Wrap Text
Report for the six months ended 31 December 2014
NORTHAM PLATINUM LIMITED
(Incorporated in the Republic of South Africa)
(Registration number 1977/003282/06)
Share code: NHM ISIN: ZAE000030912
Debt issuer code: NHMI
("Northam Platinum" or "the group")
REVIEWED INTERIM RESULTS
Report for the six months
ended 31 December 2014
KEY FEATURES
Booysendal ramp-up on track
Solid performance from Zondereinde
35% Empowerment post BEE transaction
Parallel capital raising to strengthen financial position
Expansion strategy crystallized
Unsettled labour climate
Reviewed Reviewed Audited
Six months Six months Year
ended ended ended
31 December 31 December 30 June
2014 2013 2014
% Change R000 R000 R000
INTERIM CONSOLIDATED STATEMENT OF PROFIT OR LOSS
AND OTHER COMPREHENSIVE INCOME
Sales revenue 32.7 3 040 539 2 291 183 5 339 397
Cost of sales 10.5 2 641 519 2 390 727 5 277 915
Operating costs 19.1 2 081 641 1 747 778 3 536 002
Concentrates purchased 9.6 265 783 242 478 918 605
Refining and other costs (37.8) 100 920 162 163 267 117
Depreciation and write-offs (6.3) 210 028 224 037 445 875
Change in metal inventories (218.1) (16 853) 14 271 110 316
Operating profit/(loss) 500.9 399 020 (99 544) 61 482
Share of earnings from associate and joint venture 326.7 13 459 3 154 3 464
Investment revenue (34.0) 18 335 27 762 59 963
Finance charges 22.8 (77 723) (100 639) (176 124)
Sundry expenditure (332.5) (44 489) (10 287) (26 724)
Sundry income 248.0 191 518 55 035 123 735
Profit/(loss) before tax 501.6 500 120 (124 519) 45 796
Taxation 143 808 (32 845) 26 199
Profit/(loss) for the period 488.7 356 312 (91 674) 19 597
Other comprehensive income (2 168) (996) (1 327)
Items that will not be subsequently
reclassified to profit or loss – – 418
Share of associate's remeasurements of post-
employment benefit obligations – – 418
Items that will be reclassified
subsequently to profit and loss (2 168) (996) (1 745)
Share of associate's exchange differences on
translating foreign operations (2 168) (989) (1 738)
Share of associate's fair value adjustment on
available-for-sale financial assets – (7) (7)
Total comprehensive income for the period 354 144 (92 670) 18 270
Profit/(loss) attributable to:
Owners of the parent 354 608 (96 252) 9 486
Non-controlling interests 1 704 4 578 10 111
Profit/(loss) for the period 356 312 (91 674) 19 597
Total comprehensive income attributable to:
Owners of the parent 352 440 (97 248) 8 159
Non-controlling interests 1 704 4 578 10 111
Total comprehensive income for the period 144 (92 670) 18 270
Reconciliation of headline earnings/(loss)
and per share information
Profit/(loss) attributable to shareholders 354 608 (96 252) 9 486
(Profit)/loss on sale of property, plant and equipment (643) 349 1 118
Profit on sale of associate's property, plant
and equipment (7 105) (13) (2 347)
Loss on impairment of investment in associate 8 644 – –
Tax effect on above (251) (94) 344
Headline earnings/(loss) 470.0 355 253 (96 010) 8 601
Earnings/(loss) per share - cents 456.8 89.2 (25.0) 2.4
Fully diluted earnings/(loss) per share - cents 458.2 89.2 (24.9) 2.4
Headline earnings/(loss) per share - cents 457.6 89.4 (25.0) 2.2
Fully diluted headline earnings/(loss) per share
- cents 460.5 89.4 (24.8) 2.2
Dividends per share - cents – – –
Weighted average number of shares in issue 397 586 090 384 461 090 390 969 652
Fully diluted number of shares in issue 397 586 090 387 026 914 390 969 652
Number of shares in issue 397 586 090 397 586 090 397 586 090
Reviewed Reviewed Audited
31 December 31 December 30 June
2014 2013 2014
R000 R000 R000
INTERIM CONSOLIDATED STATEMENT OF CASH FLOWS
Cash flows from operating activities 55 451 271 468 885 379
Profit/(loss) before taxation 500 120 (124 519) 45 796
Adjusted for the following non cash items:
Depreciation and write-offs 210 028 224 037 445 875
Change in provisions 15 226 14 217 14 285
Change in long-term receivables 2 355 – –
Interest paid 77 723 100 639 176 124
Movement in share based payment liability (29 000) – –
Other (3 669) (3 840) 3 049
Change in working capital (529 972) 54 965 270 414
Share-based payment expense (52 895) 65 125 61 228
Taxation paid (134 465) (59 156) (131 392)
Cash flows utilised in investing activities (352 196) (373 752) (765 945)
Property, plant, equipment, mining properties and
mineral reserves
Additions to maintain operations (160 484) (243 563) (358 200)
Additions to expand operations (191 899) (270 100) (539 645)
Proceeds relating to pre-production expenditure – 137 005 137 687
