Wrap Text
Reviewed preliminary results for the year ended 30 June 2015 - NHM/NHM001
Northam Platinum Limited
(Incorporated in the Republic of South Africa)
(Registration number 1977/003282/06)
Share code: NHM, ISIN: ZAE000030912
Debt issuer code: NHMI
ISIN: ZAG000099524
("Northam" or "the group")
REVIEWED PRELIMINARY RESULTS
FOR THE YEAR ENDED 30 JUNE 2015
KEY FEATURES OF THE YEAR
- Empowerment status secured
- Successful capital raising of R4.6 billion
- Acquisition of Everest signals strategic growth on track
- Three year wage settlement concluded after year-end
- Satisfactory performance from operations
- Booysendal ramp-up on track
- Market conditions continue to disappoint
Directors
PL Zim (non-executive chairman), PA Dunne (chief executive officer) (British), AZ Khumalo
(chief financial officer), ME Beckett (British), CK Chabedi, 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
CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND
OTHER COMPREHENSIVE INCOME
Reviewed Audited
year ended year ended
30 June 2015 30 June 2014
R'000 R'000
Sales revenue 6 035 535 5 339 397
Cost of sales 5 439 722 5 277 915
Operating costs 4 342 571 3 536 002
Concentrates purchased 602 395 918 605
Refining and other costs 199 470 267 117
Depreciation and write-offs 339 949 445 875
Change in metal inventories (44 663) 110 316
Operating profit 595 813 61 482
Share of earnings from associates and joint venture 28 769 3 464
Investment revenue 72 043 59 963
Finance charges (245 937) (176 124)
Sundry expenditure (1 587 264) (26 724)
IFRS 2 share based payment charge (874 448) –
Impairment of non-core assets (261 488) –
Net BEE lock-in fee (242 429) –
Corporate action transactional costs (172 640) –
Other (36 259) (26 724)
Sundry income 268 250 123 735
(Loss)/profit before tax (868 326) 45 796
Taxation 165 619 26 199
(Loss)/profit for the year (1 033 945) 19 597
Other comprehensive income (4 428) (1 327)
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 (4 482) (1 745)
Share of associate's exchange differences on translating
foreign operations and foreign currency transactions (4 482) (1 738)
Share of associate's fair value adjustment on available-for-sale
financial assets – (7)
Total comprehensive income for the year (1 038 427) 18 270
(Loss)/profit attributable to:
Owners of the parent (1 035 649) 9 486
Non-controlling interests 1 704 10 111
(Loss)/profit for the year (1 033 945) 19 597
Total comprehensive income attributable to:
Owners of the parent (1 040 131) 8 159
Non-controlling interests 1 704 10 111
Total comprehensive income for the year (1 038 427) 18 270
Reconciliation of headline (loss)/ earnings and per share
information
(Loss)/profit attributable to shareholders (1 035 649) 9 486
(Profit)/loss on sale of property, plant and equipment (892) 1 118
Profit on sale of associate's investment (7 105) (2 347)
Impairment of associate's assets 17 493 –
Negative goodwill on assets acquired by associate's associate (26 804) –
Foreign currency differences on repayment of long term
receivables from associates foreign operations reclassified to
profit or loss (922) –
Impairment of property, plant and equipment 2 525 –
Impairment of non-core assets 261 488 –
Tax effect on above (5 097) 344
Headline (loss)/earnings (794 963) 8 601
(Loss)/earnings per share – cents (264,3) 2,4
Fully diluted (loss)/earnings per share – cents (264,3) 2,4
Headline (loss)/earnings per share – cents (202,9) 2,2
Fully diluted headline (loss)/earnings per share – cents (202,9) 2,2
Dividends per share – cents – –
Weighted average number of shares in issue 391 834 708 390 969 652
Fully diluted number of shares in issue 391 834 708 390 969 652
Total number of shares in issue 509 781 212 397 586 090
Treasury shares in issue 159 905 453 –
Shares in issue adjusted for treasury shares 349 875 759 –
CONSOLIDATED STATEMENT OF CASH FLOWS
Reviewed Audited
30 June 2015 30 June 2014
R'000 R'000
Cash flows from operating activites 341 585 885 379
(Loss)/profit before taxation (868 326) 45 796
Depreciation and write-offs 339 949 445 875
Impairment of associates and receivable balances 261 488 –
Change in short term provisions 8 315 14 285
Equity settled share-based expense 874 448 –
Finances charges 245 937 176 124
Equity accounted earnings (28 769) (3 464)
Cash settled share-based payment (38 350) 61 228
