683)
Disposals proceeds 8 174 45 979
Increase in investments held by Northam Platinum Restoration Trust Fund (5 521) (5 259)
Increase in Environmental Guarantee Investment (8 617) (6 687)
Increase in Buttonshope Conservancy Trust (576) (351)
Acquisition of subsidiary net of cash acquired – 6 416
Dividends received – 224
Cash flows generated from financing activities 248 042 1 372 638
Proceeds from issue of shares 579 033 2 007
Acquisition of non-controlling interest (10 000) –
Finance charges (176 124) (123 703)
Dividends paid (11 066) (21 747)
(Decrease)/increase in long-term loans (3 801) 16 081
Revolving credit facilities (repaid)/drawn-down (250 000) 250 000
Domestic medium-term notes issued 120 000 1 250 000
Increase in cash and cash equivalents 367 476 193 600
Cash and cash equivalents at beginning of the year 298 580 104 980
Cash and cash equivalents at end of the year 666 056 298 580
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
Reviewed Audited
30 June 2014 30 June 2013
R'000 R'000
ASSETS
Non-current assets
Property, plant and equipment 6 287 062 6 222 226
Mining properties and mineral resources 5 653 328 5 708 825
Interest in associates and joint venture 496 509 495 498
Unlisted investment 6 6
Land and township development 10 204 15 553
Long-term receivables 94 047 87 400
Investments held by Northam Platinum Restoration Trust Fund 46 468 40 948
Environmental Guarantee Investment 51 024 42 407
Buttonshope Conservancy Trust 10 702 10 126
Deferred tax asset 96 074 –
12 745 424 12 622 989
Current assets 1 995 572 1 734 675
Inventories 1 076 853 878 530
Trade and other receivables 244 672 547 920
Cash and cash equivalents 666 174 298 580
Tax receivable 7 873 9 645
Total assets 14 740 996 14 357 664
EQUITY AND LIABILITIES
Equity
Stated capital/Share capital and share premium 9 178 688 8 599 655
Retained earnings 2 223 135 2 220 477
Other comprehensive income from associate (15 340) (14 013)
Equity attributable to owners of the parent 11 386 483 10 806 119
Non-controlling interests 5 389 9 516
Total equity 11 391 872 10 815 635
Non-current liabilities 2 157 462 1 997 826
Deferred tax liability 502 097 476 053
Long-term provisions 142 709 133 267
Long-term loans 43 763 47 564
Long-term share-based payment liability 98 893 90 942
Domestic medium term notes 1 370 000 1 250 000
Current liabilities 1 191 662 1 544 203
Current portion of long-term loans 3 801 3 801
Short-term share-based payment liability 69 942 16 665
Revolving credit facilities – 250 000
Bank overdraft 118 –
Tax payable 121 481 156 963
Trade and other payables 877 365 1 012 104
Short-term provisions 118 955 104 670
Total equity and liabilities 14 740 996 14 357 664
Net asset value – cents per share 2 865 2 824
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
Other
compre-
Equity hensive Non-
compens- income control-
Share Share Stated ation Retained from ling Total
capital premium capital reserve earnings associate interests equity
R'000 R'000 R'000 R'000 R'000 R'000 R'000 R'000
Balance at 1 July 2012 3 825 8 593 823 – 202 634 1 622 833 (9 868) – 10 413 247
Share based payment expense – – – 13 807 – – – 13 807
Transfer of equity
compensation reserve to
share-based payment liability – – – (123 704) – – – (123 704)
Transfer of equity
compensation reserve to
retained earnings – – – (92 737) 92 737 – – –
Non-controlling interest
arising on a business
combination – – – – – – 8 169 8 169
Total comprehensive income
for the year – – – – 504 907 (4 145) 23 094 523 856
Profit for the year – – – – 504 907 – 23 094 528 001
Other comprehensive income
for the year – – – – – (4 145) – (4 145)
Dividends declared # – – – – – – (21 747) (21 747)
Issue of new shares 1 2 006 – – – – – 2 007
Transfer of share capital and
share premium to stated
capital (3 826) (8 595 829) 8 599 655 – – – – –
Balance at 1 July 2013 – – 8 599 655 – 2 220 477 (14 013) 9 516 10 815 635
Acquisition of non-controlling
interest – – – – (6 828) – (3 172) (10 000)
Total comprehensive income
for the year – – – – 9 486 (1 327) 10 111 18 270
Profit for the year – – – – 9 486 – 10 111 19 597
Other comprehensive income
for the year – – – – – (1 327) – (1 327)
Dividends declared # – – – – – – (11 066) (11 066)
Issue of new shares – – 579 033 – – – – 579 033
Balance at 30 June 2014 – – 9 178 688 – 2 223 135 (15 340) 5 389 11 391 872
(#) Non-controlling interest's portion of dividends declared by entities within the Northam group.