Disposal proceeds 2 451 1 716 3 508
Investment in associate - cash distributed – 34 69
Land and township development
Additions (1 407) (1 539) (2 825)
Disposals proceeds 2 089 5 867 8 174
Increase in investments held by Northam Platinum
Restoration Trust Fund (929) (1 251) (5 520)
Increase in investments held by Environmental
Contingency Fund (1 860) (1 866) (8 617)
Increase in investment held in Buttonshope
Conservancy Trust (157) (179) (576)
Dividends received – 124 –
Cash flows generated from financing activities (133 527) 979 992 248 042
Proceeds from issue of shares – 579 033 579 033
Acquisition of non-controlling interest (50 000) (10 000) (10 000)
Finance charges (77 723) (100 639) (176 124)
Dividends paid (3 908) (6 501) (11 066)
Decrease in long-term loans (1 896) (1 901) (3 801)
Revolving credit facilities utilised/(repaid) – 400 000 (250 000)
Domestic medium-term notes issued – 120 000 120 000
(Decrease)/increase in cash and cash equivalents (430 272) 877 708 367 476
Cash and cash equivalents at beginning of period 666 056 298 580 298 580
Cash and cash equivalents at end of period 235 784 1 176 288 666 056
Reviewed Reviewed Audited
31 December 31 December 30 June
2014 2013 2014
R000 R000 R000
INTERIM CONSOLIDATED STATEMENT OF FINANCIAL POSITION
ASSETS
Non-current assets
Property, plant and equipment 6 440 526 6 084 829 6 287 062
Mining properties and mineral resources 5 642 503 5 704 490 5 653 328
Interest in associate and joint ventures 495 275 496 538 496 509
Unlisted investment 6 6 6
Land and township development 9 522 11 225 10 204
Long-term receivables 91 692 93 456 94 047
Investments held by Northam Platinum
Restoration Trust Fund 47 397 42 197 46 468
Environmental Guarantee Investment 52 884 44 273 51 024
Buttonshope Conservancy Trust 10 859 10 305 10 702
Deferred tax asset 102 162 – 96 074
12 892 826 12 487 319 12 745 424
Current assets 1 915 014 2 639 037 1 995 572
Inventories 1 107 533 1 170 897 1 076 853
Trade and other receivables 557 609 283 992 244 672
Cash and cash equivalents 241 991 1 176 288 666 174
South African Revenue Services 7 881 7 860 7 873
Total assets 14 807 840 15 126 356 14 740 996
EQUITY AND LIABILITIES
Equity
Stated capital 9 178 688 9 178 688 9 178 688
Retained earnings 2 530 928 2 117 397 2 223 135
Share of other comprehensive income from
associate (17 508) (15 009) (15 340)
Equity attributable to owners of the parent 11 692 108 11 281 076 11 386 483
Non-controlling interests – 4 421 5 389
Total equity 11 692 108 11 285 497 11 391 872
Non-current liabilities 2 130 476 2 060 721 2 157 462
Deferred tax liability 528 529 412 749 502 097
Long-term provisions 148 747 137 380 142 709
Long-term loans 41 867 45 663 43 763
Long-term share-based payment liability 41 333 94 929 98 893
Domestic medium-term notes 1 370 000 1 370 000 1 370 000
Current liabilities 985 256 1 780 138 1 191 662
Current portion of long-term loans 3 801 3 801 3 801
Short-term share-based payment liability 45 607 77 803 69 942
Revolving credit facilities – 650 000 –
Bank overdraft 6 207 – 118
South African Revenue Service 110 488 126 480 121 481
Trade and other payables 691 010 803 167 877 365
Short-term provisions 128 143 118 887 118 955
Total equity and liabilities 14 807 840 15 126 356 14 740 996
Net asset value per share - cents 2 941 2 837 2 865
Other
comprehensive Non-
Stated Retained income from controlling
capital earnings associate interests Total
R000 R000 R000 R000 R000
INTERIM CONSOLIDATED STATEMENT OF CHANGES
IN EQUITY
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 period – (96 252) (996) 4 578 (92 670)
(Loss)/profit for the period – (96 252) – 4 578 (91 674)
Other comprehensive income
for the period – – (996) – (996)
Dividends declared # – – – (6 501) (6 501)
Issue of new shares 579 033 – – – 579 033
Balance at 31 December 2013 9 178 688 2 117 397 (15 009) 4 421 11 285 497
Total comprehensive income for
the period – 105 738 (331) 5 533 110 940
Profit for the period – 105 738 – 5 533 111 271
Other comprehensive income for
the period – – (331) – (331)
Dividends declared # – – – (4 565) (4 565)
Balance at 30 June 2014 9 178 688 2 223 135 (15 340) 5 389 11 391 872
Total comprehensive income for
the period – 354 608 (2 168) 1 704 354 144
Profit for the period – 354 608 – 1 704 356 312
Other comprehensive income for
the period – – (2 168) – (2 168)
Dividends declared # – – – (3 908) (3 908)
Acquisition of non-controlling
interest – (46 815) – (3 185) (50 000)