Other 23 173 6 513
Change in working capital (221 248) 270 414
Taxation paid (255 032) (131 392)
Cash flows utilised in investing activities (1 102 096) (765 945)
Property, plant, equipment and mining properties and
mineral reserves
Additions to maintain operations (322 980) (358 200)
Additions to expand operations (779 068) (539 645)
Proceeds from sale of development ounces – 137 687
Disposal proceeds 4 212 3 508
Investment in associate – cash distributed – 69
Land and township development
Additions (1 088) (2 825)
Disposals proceeds 885 8 174
Increase in investments held by Northam Platinum Restoration (2 624) (5 520)
Trust Fund
Increase in investments held by Environmental (1 098) (8 617)
Contingency Fund
Increase in investment held in Buttonshope Conservancy Trust (335) (576)
Cash flows generated from financing activities 4 232 644 248 042
Proceeds from issue of shares – 579 033
Issue of preference share liability 4 599 426 –
Acquisition of non-controlling interest (50 000) (10 000)
Liquidity fees paid (163 903) –
Interest paid (145 170) (176 124)
Dividends paid (3 908) (11 066)
Decrease in long-term loans (3 801) (3 801)
Revolving credit facilities repaid – (250 000)
Domestic medium-term notes issued – 120 000
Increase in cash and cash equivalents 3 472 133 367 476
Cash and cash equivalents at beginning of the year 666 056 298 580
Cash and cash equivalents at end of the year 4 138 189 666 056
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
Reviewed Audited
30 June 2015 30 June 2014
R'000 R'000
ASSETS
Non-current assets 13 367 048 12 745 424
Property, plant and equipment 7 065 352 6 287 062
Mining properties and mineral resources 5 636 478 5 653 328
Interest in associates and joint venture 275 847 496 509
Unlisted investment 6 6
Land and township development 10 000 10 204
Long-term receivables 94 503 94 047
Investments held by Northam Platinum Restoration Trust Fund 49 092 46 468
Environmental Guarantee Investment 52 122 51 024
Buttonshope Conservancy Trust 11 037 10 702
Deferred tax asset 172 611 96 074
Current assets 5 784 288 1 995 572
Inventories 1 126 550 1 076 853
Trade and other receivables 498 854 244 672
Cash and cash equivalents 4 138 189 666 174
Tax receivable 20 695 7 873
Total assets 19 151 336 14 740 996
EQUITY AND LIABILITIES
Equity 9 216 425 11 386 483
Stated capital 13 778 114 9 178 688
Treasury shares (6 556 123) –
Retained earnings 1 139 808 2 223 135
Equity settled share based payment reserve 874 448 –
Other comprehensive income from associate (19 822) (15 340)
Equity attributable to owners of the parent 9 216 425 11 386 483
Non-controlling interests – 5 389
Total equity 9 216 425 11 391 872
Non-current liabilities 7 310 753 2 157 462
Deferred tax liability 521 452 502 097
Long-term provisions 187 217 142 709
Preference share liability 6 492 655 –
Long-term loans 39 963 43 763
Long-term share-based payment liability 69 466 98 893
Domestic medium term notes – 1 370 000
Current liabilities 2 624 158 1 191 662
Current portion of long-term loans 3 801 3 801
Short-term share-based payment liability 61 019 69 942
Domestic medium term notes 1 370 000 –
Bank overdraft – 118
Tax payable 102 072 121 481
Trade and other payables 959 996 877 365
Short-term provisions 127 270 118 955
Total equity and liabilities 19 151 336 14 740 996
Net asset value – cents per share 2 634 2 864
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
Other
Equity compre-
settled hensive Non-
share based income control-
Share payment Retained from ling Total
capital reserve earnings associate interests equity
R'000 R'000 R'000 R'000 R'000 R'000
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 1 July 2014 9 178 688 – 2 223 135 (15 340) 5 389 11 391 872
Acquisition of non-controlling
interest – – (46 815) – (3 185) (50 000)
Total comprehensive income for
the year – – (1 033 945) (4 482) 1 704 (1 036 723)
Loss for the year – – (1 033 945) 1 704 (1 032 241)
Other comprehensive income
for the year – – – (4 482) – (4 482)
Dividends declared # – – (2 567) – (3 908) (6 475)
Issue of new shares 4 599 426 4 599 426
Treasury shares (6 556 123) – – – – (6 556 123)
Share based payment reserve 874 448 874 448
Balance at 30 June 2015 7 221 991 874 448 1 139 808 (19 822) – 9 216 425
(#)Non-controlling interest's portion of dividends declared by entities within the Northam group.