SEGMENTAL INFORMATION
Total sales revenue Operating contribution
Reviewed Audited Reviewed Audited
30 June 2014 30 June 2013 30 June 2014 30 June 2013
R'000 R'000 R'000 R'000
Zondereinde operations* 4 383 194 4 420 977 189 878 607 676
Booysendal operations 956 203 – (128 396) –
Total 5 339 397 4 420 977 61 482 607 676
Revenue relates to external customers of the group's metal production.
* Including purchased metals
Segment assets Segment liabilities
Reviewed Audited Reviewed Audited
30 June 2014 30 June 2013 30 June 2014 30 June 2013
R'000 R'000 R'000 R'000
Zondereinde operations 4 652 033 4 439 112 3 275 718 3 369 067
Booysendal operations 10 088 963 9 918 552 73 406 172 962
Total 14 740 996 14 357 664 3 349 124 3 542 029
OTHER SEGMENT INFORMATION
Capital expenditure
Reviewed Audited
30 June 2014 30 June 2013
R'000 R'000
Zondereinde operations 361 025 381 597
Booysendal operations 539 645 1 383 200
Total 900 670 1 764 797
FAIR VALUE DISCLOSURES
The following is an analysis of the financial instruments that are measured subsequent to initial recognition at fair value.
They are grouped into levels 1 to 3 based on the extent to which the fair value is observable.
The levels are classified as follows:
Level 1: fair value is based on quoted prices in active markets for identical financial assets or liabilities.
Level 2: fair value is determined using directly observable inputs other than Level 1 inputs.
Level 3: fair value is determined on inputs not based on observable market data.
Fair value measurement at 30 June 2014
Reviewed
30 June 2014 Level 1 Level 2 Level 3
Description R'000 R'000 R'000 R'000
Financial assets through profit and loss
Investments held by Northam Platinum
Restoration Trust Fund 46 468 – 46 468 –
Environmental Guarantee Investment 51 024 – 51 024 –
Buttonshope Conservancy Trust 10 702 – 10 702 –
There were no transfers between levels during the year.
Valuation techniques used to derive level 2 fair values
The estimated net fair values of financial instruments through profit and loss have been determined using available market
information and appropriate valuation methodologies. This value is not necessarily indicative of the amounts that the group
could realise in the normal course of business. The significant inputs include market interest rates of between 5 and 8% and
have been determined using a discounted cash flow valuation technique.
CAPITAL COMMITMENTS
Reviewed Audited
30 June 2014 30 June 2013
R'000 R'000
Booysendal mine
Authorised but not contracted 338 204 54 801
Contracted 145 186 477 281
Total 483 390 532 082
Zondereinde mine
Authorised but not contracted 172 316 223 071
Contracted 154 060 127 085
Total 326 376 350 156
OTHER COMMITMENTS
Information Technology – outsource service provider
Due within one year 10 293 9 710
Due within two to five years 21 460 31 753
Operating lease rentals – office equipment
Due within one year 1 947 1 117
Due within two to five years 1 004 915
Operating lease rentals – premises
Due within one year 4 585 3 116
Due within two to five years 13 588 11 098
More than five years 5 959 11 900
Employee housing development
Authorised 4 800 4 000
Bank guarantees issued 78 736 73 210
These commitments will be funded from a combination of internal retentions and debt.
