JOHANNESBURG (Business Day) -- Production and profits hit new records at platinum miner Northam Platinum [JSE:NHM; OTCPK:NMPNF] in the year to June but it warned yesterday that shareholders should expect "a modest drop" in earnings in the current financial year.
Sales revenue rose 53.5% to R2.4 billion ($352 million) compared with last year, reflecting record production of 361,599oz of precious metals in concentrate as well as a record price of R189,286/kg ($27,800/kg) on average for Northam's basket of platinum group metals.
After a small decrease in unit cash costs, operating profits trebled. Headline earnings rose to 300.9 cents a share from 107.3 cents. The dividend was increased fourfold to 280 cents (70 cents) a share.
Northam CE Glyn Lewis said the group had made steady operational progress with a 25% increase in development metres and maintenance of good head grades. There was a slight increase in the proportion of UG2 reef mined, which contains more nonplatinum metals than Merensky reef. Because of the surge in the rhodium price, UG2 reef "was no longer the poor cousin for us".
Northam marketing manager Jerry White said platinum, which contributed 61% of Northam's revenue, was driven by demand from the car-engine catalyst sector, while sales of platinum jewellery had stabilised. Palladium, which contributed 8% of revenue, experienced diminished demand from the engine catalyst sector but palladium jewellery had made significant strides.
The price of rhodium, which contributed 8% of Northam's revenue, ranged from $1790/oz to $6250/oz in the past year as demand, largely from the engine catalyst sector, had exceeded supply.
Nickel, which contributed 8% of revenue, hit new peaks during the year, driven by demand from the stainless steel sector.
White said the fundamentals for platinum and rhodium were sound but the outlook for palladium was less certain as supplies would ensure the market remained in surplus. Some price softening was expected for nickel.
Lewis said Northam's costs were likely to come under pressure this year as it would be difficult to keep wage increases in line with inflation and maintain production levels under more difficult mining conditions.
There have been delays in bringing Northam's Booysendal project to production. Mvela Resources, which has a 22% stake in Northam, has an agreement with operator Anglo Platinum to take 50% of Booysendal.
Prefeasibility work on the project, from a technical point of view, was going well, Lewis said.
Anglo Platinum [JSE:AMS] director Bernard van Rooyen said some structural issues still needed to be agreed on between the parties relating to Mvela's empowerment.
He believed the issues would be resolved "fairly shortly."