SEGMENTAL INFORMATION
Total sales revenue
Reviewed Audited
30 June 2015 30 June 2014
R'000 R'000
Zondereinde operations 4 418 070 4 383 194
Booysendal operations 1 978 081 956 203
Intersegmental sales (360 616) –
Total 6 035 535 5 339 397
Revenue relates to external customers of the group's
metal production and includes purchased metals.
Operating profit
Reviewed Audited
30 June 2015 30 June 2014
R'000 R'000
Zondereinde operations 398 849 189 878
Booysendal operations 196 964 (128 396)
Total 595 813 61 482
Net (loss)/profit
Reviewed Audited
30 June 2015 30 June 2014
R'000 R'000
Zondereinde operations 32 367 233 937
Booysendal operations (16 929) (214 340)
Total operating segments 15 438 19 597
Zambezi Platinum (1 049 383) –
Total (1 033 945) 19 597
Segment assets
Reviewed Audited
30 June 2015 30 June 2014
R'000 R'000
Zondereinde operations 5 108 644 4 652 033
Booysendal operations 14 042 267 10 088 963
Total operating segment 19 150 911 14 740 996
Zambezi Platinum 425 –
Total 19 151 336 14 740 996
Segment liabilities
Reviewed Audited
30 June 2015 30 June 2014
R'000 R'000
Zondereinde operations 3 135 000 3 220 530
Booysendal operations 307 256 128 594
Total operating segment 3 442 256 3 349 124
Zambezi Platinum 6 492 655 –
Total 9 934 911 3 349 124
Capital expenditure
Reviewed Audited
30 June 2015 30 June 2014
R'000 R'000
Zondereinde operations 303 222 358 200
Booysendal operations 798 826 539 645
Total 1 102 048 897 845
CAPITAL COMMITMENTS
Reviewed Audited
30 June 2015 30 June 2014
R'000 R'000
Booysendal mine
Authorised but not contracted 367 584 338 204
Contracted 74 506 145 186
Total 442 090 483 390
Zondereinde mine
Authorised but not contracted 795 628 172 316
Contracted 42 376 154 060
Total 838 004 326 376
OTHER COMMITMENTS
Information Technology – outsource service provider
Due within one year 26 676 10 293
Due within two to five years 18 403 21 460
Operating lease rentals – office equipment
Due within one year 2 136 1 947
Due within two to five years 1 684 1 004
Operating lease rentals – premises
Due within one year 5 599 4 585
Due within two to five years 27 324 13 588
More than five years – 5 959
Employee housing development
Authorised 4 800 4 800
Bank guarantees issued 73 266 78 736
These commitments will be funded from a combination of internal retentions and debt.
ZONDEREINDE MINE – OPERATING AND FINANCIAL STATISTICS
Change % 30 June 2015 30 June 2014
Operating statistics*
Merensky
Development metres 0.8 6 507 6 454
Square metres mined 2.2 155 815 152 479
Tonnes milled (1.0) 795 885 803 736
Head grade – g/ton (3PGEs + Au) (1.7) 5.7 5.8
Available ore reserves – months – 20 20
UG2
Development metres 18.8 1 461 1 230
Square metres mined 24.8 186 415 149 400
Tonnes milled 15.7 1 064 499 920 420
Head grade – g/ton (3PGEs + Au) – 4.3 4.3
Available ore reserves – months – 24 24
Combined
Development metres 3.7 7 968 7 684
Square metres mined 13.4 342 230 301 879
Tonnes milled 7.9 1 860 384 1 724 156
Head grade – g/ton (3PGEs + Au) (2.0) 4.9 5.0
Financial statistics*
Precious metals in concentrates produced kg 8.4 7 950 7 331
Precious metals in concentrates purchased kg 18.4 2 338 1 975
Precious metals sold kg (1.9) 9 636 9 827
Average price realised R/kg 2.2 409 025 400 381
Operating costs R/kg 3.3 408 599 395 629
Cash costs R/kg 7.6 386 117 358 891
Precious metals in concentrates produced oz 8.4 255 595 235 693
Precious metals in concentrates purchased oz 18.4 75 168 63 488
Precious metals sold oz (1.9) 309 801 315 941
Average price realised US$/oz (7.5) 1 108 1 198
Operating costs US$/oz (6.6) 1 110 1 189
Cash costs US$/oz (2.7) 1 049 1 078
Average exchange rate realised US$1.00 = R 10.6 11.45 10.35
Operating costs per tonne milled R/tonne 3.8 1 746 1 682
Cash costs per tonne milled R/tonne 8.1 1 650 1 526
* Not audited or reviewed
BOOYSENDAL MINE – OPERATING AND FINANCIAL STATISTICS
Change % 30 June 2015 30 June 2014
Operating statistics*
UG2
Tonnes mined 35.5 1 670 437 1 233 089
Tonnes milled 17.7 1 786 375 1 517 109
Head grade – g/ton (3PGEs + Au) – 2.6 2.6
Financial statistics*
Precious metals in concentrates produced kg 32.2 3 809 2 882
Precious metals sold kg 40.2 3 509 2 503
Average price realised R/kg 0.9 402 461 398 710
Operating costs R/kg (0.9) 358 554 361 902
Cash costs R/kg 11.3 308 719 277 308