ZONDEREINDE MINE – OPERATING AND FINANCIAL STATISTICS
Change % 30 June 2014 30 June 2013
Operating statistics*
Merensky
Development metres (2.3) 6 454 6 604
Square metres mined (12.5) 152 479 174 349
Tonnes milled (16.1) 803 736 958 211
Head grade – g/ton (3PGEs + Au) – 5.8 5.8
Available ore reserves – months 20 20
UG2
Development metres (22.9) 1 230 1 596
Square metres mined (14.0) 149 400 173 635
Tonnes milled (20.5) 920 420 1 157 501
Head grade – g/ton (3PGEs + Au) 2.4 4.3 4.2
Available ore reserves – months 24 24
Combined
Development metres (6.3) 7 684 8 200
Square metres mined (13.3) 301 879 347 984
Tonnes milled (18.5) 1 724 156 2 115 712
Head grade – g/ton (3PGEs + Au) 2.0 5.0 4.9
Financial statistics*
Precious metals in concentrates produced kg (18.9) 7 331 9 041
Precious metals in concentrates purchased kg 20.9 1 975 1 633
Precious metals sold kg (8.2) 9 827 10 704
Average price realised R/kg 9.6 400 381 365 217
Operating costs R/kg 20.9 395 629 327 331(#)
Cash costs R/kg 18.8 358 891 302 048(#)
Precious metals in concentrates produced oz (18.9) 235 693 290 675
Precious metals in concentrates purchased oz 20.9 63 488 52 502
Precious metals sold oz (8.2) 315 941 344 128
Average price realised US$/oz (6.1) 1 198 1 276
Operating costs US$/oz 3.0 1 189 1 154(#)
Cash costs US$/oz 1.2 1 078 1 065(#)
Average exchange rate realised US$1.00 = R 17.4 10.35 8.82
Operating costs per tonne milled R/tonne 19.0 1 682 1 414(#)
Cash costs per tonne milled R/tonne 18.2 1 526 1 291(#)
(*)Not audited or reviewed
(#)Restated
BOOYSENDAL MINE – OPERATING AND FINANCIAL STATISTICS
Change % 30 June 2014 30 June 2013
Operating statistics*
UG2
Tonnes mined – 1 233 089 –
Tonnes milled – 1 517 109 –
Head grade – g/ton (3PGEs + Au) – 2.6 –
Financial statistics*
Precious metals in concentrates produced kg – 2 882 –
Precious metals sold kg – 2 503 –
Average price realised R/kg – 398 710 –
Operating costs R/kg – 361 902 –
Cash costs R/kg – 277 308 –
Precious metals in concentrates produced oz – 92 668 –
Precious metals sold oz – 80 476 –
Average price realised US$/oz – 1 186 –
Operating costs US$/oz – 1 087 –
Cash costs US$/oz – 833 –
Average exchange rate realised US$1.00 = R – 10.35 –
Operating costs per tonne milled R/tonne – 688 –
Cash costs per tonne milled R/tonne – 527 –
(*)Not audited or reviewed
COMMENTARY ON THE RESULTS
My first review to shareholders and stakeholders comes after having had a fair period to establish that this company, its
people and its assets, are in good shape. On behalf of the board, I must extend the most sincere thanks to my predecessor;
Glyn Lewis's contribution to this company, its shareholders and stakeholders is immense. The construction and successful
commissioning of Booysendal, the company's second PGM mine on the eastern limb now in full ramp-up stage, has completely
transformed Northam, adding to its production profile on the one hand, reducing the company's operational risk on the other
and enhancing its optionality.
F2014 AND THE OPERATING ENVIRONMENT
The last two years have been challenging for the industry in many respects. The six-week strike at Zondereinde, from
3 November 2013 to 21 January 2014, could be regarded as a harbinger of what was to follow in the rest of the industry.
At the operations we need to be alive to the potential for inter-union conflict. I have, to date, been encouraged by management's
approach – which is to increase and intensify the engagement process with the unions and to deal with any issues which
could be amplified, taken out of context, and used as a rationale for industrial action. I am also confident that the unions
will respect the two-year wage agreement we reached earlier this calendar year. This agreement, which is applicable from
1 July 2013, will remain in place until June 2015. Negotiations for F2016 are expected to begin in April 2015. Any further
industrial action in the near to medium term will have a severely damaging impact on the company, on the PGM sector as a
whole, and will further harm South Africa's rankings as an investment destination.