Balance at 31 December 2014 9 178 688 2 530 928 (17 508) – 11 692 108
# Non-controlling interest's portion of dividends declared by entities within the Northam group.
Reviewed Reviewed Audited
31 December 31 December 30 June
2014 2013 2014
R000 R000 R000
SEGMENTAL INFORMATION
Total sales revenue
Zondereinde operations 2 193 641 1 954 107 4 383 194
Booysendal operations 846 898 337 076 956 203
Total 3 040 539 2 291 183 5 339 397
Total contribution
Zondereinde operations 279 583 159 189 878
Booysendal operations 119 437 (99 703) (128 396)
Total 399 020 (99 544) 61 482
Net profit contribution
Zondereinde operations 315 726 75 499 233 937
Booysendal operations 40 586 (167 173) (214 340)
Total 356 312 (91 674) 19 597
Segment assets
Zondereinde operations 4 551 697 5 184 691 4 626 017
Booysendal operations 10 256 143 9 941 665 10 114 979
Total 14 807 840 15 126 356 14 740 996
Segment liabilities
Zondereinde operations 1 619 522 1 637 387 1 850 757
Booysendal operations 1 496 210 2 203 472 1 498 367
Total 3 115 732 3 840 859 3 349 124
Capital expenditure
Zondereinde operations 160 484 243 563 358 200
Booysendal operations 191 900 270 100 539 645
Total 352 384 513 663 897 845
FAIR VALUE DISCLOSURES
The following is an analysis of the financial instruments that are measured subsequent to initial recognition at fair value. There
were no transfers between the levels during the six months ended 31 December 2014. The financial assets are all measured at
Level 2.
Reviewed Reviewed Audited
31 December 31 December 30 June
2014 2013 2014
R000 R000 R000
Description
Financial assets through profit and loss
Investments held by Northam Platinum Restoration Trust Fund 47 397 42 197 46 468
Environmental Guarantee Investment 52 884 44 273 51 024
Buttonshope Conservancy Trust 10 859 10 305 10 702
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 fair 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 10% and have been determined using the discounted cash flow valuation technique.
Reviewed Reviewed Audited
31 December 31 December 30 June
2014 2013 2014
R000 R000 R000
CAPITAL COMMITMENTS
Booysendal Mine
Authorised but not contracted 135 935 80 488 338 204
Contracted 83 749 234 132 145 186
Total 219 684 314 620 483 390
Zondereinde Mine
Authorised but not contracted 90 822 107 765 172 316
Contracted 64 608 87 711 154 060
Total 155 430 195 476 326 376
OTHER COMMITMENTS
Information Technology - outsource service provider
Due within one year 16 588 10 000 10 293
Due within two to five years 25 087 26 632 21 460
Operating lease rentals - office equipment
Due within one year 2 321 514 1 947
Due within two to five years 2 244 915 1 004
Operating lease rentals - premises
Due within one year 4 303 3 209 4 585
Due within two to five years 13 310 13 972 13 588
More than five years 4 293 4 293 5 959
Employee housing development
Contracted 9 762 – 4 800
Bank guarantees issued 73 266 78 680 78 736
These commitments will be funded from a combination of internal retentions and debt.