Precious metals in concentrates produced oz 32.2 122 475 92 668
Precious metals sold oz 40.2 112 829 80 476
Average price realised US$/oz (8.6) 1 084 1 186
Operating costs US$/oz (10.4) 974 1 087
Cash costs US$/oz 0.7 839 833
Average exchange rate realised US$1.00 = R 10.6 11.45 10.35
Operating costs per tonne milled R/tonne 11.2 765 688
Cash costs per tonne milled R/tonne 24.9 658 527
* Not audited or reviewed
COMMENTARY ON THE RESULTS
The year under review has been a memorable one, characterised by the R6.6 billion Black
Economic Empowerment (BEE) equity transaction with Zambezi Platinum (RF) Limited (Zambezi Platinum),
which is secured for a period of ten years. Zambezi Platinum has underscored our BEE ownership
credentials; Northam is now 35.4% BEE-owned, which includes the existing Toro Trust's 4% interest.
The conclusion of this transaction has secured our growth path, with the R450 million acquisition of
the Everest mine assets and mineral reserves from Aquarius Platinum South Africa Proprietary Limited
(AQPSA). This asset wil be integrated into our Booysendal South operation which has a
large unmined resource.
Developing the Booysendal South property is expected to continue over the next five years.
As the year progressed we were faced with the challenge of an oversupplied platinum market in
which dollar-denominated prices have progressively declined. The simultaneous weakening of the
South African (SA) rand has not fully compensated for this decline.
With the pressure on our revenue line from a declining basket price, our focus has been and continues
to be on containing the unit costs of producing each platinum group metal (PGM*) ounce.
Our operating performance has been encouraging as we have continued with the ramp-up of production
at Booysendal.At Zondereinde, despite a shaft incident that put the No.1 shaft out of commission for
six weeks, and a one-week work stoppage in January this year, production losses were mitigated by
prompt remedial action and, for the year as a whole, overall production was satisfactory.
FINANCIAL OVERVIEW
The results for the year were largely determined by the steadily declining dollar PGM prices over which
we have no control and by increases in costs over which we have only minimal control. Some unit mining
costs increased at a rate greater than the rise in the overall consumer price index. While this could
well continue as higher input costs such as wages and electricity tariffs kick in, management's
vigilant approach to costs is set to continue.
Group sales revenues grew by 13.0% to R6 035.5 million (F2014: R5 339.4 million). This is due to a
combination of an increase in PGM sales volumes of 6.6% to 422 630 oz (F2014: 396 417 oz), and a 10.6%
weaker ZAR/US$ exchange rate, averaging R11.45/US$ during the year (F2014: R10.35/US$). To a degree the
weaker SA currency served to offset the lower US dollar PGM prices. The average price realised in
US dollars fell 7.5% to US$ 1 108/oz (F2014: US$1 198/oz) at Zondereinde and 8.6% to US$ 1 084/oz
(F2014: US$ 1 186/oz) at Booysendal.
The higher sales volumes achieved are on the back of higher production volumes for the group
(including purchased concentrates) which were up 15.7% to 453 238 oz (14 097 kg) compared to 391 849 oz
(12 188 kg) in F2014. Further, the average rand basket price realised for both mines was marginally higher
in F2015 than in F2014 on account of the weaker exchange rate. Zondereinde realised an average basket
price of R409 025/oz (F2014: R400 381/oz), a 2.2% improvement, whilst Booysendal's realised price improved
0.9% to R402 461/oz from R398 710/oz in F2014.
* Northam reports its resources, reserves, grade, production and sales in terms of platinum, palladium,
rhodium and gold.
Operating costs were up 22.8% largely resulting from Booysendal's new production as it ramped up during
the year, and higher wage and power costs. The higher operating costs largely overshadowed the effect of
the 25.3% drop in refining and related costs, and resulted in the 3.1% rise in cost of sales to
R5 439.7 million. The lower refining and related costs at R199.5 million reflect more normalised levels
after the smelter shutdown and rebuild, along with outsourced smelting costs incurred in the prior year.