Our adherence to Mining Charter requirements are being scrutinised internally and externally – and we have flagged areas
which need an accelerated and intensified approach. Our housing and accommodation strategy has successfully resulted in the
sale of 359 housing units to new home owners at Mojuteng near Zondereinde. An additional 29 stands are being prepared for
housing construction for the benefit of employees. We have also converted from the current hostel accommodation and built
1 640 employee single units (including units for contractors). In spite of these successes, we are conscious that the Mining
Charter targets are beyond our reach for this year. The accommodation and home ownership strategy is one that is currently
being reviewed and accelerated.
PERFORMANCE 2014
Financial performance
Taking into account the current operating environment, Northam's results for F2014 were predictably lower compared to
F2013. Despite lower production from the Zondereinde mine, sales volumes were supplemented by a contribution from the
Booysendal mine for the first time and also from a release of inventory which had built up during the smelter rebuild at the
beginning of the financial year resulting in sales for the group of 12 330kg (3PGE+Au) or 396 417oz.
The higher sales volumes, combined with the effects of the much weaker ZAR/USD exchange rate year on year (F2014: R10.35/US$;
F2013: R8.82/US$) contributed to sales revenues of R5.3 billion for the group.
Platinum group metal sales from Zondereinde mine fell by 8.2% to 9 872kg (F2013: 10 704kg), while Booysendal contributed
towards metal sales for the first time with a total of 2 503kg.
The average basket price for Zondereinde mine's metals released was 9.6% higher in F2014 at R400 381/kg (F2013: R365 217/kg),
while Booysendal mine's platinum group metal sales achieved an average price of R398 710/kg. The improvement in the basket
prices is attributable to the weakening of the rand rather than an improvement in the average US dollar prices of platinum
group metals, which were 6.1% lower for the group at US$1 198/oz (3PGE+Au) (F2013: US$1 276/oz).
The 38.4% increase in group cost of sales to R5.3 billion (F2013: R3.8 billion) is as a result of a combination of increases in
operating costs, purchased concentrates, refining and related costs and amortisation. Operating costs increased by 25.1% to
R3.5 billion (F2013: R2.8 billion), owing to Booysendal mine's contribution to group costs, whilst concentrate purchased rose
by 39.7% to R918.6 million (F2013: R657.5 million), on the back of increased volumes of purchased concentrates from a third
party during the strike period. At Zondereinde mine the quantity of concentrates purchased increased by 20.9% to R1 975kg
(F2013: R1 633kg).
Refining and related costs rose significantly by 65.3% to R267.1 million (F2013: R161.6 million) owing to increased volumes
emanating from Booysendal mine as well as toll treatment charges incurred during the period during which the Zondereinde
smelting complex was being rebuilt following the smelter run-out in May 2013. As the new Booysendal mine is now
operational, the substantial 90.0% increase in amortisation charges to R445.9 million (F2013: R234.7 million) results from
first time amortisation charges on Booysendal mine's property, plant and equipment as well as mining properties and mineral
resources. Cost of sales in F2014 also incorporates a 21.2% increase in metal inventories during the year. This change in metal
inventories amounts to an increase of R110.3 million (F2013: R66.6 million decrease in inventories).
The operating profit of the group fell by 89.9% to R61.5 million (F2013: R607.7 million) mainly as a result of high increases in
the components making up the cost of sales. Consequently, the operating margin fell to 1.2% compared to 13.8% in F2013.
Investment revenues were 79.4% higher, at R60.0 million on the back of higher average cash balances resulting from the
group's fund raising activities in F2014 and lower capital expenditure as the construction of Booysendal mine nears an end.
Finance charges increased significantly to R176.1 million (F2013: R17.9 million) as the group utilised the domestic medium
term note financing facilities and the revolving credit facilities more actively during F2014 relative to F2013 and also because
finance charges relating to the Booysendal development were capitalised as borrowing costs during F2013. Sundry income
was 40.0% higher at R123.7 million owing to increased foreign exchange gains resulting from the weakening rand against
the US dollar during F2014.