Reviewed Reviewed Audited
31 December 31 December 30 June
2014 2013 2014
% Change
ZONDEREINDE MINE
OPERATING STATISTICS*
Merensky
Development metres 1.2 3 259 3 219 6 454
Tonnes mined 7.8 514 433 477 137 960 513
Tonnes milled 11.4 431 714 387 597 803 736
Head grade - g/t (3 PGEs + Au) (3.4) 5.7 5.9 5.8
Available ore reserves - months – 20 20 20
UG2
Development metres 60.6 737 459 1 230
Tonnes mined 19.9 530 497 442 513 946 498
Tonnes milled 27.7 556 399 435 637 920 420
Head grade - g/t (3 PGEs + Au) 7.3 4.4 4.1 4.3
Available ore reserves - months – 24 24 24
Combined
Development metres 8.6 3 995 3 678 7 684
Tonnes mined 13.6 1 044 930 919 650 1 907 011
Tonnes milled 20.0 988 113 823 234 1 724 156
Head grade - g/t (3 PGEs + Au) – 5.0 5.0 5.0
FINANCIAL STATISTICS*
Precious metals in concentrates produced kg 20.2 4 179 3 477 7 331
Precious metals in concentrates purchased kg 12.2 661 589 1 975
Precious metals sold kg 0.6 4 647 4 620 9 827
Average price realised R/kg 8.1 414 359 383 258 400 381
Operating costs R/kg (4.0) 388 547 404 674 395 269
Cash costs R/kg (3.0) 362 007 373 266 358 891
Precious metals in concentrates produced oz 20.2 134 345 111 789 235 693
Precious metals in concentrates purchased oz 12.2 21 247 18 946 63 488
Precious metals sold oz 0.6 149 415 148 551 315 941
Average price realised US$/oz 0.1 1 180 1 179 1 198
Operating costs US$/oz (12.4) 1 100 1 255 1 189
Cash costs US$/oz (11.5) 1 025 1 158 1 078
Average exchange rate realised US$1.00 = R 9.5 10.98 10.03 10.35
Operating costs per tonne milled R/tonne (3.1) 1 656 1 709 1 682
Cash costs per tonne milled R/tonne (2.9) 1 531 1 577 1 526
* Not audited or reviewed
Reviewed Reviewed Audited
31 December 31 December 30 June
2014 2013 2014
% Change
BOOYSENDAL MINE
OPERATING STATISTICS*
UG2
Tonnes mined 37.4 846 116 615 676 1 233 089
Tonnes milled 6.8 929 262 870 072 1 517 109
Head grade - g/t (3 PGEs + Au) – 2.6 2.6 2.6
Available ore reserves - months** – – –
FINANCIAL STATISTICS*
Precious metals in concentrates produced kg 15.8 2 041 1 763 2 882
Precious metals sold kg 59.9 1 820 1 138 2 503
Average price realised R/kg 10.7 419 531 379 118 398 710
Operating costs R/kg 4.1 310 998 298 684 361 902
Cash costs R/kg 10.7 255 613 230 911 277 308
Precious metals in concentrates produced oz 15.8 65 630 56 696 92 668
Precious metals sold oz 59.9 58 513 36 589 80 476
Average price realised US$/oz 2.4 1 193 1 165 1 186
Operating costs US$/oz (4.9) 881 926 1 087
Cash costs US$/oz 1.1 724 716 833
Average exchange rate realised US$1.00 = R 9.5 10.98 10.03 10.35
Operating costs per tonne milled R/tonne 12.9 683 605 688
Cash costs per tonne milled R/tonne 20.1 562 468 527
* Not audited or reviewed
** Booysendal mine is still in build-up phase
COMMENTARY ON RESULTS
INTRODUCTION
The first half of the 2015 financial year started with a shaft incident at Zondereinde, which rendered the
No. 1 shaft out of commission for a period of six weeks. Nevertheless Zondereinde management did well to
mitigate the losses from this interruption and the business unit put in a commendable performance for the
half-year.
At Booysendal there has been good progress with the ramp-up, with steady state production on track for
October 2015.
Work continues on the implementation of the Black Economic Empowerment transaction (BEE transaction),
announced to shareholders on 22 October 2014, to secure the company's empowerment equity credentials.
As indicated in our recent SENS announcement on 17 February 2015, shareholders will be required to
approve the transaction at a general meeting to be held on 19 March 2015. The parallel capital raising
associated with this transaction will add strength to our financial position, which we intend to employ
prudently to secure future growth and create value.
The commodity markets have been marked by lower US dollar metal prices, as the European economy remains
depressed and the Chinese economy continues to slow down. The ZAR/US$ exchange rate has however
weakened over the current period, somewhat cushioning the impact of lower US dollar metal prices.
The week-long unprotected work stoppage at Zondereinde at the beginning of H2 F2015 is indicative of the
complex labour and operating climate which has persisted for a few years now.
MARKET OVERVIEW
During 2014 the PGM markets remained subdued and prices generally lacklustre. Markets have been
characterized by a surplus of above-ground metal stocks, and dogged by poor macroeconomic conditions
in several of the world's key economies. Global PGM supplies declined during 2014 reflecting the impact
of the five-month strike in South Africa, and whilst demand for metal has been variable across the principal
sectors of consumption, the current market deficits for each of platinum, palladium and rhodium have,
as yet, failed to impose any significant impact on metal prices. The ZAR/US$ exchange rate weakened
during the reporting period, and provided some export revenue relief against the uninspiring US dollar price
performance of Northam's basket of metals.