Depreciation and write-offs were lower in F2015 owing to a change in the depreciation methodology
(which was a change in accounting estimate). This is evident primarily at Booysendal whereby most assets
are now depreciated on a unit of production basis rather than the straight line method. This method
better matches the depreciation charge to the rate of depletion of reserves at Booysendal.
The group has achieved an operating profit of R595.8 million, higher than the F2014 operating profit of
R61.5 million. Both the higher operating profit and higher operating profit margin of the group, at 9.9%
(F2014: 1.2%), are due to the combination of higher production volumes from both mines, higher average
rand basket prices realised, lower refining and related costs and lower depreciation and write-off
charges as stated above.
The share of earnings from associates and joint ventures of R28.8 million (F2014: R3.5 million), is
attributed to higher earnings from Trans Hex Group Limited. Investment revenues of R72.0 million
(F2014: R60.0 million) mainly comprise interest earned on the group's invested funds.
Finance charges which amounted to R245.9 million (F2014: R176.1 million) are higher owing to the interest
of R145.1 million incurred mainly on the domestic medium term notes and on the use of the revolving credit
facility, and R100.8 million for the preference dividends payable to preference shareholders of
Zambezi Platinum (which is consolidated in the results) in terms of the BEE transaction.
Sundry expenditure amounted to R1 587.3 million (F2014: R26.7 million) reflecting accounting charges
and costs associated with the two major corporate deals undertaken in the current year, the BEE
transaction and the acquisition of the Everest mine from AQPSA. Included in costs associated with the
BEE transaction are the "share-based payment" charge of R874.4 million which is a once-off charge and
the R242.4 million net lock-in fee (being the gross R400.0 million lock-in fee paid to the BEE participants
(collectively the ESOP Trust, the Booysendal Community Trust, the Zondereinde Community Trust, the
Strategic Partners and the Women's Consortium as defined in the circular dated 17 February 2015) less
taxes paid and less the portion of the lock-in fee relating to the three Trusts which are eliminated on
consolidation). Shareholders are referred to the pro forma financial effects of the said BEE transaction
circular for the mechanics of the transaction. Also included in sundry expenditure are the non-core asset
impairment charges of R261.5 million for the Pandora joint venture, Trans Hex Group Limited and Dwaalkop
investments and corporate action costs related mainly to the said two corporate transactions of
R172.6 million.
The sundry income of R268.3 million (F2014: R123.7 million) incorporates the once-off proceeds of
R183.8 million received in terms of the No.1 shaft incident insurance claim.
The taxation charge of R165.6 million (F2014: R26.2 million) is higher than in the comparative period due
to the higher taxable profits earned by the group in F2015 relative to F2014 as well as capital gains
taxes paid by the group due to the lock-in fee received in Zambezi Platinum, and a number of BEE costs
not being tax deductible.
The group reported a net loss of R1 033.9 million (F2014: profit of R19.6 million), and a loss per share
of 264.3 cents (F2014: profit of 2.4 cents per share) reflecting the year's loss and the effect of the
increase in the weighted average number of shares in issue of 391 834 708 shares (F2014: 390 969 652).
The group's total number of shares in issue at 30 June 2015 was 509 781 212 (F2014: 397 586 090)
following the issue of 112 195 122 shares to Zambezi Platinum, which is Northam's 31.4% BEE shareholder.
The group has 159 905 453 treasury shares (F2014: no treasury shares held) which are not accounted for
in the calculation of the abovementioned loss per share. Zambezi Platinum's results are consolidated with
Northam's group results.
Cash flows from operating activities were lower in F2015 at R341.6 million (F2014: R885.4 million) mainly
due to the higher working capital requirements and tax paid. Higher working capital requirements emanate
from higher sales and debtors balances and an increase in inventory values which rose based on the higher
production volumes of the group. Cash flows utilised in investing activities were higher at
R1 102.1 million (F2014: R765.9 million) due to both stay in business and project capital expenditure
which includes the acquisition of Everest mine assets, accounted for as an asset acquisition.
Cash flows generated from financing activities amounting to R4 232.6 million (F2014: R248.0 million) are
largely accounted for by the proceeds of R4 599.4 million received by Northam from the issue of
112 195 122 million shares to Zambezi Platinum. The cash balance of the group at year end was therefore
a healthy balance of R4 138.2 million, most of which was received in May 2015 from the BEE transaction.
OPERATIONS
Zondereinde
The Zondereinde mine is operating at steady state, and its performance during the year under review
reflects this stability and our confidence in its sustainability. Despite the No.1 shaft incident early in
the financial year, and the one-week work stoppage in January, Zondereinde delivered 795 885 tonnes
(F2014: 803 736 tonnes) of Merensky reef to its processing plant at a head grade of 5.7g/t (F2014: 5.8g/t).
