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Trading statement and trading update
NORTHAM PLATINUM LIMITED
Incorporated in the Republic of South Africa
(Registration number 1977/003282/06)
Share code: NHM ISIN: ZAE000030912
Debt issuer code: NHMI
Bond code: NHM002 Bond ISIN: ZAG000129024
Bond code: NHM006 Bond ISIN: ZAG000158577
Bond code: NHM007 Bond ISIN: ZAG000158593
Bond code: NHM009 Bond ISIN: ZAG000158866
Bond code: NHM011 Bond ISIN: ZAG000159237
Bond code: NHM012 Bond ISIN: ZAG000160136
Bond code: NHM013 Bond ISIN: ZAG000162181
Bond code: NHM014 Bond ISIN: ZAG000163650
Bond code: NHM015 Bond ISIN: ZAG000164922
Bond code: NHM016 Bond ISIN: ZAG000167750
Bond code: NHM017 Bond ISIN: ZAG000167891
Bond code: NHM018 Bond ISIN: ZAG000168097
Bond code: NHM019 Bond ISIN: ZAG000168105
(“Northam”, “company” or the “group”)
TRADING STATEMENT AND TRADING UPDATE
In terms of paragraph 3.4(b) of the JSE Limited Listings Requirements, companies are required to publish
a trading statement as soon as they are satisfied, with a reasonable degree of certainty, that the financial
results for the current reporting period will differ by at least 20% from the financial results of the previous
corresponding period.
Northam expects to achieve a record operating profit for the year ended 30 June 2020 (“F2020”),
underpinned by a solid performance at all operations and higher prices realised for our basket of metals.
This is despite significant production losses associated with the national lockdown (“Lockdown”) and
phased restart of mining activities following the onset of the COVID-19 pandemic in South Africa.
The group achieved production from own operations of 515 370 4E oz, representing a marginal 0.9%
decrease from the year ended 30 June 2019 (“F2019”) (F2019: 519 954 4E oz). Purchased material
increased by 212.9% to 72 443 4E oz (F2019: 23 154 4E oz). Sales volumes amounted to 582 686 4E oz,
which included ore sales (F2019: 583 069 4E oz.), whilst total revenue per platinum ounce sold increased
by 78.8% to R53 009/Pt oz (F2019: R29 640/Pt oz), resulting in a cash margin per platinum ounce in excess
of 40%.
The group achieved record sales revenue, record operating profit and record earnings before interest, tax,
depreciation and amortisation (“EBITDA”) for the year. These record outcomes were achieved
notwithstanding the impact of mine and production stoppages which occurred as a result of the COVID-19
induced Lockdown. Prior and up to the commencement of the Lockdown period, the group was on track to
achieve record production from own operations during F2020.
F2020 Financial Highlights
F2020 F2019
Basic earnings per share 562.78 – 622.02 cents 17.2 cents
Headline earnings per share 562.40 – 621.60 cents 15.8 cents
Normalised headline earnings per share 624.53- 690.27 cents 270.1 cents
Number of shares in issue including treasury
shares 509 781 212 509 781 212
Weighted average number of shares* 349 875 759 349 875 759
* Used to determine the basic and headline earnings per share, calculated as 509 781 212 shares in issue less
159 905 453 shares held by Zambezi Platinum (RF) Limited (“Zambezi”). Zambezi is Northam’s major empowerment
shareholder and Zambezi’s financial results are consolidated into the group’s financial results.
However, the Lockdown resulting from COVID-19 and consequential production stoppages have been
disruptive, and Northam’s proactive and positive response measures minimised the impact on production
to an equivalent estimated loss of 108 685 4E oz. Northam would like to extend its sincere appreciation to
management and our employees, in restarting the operations in a safe and effective manner and making a
concerted effort to achieve normalised production. Surface ore sources at Eland mine, together with
streamlined operations at the mechanised Booysendal mine, enabled a swift restart. By financial year end,
Booysendal mine and Eland mine were again operating at full complement, whilst Zondereinde mine was
operating at 80% capacity. Normalised production is expected to resume at Zondereinde by the second
half of the current financial year ending 30 June 2021 (“F2021”) with a corresponding reduction to our F2021
production estimate.
The health and wellness of our employees and our host communities were given priority in our response to
COVID-19. Our program for restarting operations drew on our many years of experience in managing
significant health threats such as HIV and tuberculosis. We followed the prescripts of the National Institute
for Communicable Diseases and the amended regulations pertaining to the Disaster Management Act No.
57 of 2002, working in collaboration with the various government departments and the Minerals Council.
Our program encompassed screening and identification for early diagnosis and treatment, as well as health
promotion through a variety of educational initiatives.
All growth projects progressed well during F2020. Booysendal South has advanced into production ramp-
up, Zondereinde Western extension is ahead of schedule and on reef development of Eland mine continued
whilst simultaneously increasing mineable reserve.
Despite significant logistical hurdles associated with COVID-19, including border closures that made the
distribution of refined metal challenging, the group maintained robust refined metal sales of 560 238 4E oz.