The current reporting period (H1 F2015) was marked by a decrease in the group US dollar basket prices
(3PGE + Au) compared to the previous comparative period H1 F2014. The prices of palladium and rhodium
increased by 10% and 25% respectively. In contrast, the price of platinum declined by 8.7% resulting in the
basket price realised falling by 3.1% for the period.
The group rand basket price increased by 8.7% to R415 814/kg (H1 F2014: R382 442/kg) largely
as a result of the 9.5% weakening of the rand against the US dollar over the reporting period from
R10.03/US$ to R10.98/US$.
FINANCIAL OVERVIEW
The higher earnings (total comprehensive profit) of R354.1 million for the current reporting period
(H1 2014: loss R92.7 million) is attributable to two main factors:
- Increased group production volumes which had a positive influence on unit cash costs. The comparative
period in the previous financial year was marked by protracted industrial action at Zondereinde;
- a generally higher ZAR basket price for platinum group metals (3PGE + Au) due to a weaker ZAR/US$
exchange rate.
The incident at Zondereinde's No. 1 shaft in July 2014 resulted in six weeks of lost production estimated at
615kg. Revenue losses from this incident are estimated at R255.0 million which was partially recovered by
an insurance claim of some R150.0 million included in sundry revenue.
Metal sales revenues for the group reached R3.0 billion for the period (H1 F2014: R2.3 billion) reflecting the
effect of the higher volumes combined with the rand weakening by 9.5% year on year against the US dollar.
Noteworthy is the contribution from Booysendal where metal sales ramped up to 1 820kg (H1 F2014: 1 138kg),
an increase of 59.9% year on year.
The 10.5% increase in group cost of sales to R2.6 billion (H1 F2014: R2.4 billion) mainly emanates from
higher operating costs associated with the improved volumes, higher power costs and the higher price of
labour, as well as higher purchases of concentrates from third parties which were up 9.6% to R265.8 million
(H1 F2014: R242.5 million).
Positively affecting group cost of sales were lower charges for refining costs, at R100.9 million, resuming
normal levels after having used outsourced smelting services in the previous comparable period.
The 6.3% drop in the depreciation charge to R210.0 million (H1 F2014 R224.0 million) reflects the effect of
the change in the group's depreciation calculation methodology to better match the rate of consumption of
reserves (a change in accounting estimate), especially at the Booysendal mine.
The cost of sales also incorporates a change in metal stocks which was a negative R16.9 million in the
current period compared to a positive R14.3 million in H1 F2014.
With the increase in sales and the drop in certain components of operating costs, the loss of
R92.7 million in the previous H1 was turned around into a profit of R354.1 million. Investment
revenues declined by 34.0% to R18.3 million (H1 2014: R27.8 million) mainly owing to the lower cash
balances that the group had invested, compared to the previous period when it had raised a gross
R600.0 million from shareholders. The lower net debt position during the period reflected positively
also on finance charges, which were 22.8% lower at R77.7 million. In addition, the R1.4 billion
revolving credit facility has not been drawn down during the current period. Sundry income is higher
at R191.5 million (H1 F2014: R55.0 million) largely due to the R150.0 million insurance claim for the
shaft incident mentioned above.
Due to the higher profitability of the group, the tax charge increased to R143.8 million (H1 F2014: R32.8 million).
Consequently profit after tax for the group has increased to R356.3 million (H1 F2014 loss R91.7 million).
Cash flows from operating activities fell by 79.6% to R55.5 million (H1 F2014: R271.5 million) due mainly to
higher working capital requirements and higher taxes paid. The No. 1 shaft incident resulted in lower than
expected sales and an insurance claim of R150 million which had not been settled by the end of the current
period. In addition, a sale amounting to R70 million of metal stock was temporarily delayed in December
2014 and only processed in January 2015.
Cash flows utilised in investing activities have declined compared to the previous period owing to lower
development costs (capital expenditure) at Booysendal mine which is nearing completion.
Cash flows generated from financing activities are lower mainly owing to the absence of any fundraising
during the current period compared to the previous period when proceeds were raised through the claw
back rights offer (H1 F2014: net R579.1 million). In addition, there were no borrowings or usage of credit
facilities during the current period (H1 2014: R520.0 million).