UG2 tonnages came in at 1 064 499 tonnes (F2014: 920 420 tonnes) to the processing plant at a head grade of
4.3g/t (F2014: 4.3g/t).
This blend of reef resulted in the overall head grade falling to 4.9g/t (F2014: 5.0g/t). Metals produced from
underground increased to 7 950kg (F2014: 7 331). Concentrates purchased were 2 338kg (F2014: 1 975kg).
At the year's end available ore reserves on the Merensky reef were sufficient for 20 months' production
and on the UG2 reef for 24 months'.
Overall the Zondereinde mine operated well during the year. However, mining flexibility on the Merensky
reef horizon remains constrained owing to challenging geological conditions, particularly in the north-west
quadrant of the mine. Production from the UG2 horizon is relatively easier. With planned modifications to
the processing plant, the smelter will be in a position to accommodate a higher proportion of UG2 reef.
Future production from Zondereinde is consequently planned at a 65:35 UG2: Merensky ratio for 21 years.
Construction of the decline section has progressed satisfactorily with the conveyor decline on the 16 level
elevation and good progress being made in developing the barrels of the material incline between 14 and 16
levels. An underground refrigeration plant was commissioned during the year on 13 level which has improved
environmental conditions in the deepening section of the mine markedly. The completion of this suite of
infrastructure will provide access to good quality Merensky reef and increase the life of Zondereinde to
more than 20 years.
Wage negotiations got underway in May 2015 and were successfully concluded after the year end when a
three-year agreement was signed with the National Union of Mineworkers.
Health and safety
At Zondereinde, three million fatality free shifts were recorded during March this year for the first time.
The management team and all employees are to be congratulated on this milestone achievement. The total number
of injuries recorded declined year on year resulting in an improved lost time injury incidence rate (LTIIR).
Overall the operation's LTIIR was 1.31 (F2014: 1 70) per 200,000 hours worked and the reportable injury
incidence rate (RIIR) was 0.94 (F2014: 0.86).
Shaft steelwork was damaged during a rope-change exercise at Zondereinde's No.1 shaft in July last year.
The incident put the shaft out of commission for six weeks. Repairs were carried out successfully and safely.
Costs and capital expenditure
Zondereinde's total operating costs were R3 114.8 million against R2 690.9 million in F2014. Although the
value of purchased concentrates decreased by 34.4%, to R602.4 million, the quantum purchased rose by
18.4% to 75 168 oz (2 338 kg) (F2014: 63 488 oz (1 975kg)), illustrating lower purchase prices of
concentrates as PGM prices fell during the year.
Unit operating and cash costs at Zondereinde were 3.3% and 7.6% higher at R408 599/kg (F2014: R395 629/kg)
and R386 117/kg (F2014: R358 891/kg) respectively, reflecting higher operating costs as mentioned above and
the impact of six-week interruption of production associated with the No.1 shaft incident in July 2014, and
the one-week work stoppage in January 2015.
In the light of the current weakness of platinum prices, we have adopted a cautious approach to capital
spending. While we had planned to spend more in the year under review, certain expenditure was deferred
resulting in total spend of R303.2 million, including the deepening project.
We cannot, however, defer capital projects indefinitely and we shall persist with projects that are of
strategic importance to the business.
This will include the construction of a new furnace, an upgrade to the UG2 concentrator to increase
throughput and continuing the development of mining infrastructure to 18 level to extend the life of the mine.
The annual cost of this five-year deepening project is expected to run at R130 million and is included in
Zondereinde's F2016 stay in business capital estimate of R303.0 million.
Processing and refining
The group's processing and refining capability is a strategic advantage. The review we embarked on last year
highlighted a number of options which we have pursued in the intervening period.
- Production of UG2 at Zondereinde is planned to increase over time. Therefore the decision has been made
to increase the throughput of the UG2 concentrator from the current 90 000 tonnes per month. The mine is
carrying out certain test work before finalising the design parameters for the upgrade.
This project is expected to cost R60 million.
- Whilst the board has approved capital expenditure for the installation of an additional 20MW furnace as
part of the smelter expansion and de-risking programme a sum of R10.0 million has been committed to date for
design and drawing work for the new furnace. This project, estimated at R750.0 million, is expected to be
completed over the next three years, market conditions allowing. The additional capacity will add significant
mining flexibility, allowing for higher volumes of UG2 ore to be mined and treated.The additional capacity
will support the growth in production from Booysendal.
- A new autoclave with sufficient capacity to match the potential throughput from the expanded smelter
facility was installed and commissioned at the base metal removal plant earlier this year at a cost of
R31.0 million.