This highlights the strong relationships that we have developed and maintained with our industrial customer
base over many years.
Group unit costs were negatively impacted by lower production levels, as operating costs continued close
to pre-Lockdown levels. This was largely attributable to our decision to maintain payment of salaries and
ancillary benefits to all of our employees during the Lockdown period and phased restart, notwithstanding
the lost production and the phased restart’s negative impact on productivity.
In light of this, and as part of our COVID-19 response measures, the group proactively implemented a multi-
pronged action plan to preserve liquidity. This entailed a restructuring of the company’s domestic medium-
term note programme to significantly extend maturity dates of notes in issue, to raise some additional debt
funding and to generally smooth the maturity profile of the various note series (“Note Switch”). In addition,
our revolving credit and general banking facilities were refinanced on more favourable terms, extending the
maturity date whilst reducing the cost of debt. Both facilities were undrawn at financial year end.
In addition to direct production and revenue losses associated with COVID-19, the group incurred once-off
costs directly related to the COVID-19 pandemic and the Lockdown period of R977.2 million (the bulk of
which relates to employee costs).
Total group capital expenditure reduced year on year to R2.4 billion as a result of capital intensive programs
at Booysendal mine either having been completed or nearing completion and thus tapering down in terms
of total annual expenditure. R2.0 billion was incurred on expansionary capital expenditure and R382.2
million on sustaining capital expenditure. A decision to temporarily scale back on specific growth projects
in the interest of liquidity preservation was made after the onset of COVID-19 and the concomitant
Lockdown period. However, the group remains committed to its strategy of developing low-cost, long-life
assets in order to position itself at the lower end of the industry cost curve and the group envisages no
lasting effects in this regard.
The development of our project pipeline, which builds on our existing asset base, is bearing fruit and will
continue to deliver a strong and sustainable financial performance in the coming years. Despite the effect
of the COVID-19 pandemic, Northam achieved record financial results for the year and generated significant
free cash. Our forecasted production growth, together with favourable rand denominated metal prices, are
expected to further support and enhance free cash flow generation over the medium-term.
Our strategy of returning value to shareholders remains unchanged and can be implemented through the
payment of dividends, a share buyback or a purchase of Zambezi preference shares. We believe that, to
date, the most efficient mechanism to return value to Northam’s shareholders has been through the
purchase of Zambezi preference shares.
The acquisition of the Zambezi preference shares reduces the preference share dividend expense and
liability included in the consolidated financial statements, as well as Northam’s potential financial exposure
under the guarantee provided to holders of Zambezi preference shares, should the guarantee be called
upon. Furthermore, in the event that Zambezi elects to redeem the Zambezi preference shares through a
distribution of Northam ordinary shares held by Zambezi, then the redemption of the Zambezi preference
shares held by Northam at such time will result in a distribution of Northam shares to Northam, thereby
reducing the number of Northam shares in issue.
To this end, Northam has continued to purchase Zambezi preference shares and held 53 595 254
preference shares at 30 June 2020, representing c.33.5% of all Zambezi preference shares in issue.
Subsequent to the financial year end, Northam acquired an additional 11 498 633 Zambezi preference
shares and currently holds 65 093 887 preference shares, representing c. 40.7% of all Zambezi preference
shares in issue. Purchases to date have returned R4.8 billion of value to Northam shareholders, R4.6 billion
of which was returned post F2019. Despite these purchases, the group achieved a net debt position of R3.3
billion with a net debt to EBITDA ratio well below 1 : 1 as at 30 June 2020. The average premium (expressed
as a percentage to face value, being the capital amount and all accrued preference share dividends,
calculated until the date of each acquisition) paid on these purchases has been less than 2.2%.
Northam’s purchases of Zambezi preference shares to date has reduced the preference share dividend
expense in the consolidated financial statements for F2020 by R299.7 million. The full positive impact on
the income statement arising from some of these purchases will only accrue in F2021 and this, combined
with the compounding effect of dividends accruing on Zambezi preference shares, is expected to contribute
positively towards reducing the preference share dividend expense in future.
The group’s balance sheet strength and the relatively quick recovery to production capacity, combined with
the positive impact on medium term liquidity arising from the Note Switch, collectively position the group
well to continue to proactively and aggressively return value to shareholders.
In summary, whilst F2020 has been a challenging year in the face of the global COVID-19 pandemic and
its wide-ranging knock-on effects, the company has performed well. Northam has efficiently managed the
impact of the COVID-19 pandemic and has not wavered from its strategy of pursuing production growth
and asset diversification. We have delivered a meaningful return of value to our shareholders and look
forward to continuing to do more over the coming year.
The financial information contained in this announcement has not been reviewed or reported on by
Northam’s auditors. The audited results for the year ended 30 June 2020 are expected to be published on
or about 28 August 2020.
Johannesburg
12 August 2020
Sponsor and Debt Sponsor
One Capital
Date: 12-08-2020 07:27:00
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