The group net taxation charge of R26.2 million (F2013: R169.1 million) was lower owing to the decline in profit before tax
achieved in F2014. A lower total comprehensive income of R18.3 million has been incurred in the current year, compared to
R523.9 million in F2013, largely as a consequence of the strike at Zondereinde mine which resulted in lower revenues, as well
as costs associated with the new Booysendal mine which is still ramping up, achieving approximately 50% of steady state
production as at 30 June 2014.
Cash flows from operating activities improved by 68.9% to R885.5 million (F2013: R524.2 million) owing to higher sales
revenues achieved by the group in F2014 and lower working capital requirements.
Cash flows utilised in investing activities decreased significantly from R1.7 billion in F2013 to R766.1 million in F2014, on the
back of a significant decline in capital expenditure at Booysendal mine which is now fully commissioned. Revenue relating
to the sale of development ounces of R137.7 million were offset against these cash outflows in F2014, consequently further
reducing cash flows utilised in investing activities.
Cash flows generated from financing activities also fell significantly by 81.9% to R248.0 million (F2013: R1.4 billion)
mainly as a result of the relatively lower quantum of finance raised in F2014, being net proceeds from the issue of shares
of R579.0 million and also the R120 million raised from the domestic medium term notes programme, compared to the
R1.25 billion raised in F2013.
Financing arrangements
The group successfully raised a total of R1 billion in additional cash and financing facilities through a R600 million claw back
rights offer underwritten by Coronation Asset Management Proprietary Limited, and a R400 million additional RCF from
Nedbank Limited, which is only available until March 2015. R120 million was also raised through a tap issue on the domestic
medium term notes programme during the year. Certain covenant conditions have been relaxed until December 2014.
Zondereinde mine – safety
There were no fatalities during the year under review. The total number of injuries recorded was lower year on year primarily
as a result of substantially fewer shifts worked owing to industrial action. After the conclusion of the strike, safety personnel, in
consultation with other service departments, assisted mining crews to ensure that workplaces which had not been operational
for the duration of the strike were subjected to thorough risk assessments. Risks were duly scrutinised and recorded, and
remedial action plans were prioritised and executed.
The 'making safe' of workplaces was the most urgent priority at the start-up of operations after 21 January 2014. Safety
officers intensified on-the-job training activities and management carried out due diligence in declaring working areas safe.
Injury rates for the year, however, regressed slightly. Management and employees continue to work together and considerable
efforts have been made to reduce the quantum and severity of injuries on the mine.
The lost time injury incidence rate (LTIIR) for the year was 1.70 per 200 000 hours worked (F2013: 1.50). The reportable injury
incidence rate (RIIR) was 0.86 per 200 000 hours worked (F2013: 0.83).
Zondereinde mine – operating performance
Zondereinde mine's operating performance was adversely impacted by the 11 week strike, which began on 3 November 2013
and ended on 21 January 2014, resulting in the combined tonnes milled declining by 18.5% to 1 724 156 tonnes (F2013:
2 115 712 tonnes). Merensky reef tonnes milled were 803 736 tonnes (F2013: 958 211 tonnes) at a head grade of 5.8g/t
(3PGE+Au) and the UG2 reef contributed 920 420 tonnes (F2013: 1 157 501 tonnes) at a head grade of 4.3g/t (3PGE+Au).
This resulted in a combined head grade of 5.0g/t. The available ore reserves of the Merensky and UG2 reefs are estimated at
20 months and 24 months respectively.
Total operating costs were R2.7 billion compared to R2.8 billion in F2013, a 2.5% decrease. Metals in concentrate
production fell by 18.9% to 7 331kg (F2013: 9 041kg), while purchased metals in concentrate increased by 20.9% to
1 975kg (F2013: 1 633kg).
The lower production volumes had a negative impact on costs with unit operating and cash costs attributable to mining and
processing Merensky and UG2 ore increasing by 19.0% to R1 682 per tonne (F2013: R1 414 per tonne) and by 18.2% to
R1 526 per tonne (F2013: R1 291 per tonne) respectively.