Booysendal
Booysendal continued the ramp-up to its annual steady-state PGMs production target of 160 000 oz planned to
be reached in the first half of F2016.
Operationally good progress is being made with the equipping of the last two production sections, scheduled
for October 2015, to complete the original capital footprint. The concentrator performed well above its
nameplate capacity in the last three months of the year, achieving an average recovery of 86%. The plan to
exploit the Merensky reef from the existing footprint advanced well with the box cut completed and the
development of the declines in progress to extract a bulk sample for metallurgical test work. This work
is expected to be complete in the second half of F2016 following which a decision will be made on developing
a Merensky mining module.
During the new financial year conceptual design work on exploiting the Booysendal South orebody (including the
former Everest mine infrastructure) will be progressed to a feasibility study. The decision to begin
construction of new mining modules will be taken against the background of current and expected PGM market
conditions and the potential return on investment. The feasibility is expected to cost R22.0 million and will
be completed by May 2016.
For the year as a whole Booysendal's run-of-mine production totalled 1 670 437 tonnes (F2014: 1 233 089 tonnes)
with the tonnage milled increasing to 1 786 375 tonnes (F2014: 1 517 109 tonnes) at a head grade of 2.6g/t
(F2014: 2.6g/t).
Health and safety
As underground production ramped up, safety statistics regressed compared to the preceding year. The LTIIR
rose to 0.54 (F2014: 0.27) per 200 000 hours worked while the RIIR was also higher at 0.41 (F2014: 0.21).
Safety a wareness remains a key focus area for management at Booysendal. The mine continues to deliver a
good safety performance with a key differentiator being the mechanised mining method.
Costs and capital expenditure
As the mine has progressed towards steady state, costs have approached the sort of levels we might expect when
underground operations are delivering fully to the mill. Less material will be drawn from the surface stockpile
to augment underground material. Booysendal's total operating costs were R1 192.2 million against R806.8 million
in F2014 with unit operating costs 0.9% lower at R358 554/kg (F2014: R361 902/kg) and cash costs 11.3% higher
at R308 719/kg (F2014: R277 308/kg).
The 0.9% drop in unit operating cost in F2015 at Booysendal results from the lower depreciation charge
incurred by the mine following the change in depreciation methodology mentioned above.
The higher rand per tonne milled operating cost of R765/ton (F2014: R688/ton) and cash cost of R658/ton
(F2014: R527/ton) at Booysendal is attributable to the fact that in the prior year a higher proportion of
milled tonnage was sourced from the pre-production stockpile.
As Booysendal reaches its design capacity capital expenditure levels have declined accordingly. Total expenditure
excluding the Everest mine asset aquisition for the year came in at R398.8 million, below the planned level of
R483.4million (F2014: R539.6 million). Booysendal's F2016 stay in business capital is estimated at R112.5 million,
with project capital estimated at R250.0 million. Project capital will be spent on the continued development of
the Merensky decline to extract a bulk sample and the completion of the current UG2 decline. Total capital
expenditure since the start of the phase 1 Booysendal mine development is expected to close out at R4.5 billion.
CORPORATE ACTIVITY
- On 22 October 2014 shareholders were advised that the group had concluded a fully funded R6.6 billion BEE
transaction, in parallel with a successful equity raise of R4.6 billion. The transaction, which secures a
sustainable 35.4% BEE interest in Northam, was approved by shareholders on 19 March 2015. In terms of the
transaction Northam issued 112 195 122 shares (22% of Northam's new number of issued shares) to Zambezi Platinum.
Zambezi Platinum, a special purpose vehicle for the BEE transaction, acquired a further 47 710 331 Northam shares,
equal to 9.4% from the Public Investment CorporatioZ SOC Limited. Zambezi Platinum then listed its preference
shares on the JSE Limited on 11 May 2015. Zambezi Platinum's ordinary unlisted shareholders are the BEE
participants, who collectively hold 31.4% interest in Northam through Zambezi Platinum. Along with a further 4%
BEE credit recognised through the participation in profits by the employees' Toro Trust, the BEE holding of the
group now stands at 35.4%, in excess of the 26% required by the South African Mining Charter.
- On 10 February 2015 the company entered into a sale of assets agreement with AQPSA. In terms of the transaction
Northam acquired the Everest mining assets on 26 June 2015 for a total cash purchase consideration of R400 million
(excluding VAT) and, the payment of R50 million (excluding VAT) for the Everest mining right, will be paid to
AQPSA once the Section 11 consent has been granted by the Minister of Mineral Resources to transfer the
mining licence to Booysendal Platinum Proprietary Limited.