CORPORATE ACTIVITY
On 22 October 2014 Northam announced a R6.6 billion BEE transaction in terms of which the company
intends to raise R4.6 billion in cash by issuing new shares. The effect of the transaction would be to
increase Northam's BEE shareholding from the current 4% (represented by the employees' Toro Trust) to
35.4% post the conclusion of the deal whilst injecting approximately R4 billion in cash to fund Northam's
growth strategy.
The transaction has been facilitated by current shareholders, the Public Investment Corporation SOC Limited
and Coronation Asset Management Proprietary Limited and secures a 10-year Historically Disadvantaged
South African (HDSA) ownership status for Northam in terms of the South African Mining Charter and mining
legislation.
The BEE transaction will involve the immediate transfer of economic value to a representative grouping of
broad-based HDSA participants, including employees, communities as well as a women's group and a range
of strategic HDSA partners. All Northam shareholders will have the right to participate in the transaction
funding on a pro rata basis and funds are expected to flow in the last quarter of F2015. Full details of the
transaction are contained in a circular which was posted to shareholders on 17 February 2015.
The receipt of the above-mentioned funds will strengthen Northam's financial position, and along
with currently available borrowing facilities should enable the group to exploit value-accretive growth
opportunities that present themselves.
During the current period the group purchased an additional 20% of Northam Chrome Producers
Proprietary Limited (NCP) for R50.0 million with effect from 1 August 2014. This brings the total holding in
this subsidiary to 100%. NCP produces chrome from Zondereinde's UG2 tailings.
OPERATIONS REVIEW
Zondereinde
Safety
No fatalities were recorded. The lost time injury incident rate (LTIIR) for the period was 1.23 per 200 000
hours worked (H1 F2014: 1.70) and the reportable injury incident rate was 0.84 (H1 2014: 0.86).
Considerable effort continues to be applied by both management and employees in order to ensure the
safety of all the group's employees. Five production days were lost to a safety stoppage in the deepening
section of the mine.
On 28 July, the No 1 shaft's steelwork was damaged following an incident during a rope change exercise.
This put the shaft out of commission for six weeks resulting in the mine losing an estimated 615kg.
Operating performance
Total tonnages milled increased by 20.0% to 988 113 tonnes (H1 F2014: 823 234 tonnes), despite the
six-week production interruption at No. 1 shaft. Merensky reef tonnes milled were 431 714 tonnes
(H1 F2014: 387 597 tonnes) at a head grade of 5.7g/t (3PGE + Au) and the UG2 reef contributed
556 399 tonnes (H1 F2014: 435 637) tonnes at a head grade of 4.4g/t. The combined head grade was
unchanged at 5.0g/t (H1 2014: 5.0g/t). The available ore reserves of the two reefs Merensky and UG2 are
20 months and 24 months respectively.
The total operating cost at Zondereinde was R1.5 billion (H1 F2014: R1.3 billion) which represents a 16.3%
increase. Metals in concentrate production rose by 20.2% to 4 179kg (H1 F2014: 3 477kg). Purchased material
increased to 661kg compared to H1 F2014's 589kg, a 12.2% increase. The higher production volumes resulted
in lower unit operating costs of R388 547/kg (H1 F2014: R404 674/kg) whilst unit cash costs fell by 3.0% to
R362 007/kg (H1 2014: R373 266/kg).
Steady progress continues to be made with extending the decline section of the mine. The completion
of this infrastructure to 18 level will ultimately result in an extension of the mine's life to greater than
20 years.
Employee relations
During the period under review there were no labour-related disruptions. Whilst the National Union of
Mineworkers (NUM) is the dominant union at Zondereinde representing some 70% of the workforce,
the Association of Mine and Construction workers Union (AMCU), has gained sufficient membership
which entitles it to organisational rights at Zondereinde.
Capital expenditure
The total capital expenditure for current period was R156.4 million (H1 F2014: R270.1million). A further
R163.9 million is expected to be spent for the rest of the financial year.
Operational optimisation
Preparatory work to optimise the extraction of the Merensky and UG2 orebodies and extend the life of mine at
Zondereinde continues. This entails re-configuring the concentrator plants and increasing smelter and base metal
removal capacity as well as completing the establishment of mining infrastructure to the 18 level horizon, some
2 300 metres below surface. The completion of the decline system is expected to cost R150 million per annum
for the next five years.
Booysendal
Safety
Booysendal again delivered a commendable safety performance during the reporting period despite a slight
regression in the safety statistics. The LTIIR was 0.46 per 200 000 man hours (H1 F2014: 0.35) the RIIR was
0.28 per 200 000 man hours worked (H1 F2014: 0.23).