The smelter rebuild was completed at the end of September as planned, and successfully recommissioned thereafter
at a cost of R54.0 million. The facility is operating normally. Progress on ore reserve development in the north west
quadrant of the mine and the deepening project was curtailed during the strike. Following a slow restart, these activities
are progressing satisfactorily.
Zondereinde mine – capital expenditure
Total capital expenditure in F2014 was R351.5 million (F2013: R363.9 million). This included R54.0 million for the smelter
rebuild. Capital expenditure is estimated to be R331.2 million in F2015.
Booysendal mine – safety
As a relatively shallow and mechanised mine, it was anticipated that Booysendal should have lower injury rates compared to
conventional deep mines, and this has proved true during F2014. The LTIIR for the year was 0.27 per 200 000 hours worked
(F2013: 0.53). The RIIR was 0.21 per 200 000 hours worked (F2013: 0.33). There were no safety-related work stoppages
during the year.
Booysendal mine – operating performance
The mine continues to ramp up to full production. Only UG2 ore is produced at Booysendal and 1 517 109 tonnes were milled
in F2014 at a head grade of 2.6g/t (3PGE+Au), producing 2 882kg of metals in concentrate.
The mine's operating cash costs were R688 and R527 per tonne milled respectively. This is not a realistic reflection of the
performance of Booysendal as the current year's unit costs were lower owing to the processing of the pre-production stockpile.
More realistic unit costs are expected as the mine ramps up to steady state production, which is expected by October 2015.
Booysendal mine – capital expenditure
Capital expenditure in F2014 was R539.6 million (F2013: R1.4 billion), with the significant decrease owing to the near-
completion of the construction of the mine which began production on 1 July 2013. Forecast capital expenditure in F2015
is expected to be R483.4 million of which R78.4 million will be allocated to routine capital, and of the R405 million project
capital, R50 million is to be spent on a project to investigate the feasibility of mining Merensky ore at Booysendal.
The total capital expenditure for the development of Booysendal mine since inception is expected to be R4.9 billion by the end
of F2015. The original capital budget for Booysendal was R3.9 billion in June 2010 terms.
BLACK ECONOMIC EMPOWERMENT
The equity shortfall in Northam's empowerment status has been a matter of concern for a considerable period. To this
end we have continued to progress our proposed empowerment transaction, balancing the needs of our current
shareholders with the Department of Mineral Resources requirements to bolster Northam's empowerment status.
A successful conclusion of the proposed transaction will enable Northam to pursue its strategic ambitions.
STRATEGIC REGENERATION FOR FUTURE SUSTAINABILITY
One of the major features of the current economic environment, and of the PGM markets in particular, is the failure of the
markets to react to the supply shortfalls occasioned by the strike in South Africa, giving rise to the postulation that above-
ground stocks have comfortably satisfied demand since the 2008 financial crisis. The research we have available to us suggests
that we are unlikely to see a more marked and sustained recovery in the platinum price until 2018 and beyond, when
significant deficits in platinum supply will start manifesting. For us at Northam now the challenge is to position the company
favourably in order to draw substantial benefit from a turn in market conditions, which for platinum is anticipated to turn in
2018, while we are already seeing some movement in palladium and rhodium prices.
The labour relations climate in the sector, and indeed the country, remains fraught, and we are already seeing the early
signs of industry restructuring. With these opportunities in the offing we have to ensure that we are optimally positioned
and strategically fit to act purposefully and swiftly. I have referred previously to the imperative for the restoration of our
empowerment status, the acceleration of a number of Mining Charter initiatives including the housing and accommodation
strategy, and the perceived lack of a social wage, all of which remain critical elements of our licence to operate in the future.
In anticipation of any opportunities arising, we have embarked on a strategic review of the business – an exercise with clear
terms of reference and limited life span. This process is being managed by a small and lean, but extremely proficient internal
team, supplemented by an external consultancy with specialist industry knowledge. Our approach is two-pronged, but runs in
parallel lines, with an internal operational focus, and a broader external business strategy.
Operational optimisation
Given the considerable infrastructural footprint at Zondereinde, our focus there will be on increasing the current 15 year life of
mine through prioritising the deepening project, further exploitation of the UG2 orebody and improving the process plant to
deal with a higher UG2 ratio, while also improving the Zondereinde operation's position on the cost curve.