- On 10 March 2015 we advised shareholders that the 13.5% stake in the company held by Eurasian Natural Resources
Corporation since 2011, had been placed with a number of institutional investors, following a bookbuild exercise.
- During the year 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 Northam's total holding in the subsidiary to 100%.
NCP produces chrome from Zondereinde's UG2 tailings.
MINERAL RESOURCES AND RESERVES
The process to estimate the group's mineral resource and reserve is conducted on an annual basis. The latest mineral
resource and reserve estimation will be published in the 2015 integrated annual report, due for publication in early
October 2015.
CHANGES TO THE BOARD OF DIRECTORS
Mr Jim Cochrane resigned as a director on 15 April 2015. Mr Ralph Havenstein has taken over from Mr Alwyn Martin as
lead independent director on 18 August 2015. Mr Brian Mosehla's appointment as a non-executive director was approved
by the board on 18 August 2015. His appointment is effective from 19 August 2015. Mr Martin has stepped down as lead
independent and will remain on the board.
PROSPECTS*
Whilst the outlook for PGMs in the short to medium term is likely to remain subdued the economic and social factors
affecting the country have resulted in a precarious economic situation. Higher costs, mainly from labour and power
inputs have eroded operating margins. However, Northam is well placed to take advantage of opportunities that may
arise from the current adverse economic conditions.
The recent three-year wage agreement with the recognised union at the Zondereinde mine provides stability going
forward and allows management to focus on operational matters. On the eastern limb social unrest poses a risk to
normal operations at Booysendal.
The group's financial performance depends largely on better metal prices, and a stable working environment.
Management is confident that the group's strong balance sheet and prudent financial controls will provide
support until such time that metal prices rise sustainably.
*Information in this section has not been reviewed by the group's auditors
AUDITOR'S REVIEW
The preliminary financial statements of the group for the year ended 30 June 2015 (financial statements) have been
reviewed under the supervision of Mr M Herbst CA (SA), a registered auditor of Ernst & Young Inc., who are the
group's auditors. A copy of their unmodified reviewed report is available for inspection at Northam's
registered office. The auditor's report does not necessarily report on all the information contained in this
announcement/financial results. Shareholders are therefore advised that in order to obtain a full understanding of
the nature of the auditor's engagement they should obtain a copy of the auditor's report together with the
accompanying financial information from the issuer's registered office.
ACCOUNTING POLICIES – BASIS OF PREPARATION
The condensed financial statement has been prepared on the historical cost basis, except for certain 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 No. 71 of 2008 of South Africa, and incorporate the accounting policies which are consistent
with those adopted in the financial year ended 30 June 2014 with the exception of the adoption of the following
amendments, standards or interpretations with effect from 1 July 2014:
Standard Subject
IFRS 10, IFRS 12 & Investment Entities - Amendments to IFRS 10, IFRS 12 and IAS 27
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
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 financial results statements
are presented, as well as additional disclosures in the annual financial statements. They did not impact any
amounts recognised in the preliminary consolidated statement of comprehensive income or preliminary consolidated
statement of financial position.
RELATED PARTIES
From time to time 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 finite life and are also dependent amongst other things on geological, technical as
well as economic factors such as commodity prices and exchange rates. The global economic outlook and low
US dollar metal prices are a concern as Northam is an exporter of PGMs to global markets. Operations continue
to be under pressure due to increasing input costs (mainly power and labour) and lower metal prices.
The ZAR/US$ exchange rate however continues to weaken and to a certain extent cushions the effects of
lower metal prices.
Management has implemented thorough cost-cutting initiatives. This effort, along with the group's strong
balance sheet and current operational cash flows has informed the opinion of management that the group
remains a going concern.
PREPARATION
These preliminary results have been prepared under the supervision of the Chief Financial Officer,
Mr A Z Khumalo CA (SA). The annual results of the group will be published on the group's
website on Thursday, 20 August 2015.
EVENTS AFTER THE REPORTING PERIOD
Shareholders were advised on 30 July 2015 that the management of Zondereinde had signed a three-year
wage agreement with the recognised union at the mine.
DIVIDEND
Given the current difficult conditions in the industry, and the potential cash requirements of
the group's operations and for the continued development of its assets, the board has resolved
not to declare a dividend for the F2015 year (F2014: nil cents per share).
ON BEHALF OF THE BOARD
PL Zim PA Dunne
Chairman Chief executive officer
Johannesburg
18 August 2015
These results are available on the Northam website at www.northam.co.za and at Northam's registered office.
Johannesburg
20 August 2015
Sponsor and Debt Sponsor
One Capital
Date: 20/08/2015 08:00:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
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