Operating performance
The production ramp-up at the Booysendal mine continues as planned. Run of mine production increased
by 37.4% to 846 116 tonnes (H1 2014: 615 676 tonnes) whilst the tonnage milled increased by 6.8%
to 929 262 tonnes (H1 F2014: 870 072 tonnes). The head grade remained constant at 2.6g/t owing to
the inclusion of lower grade development tonnage in the mill feed. The production of metals in
concentrate increased by 15.8% to 2 041kg (H1 2014: 1 763kg) as a result of significantly improved
concentrator recoveries.
The total operating cost of the mine for the current period was R531.6 million (H1 F2014: R410.5 million).
Unit operating and cash costs increased by 4.1% to R310 998/kg (H1 F2014: R298 684 /kg) and R255 613/kg
(H1 F2014: R230 911/kg) respectively.
The H1 F2015 unit costs have been positively influenced by the supplementation of mill feed by tonnage
from the surface stockpile and are therefore not necessarily representative of the costs at steady state.
Employee relations
There were no labour relations disruptions at Booysendal during the reporting period.
Capital expenditure
A total of R191.9 million was spent in the current period and R239.9 million is expected to be spent in the
remainder of the financial year. R30.0 million has been committed for the investigation into the feasibility
of mining Merensky ore at Booysendal.
The total capital expenditure for the Booysendal mine is expected to be R4.9 billion by the end of
calendar 2015.
Operational optimisation
The feasibility of mining Merensky ore at Booysendal mine is being investigated. Site work has commenced
on a box-cut to extract a bulk sample of Merensky ore to conduct metallurgical test work and to also
examine the feasibility of mining the Merensky reef using mechanised methods.
STRATEGIC UPDATE
The strategic review announced in August 2014 remains ongoing with some clear opportunities emerging:
- Northam can grow its production in a capital efficient manner at the lower end of the platinum industry
cost curve by developing its >100 million 4E ounce resource at Booysendal. A step in progressing this
growth has been taken post the period under review in terms of the announced acquisition from Aquarius
Platinum (South Africa) Proprietary Limited (AQPSA) of its Everest assets.
- Northam can reduce its operating risk, by diversifying its production assets. In the past, the group had
considerable "single site" operating risk.
- Northam can reduce, over time, its risk exposure by focusing future growth on mechanised bord and
pillar mining methods. This approach is neither labour nor capital intensive and, history shows that it
delivers materially better safety statistics.
- At Zondereinde, Northam has the opportunity to become more competitive, optimising its operations
by focussing on less geologically complex reserves of Merensky Reef and UG2. The Zondereinde mine
is relatively well placed by virtue of having pre-developed, de-stressed, relatively high grade UG2 Reef
and under-exploited, more conformable Merensky Reef accessible from its developing sub-decline
shaft system. Management estimates that the Zondereinde operation should be able to deliver around
300 000oz 4E per annum over the next 20 years.
- Northam will continue to assess opportunities which may arise from restructuring in the sector and which
fits its objective of growing down the industry cost curve.
- Northam is well positioned to deliver powerful cash flow for its shareholders when the next commodity
price upcycle begins. This said, management firmly believes it prudent to position the group for positive
free cash flow at the current commodity prices.
MINERAL RESOURCES AND RESERVES
The mineral resource and reserve estimation is an annual process. Management is not aware of any material
changes to the inputs to the resource and reserve estimation process.
PROSPECTS*
The outlook for metal prices remains subdued with some relief for South African producers coming
from a weakening exchange rate. The unstable supply of electricity by Eskom is also a major concern for
maintaining production momentum.
The company's two year wage agreement with the NUM expires at the end of June 2015 and negotiations
for a new wage agreement are expected to start before the end of the financial year.
The financial strength of the group is therefore dependent on stable labour relations and achieving
production targets as well as realising metal prices which comfortably exceed the cost of production.
Despite the difficult operating conditions, the company remains well positioned for the future.
* Information in the paragraph has not been reviewed by the company's auditors.