At Booysendal we need to keep our focus on the ramp-up, with full production scheduled for October 2015, along with
improving the metallurgical recoveries to 85%; also, given the size of the Booysendal resource we need to evaluate the
opportunities it poses for growth. In terms of processing and refining, Northam's strategic advantage has perhaps not always
been fully recognised and we will be exploring its capacity and capability in order to further reduce any risks.
Strategic objectives
In terms of the strategic review we have put in place, we will look towards capitalising on any restructuring in the sector,
and have put together a four-stage framework which will take account of contiguous, non-contiguous and global expansion
opportunities in pursuit of reaching an aspirational target of 1 million ounces (3PGE+Au) by 2020. The process entails a
thorough sifting of PGM opportunities in order to come up with a priority list of expansion possibilities, both domestically and
globally, and to recalibrate the business based on the presumption of much higher metal prices by 2018.
Phase One and Two: Entails the identification of development aspects within the life-of-mine plan; evaluating the company's
projected capacity to finance expansion projects; and the economic evaluation of various expansion opportunities in close
contiguity to the Zondereinde and Booysendal operations.
Phase Three and Four: In parallel, other non-contiguous and global expansion opportunities within the PGM sector will be
assessed for growth. These targets are being identified by way of a unique set of weighted qualitative criteria to suit our
strategic objectives.
PROSPECTS*
Social and economic uncertainty is likely to continue to influence the fortunes of the platinum industry in the near future. Barring
any disruptions to Northam's operations in F2015 and F2016 Zondereinde mine is expected to continue in steady state production.
The Booysendal mine is anticipated to reach steady state production by October 2015. The stable financial performance of
the group therefore is largely dependent on improved industrial relations, improved demand for platinum group metals in the
global economy, (which could result in higher US dollar metal prices) achieving production targets and benign cost inflation.
A weakening R/US dollar exchange rate as well as above average increases in administered prices such as Eskom's power
tariffs pose a risk to cost inflation.
* Information in this paragraph has not been reviewed by the group's auditors
PA Dunne
Chief executive officer
AUDITOR'S REVIEW
The financial results of the group have been reviewed under the supervision of Mr M Herbst CA (SA), registered auditor of
Ernst & Young Inc., the group's auditors. A copy of their unmodified review report is available for inspection at Northam's
registered office.
Accounting Policies – basis of preparation
The financial statements have been prepared on the historical cost basis, except for financial instruments that are stated at
fair value. These group preliminary financial statements have been prepared in accordance with the framework concepts and
the measurement and recognition requirements of the International Financial Reporting Standards (IFRS), its interpretations
issued by the IFRS Interpretations Committee, the SAICA Financial Reporting Guides as issued by the Accounting Practices
Committee, presentation and disclosure as required by IAS 34 – Interim Financial Reporting, the JSE Listing Requirements
and the requirements of the Companies Act of South Africa, with the exception of the adoption of the following amendments,
standards or interpretations with effect from 1 July 2013:
Standard Subject
IFRS 1 First time adoption of International Financial Reporting Standards – Government Loans (Amendment)
IFRS 1 First time adoption of International Financial Reporting Standards – Application of IFRS 1 for previous IFRS
reporters (Annual Improvements Project 2012)
IFRS 1 First time adoption of International Financial Reporting Standards – Borrowing costs capitalised under
previous GAAP (Annual Improvements Project 2012)
IFRS 10 Consolidated Financial Statements
IFRS 10 Consolidated Financial Statements – Transition guidance amendments (Amendment)
IFRS 11 Joint Arrangements
IFRS 12 Disclosure of Interests in Other Entities
IFRS 11 Joint Arrangements and Disclosure of Interests in Other Entities – Transition guidance amendments
and 12 (Amendment)
IFRS 13 Fair Value Measurement
IAS 16 Property, Plant and Equipment – Classification of servicing equipment (Annual Improvements
Project 2012)
IAS 19 Employee Benefits (Revised)
IAS 27 Consolidated and Separate Financial Statements – Reissued as IAS 27 Separate Financial Statements (as
amended in 2011)
IAS 28 Investments in Associates and Joint Ventures (Amendment)
IAS 32 Financial Instruments: Presentation – Tax effect of distributions (Annual Improvements Project 2012)
IFRS 7 Financial Instruments: Disclosures – Offsetting Financial Assets and Financial Liabilities (Amendment)
IAS 34 Interim Financial Reporting – Interim Financial Reporting and segment information for total assets and
liabilities (Annual Improvements Project 2012)
IFRIC 20 Stripping Costs in the Production Phase of a Surface Mine
The adoption of these amendments resulted in changes only in the way in which the group preliminary financial statements are
presented, as well as additional disclosures in the annual financial statements. They did not impact any amounts disclosed in
the preliminary consolidated statement of comprehensive income or preliminary consolidated statement of financial position.