AUDITOR'S REVIEW
The financial results of the group have been reviewed under the supervision of Mr M Herbst CA(SA) a
registered auditor of Ernst & Young Inc., the group's auditors. A copy of their unmodified reviewed 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 interim 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 No. 71 of 2008 (Companies Act), with the exception of the adoption of the following
amendments, standards or interpretations with effect from 1 July 2014:
Standard Subject
IFRS 10, IFRS Investment Entities - Amendments to IFRS 10, IFRS 12 and IAS 27
12 & IAS 27
IAS 32 Offsetting Financial Assets and Financial Liabilities - Amendments to IAS 32
IAS 36 Recoverable Amount Disclosures for Non-Financial Assets - Amendments to IAS 36
IAS 39 Novation of Derivatives and Continuation of Hedge Accounting - Amendments to IAS 39
IFRIC 21 Levies
AIP IFRS 1 First-time Adoption of International Financial Reporting Standards - Meaning of 'effective IFRSs'
AIP IFRS 13 Fair Value Measurement - Short-term receivables and payables
IAS 19 Defined Benefit Plans: Employee Contributions - Amendments to IAS 19
AIP IFRS 2 Share-based Payment - Definitions of vesting conditions
Standard Subject
AIP IFRS 3 Business Combinations - Accounting for contingent consideration in a business combination
AIP IFRS 8 Operating Segments - Aggregation of operating segments
AIP IFRS 8 Operating Segments - Reconciliation of the total of the reportable segments' assets to the
entity's assets
AIP IAS 16 Property, Plant and Equipment and IAS 38 Intangible Assets - Revaluation method -
proportionate restatement of accumulated depreciation/amortisation
AIP IAS 24 Related Party Disclosures - Key management personnel
AIP IFRS 3 Business Combinations - Scope exceptions for joint ventures
AIP IFRS 13 Fair Value Measurement - Scope of paragraph 52 (portfolio exception)
AIP IAS 40 Investment Property - Interrelationship between IFRS 3 and IAS 40 (ancillary services)
The adoption of these amendments resulted in changes only in the way in which the interim financial results
statements are presented, as well as additional disclosures in the annual financial statements. They did not
impact any amounts disclosed in the interim consolidated statement of comprehensive income or interim
consolidated statement of financial position.
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 are concluded on an arm's
length basis.
GOING CONCERN
By their very nature mining operations have a finite life and are also very dependent amongst other things
on geological, technical as well as economic factors such as commodity prices and exchange rates. The
global economics outlook is uncertain, even though the United States appears to be out of recession,
Europe remains mired in a stagnating economy, which may even slip into deflation, whilst the Chinese
economy's growth is slowing. Northam is an exporter of platinum group metals to these three regions of
the world and metal prices have remained subdued due to lower demand. Locally Northam is subject to the
social, economic and labour instability which can pose a threat to its operations.
The ZAR/US$ exchange rate however continues to weaken and to a certain extent cushions the effects of
lower US dollar metal prices.
Notwithstanding the above mentioned factors management is of the opinion that the group remains a
going concern taking into account the availability of its current operational cash flows, available borrowing
facilities and assuming uninterrupted production in the foreseeable future.
PREPARATION
These reviewed interim results have been prepared under the supervision of the Chief Financial Officer,
Mr AZ Khumalo CA(SA). The interim results of the group will be published on the company's website on
Friday, 20 February 2015.
EVENTS AFTER THE REPORTING PERIOD
The attention of shareholders is drawn to the following:
A. The work stoppage that began on the nightshift of Tuesday, 13 January 2015 and ended on 20 January
2015.
B. Notice pursuant to section 45(5) of the Companies Act.
1. On 5 November 2014, Northam's shareholders approved a special resolution pursuant to section 45 of
the Companies Act authorising the board of directors to provide financial assistance to a corporation
which is related or inter-related to Northam.
2. On 10 February 2015 shareholders were advised by way of a SENS announcement that Northam had
entered into an agreement with AQPSA in terms of which Northam will acquire the Everest Mining
Assets and Everest Mining Right, for a total cash purchase consideration of R450 million (Transaction).
2.1 In terms of the Transaction, Northam will provide financial assistance to Micawber 278 Proprietary
Limited (Micawber, a wholly-owned subsidiary of Northam) to acquire the Everest Mining Assets
and Everest Mining Right;
2.2 Section 45(5) of the Companies Act, requires a company to provide written notice to its
shareholders, amongst others, of the adoption of a board resolution to provide financial assistance
if the total value of all loans, debts, obligations or assistance contemplated in that resolution,
together with any previous such resolution during the same financial year, exceeds one-tenth of
1% of the company's net worth at the time of the resolution;
2.3 This notice is provided because the value of the financial assistance referred to in paragraph 2
exceeds the threshold stated in paragraph 2.2.
DIVIDEND
The board has resolved not to declare an interim dividend but will review the dividend policy at financial
year-end.
ON BEHALF OF THE BOARD
PL Zim PA Dunne
Chairman Chief executive officer
Johannesburg
18 February 2015
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,
Republic of South Africa.
Company secretary
Ms PB Beale
Transfer secretaries
Computershare Investor Services
Proprietary Limited
70 Marshall Street, Johannesburg, 2001.
P O Box 61051, Marshalltown, 2107,
South Africa.
Sponsor and debt sponsor
One Capital
17 Fricker Road, Illovo, 2196.
P O 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.
20 February 2015
Date: 20/02/2015 08:00:00 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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