COMMENTARY ON THE RESULTS CONTINUED
RELATED PARTIES
The group enters into various sale, purchase and lease transactions in the ordinary course of business with a large number of
entities, some of whom are related parties. All transactions covered in these results are concluded on an arm's length basis.
GOING CONCERN
Mining operations have a limited life by nature and their operations are dependent on, amongst other things, geological,
technical as well as economic factors such as demand volumes, commodity prices and exchange rates. The outlook for the
global economy remains uncertain and the labour relations, especially in the mining and related sectors in South Africa are
fragile. Although there are signs that the United States is emerging out of recession and the Eurozone economy has bottomed
out, the Chinese economic performance is still uncertain.
The volatile rate of exchange of the South African rand against the US dollar has weakened significantly recently. In addition
average PGM prices in US dollar terms seem to have bottomed out.
Management believes however that, assuming uninterrupted production and the availability of operational cash flows and
borrowing facilities, the group remains a going concern.
PREPARATION
These reviewed preliminary results have been prepared under the supervision of the chief financial officer, Mr AZ Khumalo CA (SA).
The preliminary results of the group will be published on Northam's website on Thursday, 14 August 2014.
EVENTS AFTER THE REPORTING PERIOD
There have been no significant events subsequent to 30 June 2014 which require adjustment or additional disclosure to these
interim financial annual results.
DIRECTORS
Ms NJ Dlamini (Dr) resigned as an independent non-executive director on 30 September 2013.
Mr PA Dunne was appointed a director and chief executive officer on 1 March 2014 in place of Mr GT Lewis who resigned as
a director and chief executive officer on the same day.
Mr JAK Cochrane's status changed from a non-executive director to that of an independent non-executive director.
DIVIDEND
Owing to the continued uncertainty prevailing in the mining industry and the continuing cash requirements at the Booysendal
mine for the ramp up, the board has resolved not to declare a dividend for F2014 (F2013: nil cents per share).
ON BEHALF OF THE BOARD
PL Zim PA Dunne
Chairman Chief executive officer
Johannesburg
12 August 2014
Directors
PL Zim (non-executive chairman), PA Dunne (chief executive officer) (British), AZ Khumalo
(chief financial officer), ME Beckett (British), CK Chabedi, JAK Cochrane (British),
R Havenstein, Ms TE Kgosi, and AR Martin.
Registered office
Block 1A, Albury Park, Magalieszicht Avenue, Dunkeld West, Johannesburg, 2196
PO Box 412694, Craighall, 2024, South Africa
Company secretary
Ms PB Beale
Transfer secretaries
Computershare Investor Services Proprietary Limited
70 Marshall Street, Johannesburg, 2001
PO Box 61051, Marshalltown, 2107, South Africa
Sponsor and debt sponsor
One Capital
17 Fricker Road, Illovo, 2196
PO Box 784573, Sandton, 2146, South Africa
These results are available on the Northam website at www.northam.co.za and at Northam's registered office.
14 August 2014
Date: 14/08/2014 08:06:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
The JSE does not, whether expressly, tacitly or implicitly, represent, warrant or in any way guarantee the truth, accuracy or completeness of
the information published on SENS. The JSE, their officers, employees and agents accept no liability for (or in respect of) any direct,
indirect, incidental or consequential loss or damage of any kind or nature, howsoever arising, from the use of SENS or the use of, or reliance on,
information disseminated through SENS.
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