Northam investing R5.5bn in platinum growth projects

JOHANNESBURG (miningweekly.com) – Platinum mining company Northam on Friday elaborated on the company’s suite of four growth projects timed to fill an expected future demand pull unmet by constrained future South African platinum supply.

The Johannesburg Stock Exchange- (JSE-) listed company, headed by CEO Paul Dunne, expects the current challenging market conditions and stressed balance sheets to constrain primary supply from South Africa and global demand to grow in line with world gross domestic product.

Longer term, the company is optimistic about a more positive dollar pricing environment for its platinum-group metals (PGMs).

In addition to the company’s stable production base from the conventionally mined Zondereinde platinum mine and the mechanised Booysendal North mine, the company’s board has approved a total capital expenditure (capex) of R5.5-billion on four growth projects.

By far the biggest of these is the R4.2-billion, six-year, 240 000 oz/y Booysendal South project on which work has already begun and which will reach steady state in 2022.

This project is made up of two upper group two (UG2) mining modules – accessed from a capital-lowering common central portal complex – and one small Merensky reef mining module, similar to the north mine.

At the company’s presentation of 15.7% higher production of 436 960 oz for the year to June 30 when operating profit declined to R383-million on a 6.3% margin, pictures of box cut guniting and development of a pollution control dam were flashed on a large screen. (Also watch attached Creamer Media video).

Work on an aerial conveyor system from a supplier in Austria will deliver ore from the central portal complex to a 250 000 t/m PGM concentrator plant and integrated chrome extraction plant 4 km away, which was acquired with the takeover of the Everest mine from Aquarius Platinum.

Dunne also flashed up details of the three other projects, which include the R300-million, two-year, 25 000 oz/y Booysendal Merensky Phase 1 project at the Booysendal North mine, on which R75-million has already been spent.

Infrastructure has already been established for initial mining to be accompanied by the development of the decline system so that additional mining sections can be established if needed and swing production can be provided.

The Booysendal UG2 North Deepening project, on which R60-million has already been spent and which involves the addition of two extra mining levels, is seen as a logical, capital-efficient extension of the original Booysendal footprint.

The conveyor-decline cluster for this R270-million, three-year, 30 000 oz/y project is already totally on reef and will thus offer an immediate payback element.

The fourth project is the Zondereinde smelter expansion project, on which R292-million has already been spent and commissioning is on schedule for the second half of next year.

This R750-million project, involving the construction of a 20 MW furnace and dryer, follows on the extension of Northam's strategic partnership with platinum-refining company Heraeus, which has contributed the first €10-million of a total of €20-million in exchange for a renewal of the current refining arrangements and guarantees a supply of refined metal to the German company.

The company's mineral reserves have risen from 19.1-million ounces last year to 24.5-million ounces now.

The company, already with long-life Booysendal and Zondereinde operations, has a strategy of growing down the cost curve by developing shallow, mechanisable orebodies.

“Project execution will be key,” Dunne said at the presentation attended by Creamer Media’s Mining Weekly Online.

NEW MINING CHARTER

In line with the new Mining Charter’s focus on ownership and employee living conditions, Northam has extended black economic empowerment (BEE) equity ownership to 31.4%, well above the current 26% requirement, will have the Zondereinde hostels converted to single room accommodation by December and a number of employees have taken up the company offer to become first-time homeowners.

Zambezi Platinum, the company created to house the newly constituted black shareholding in Northam Platinum, was listed on the main board of the JSE in May last year as the kernel of JSE-listed Northam’s R6.6-billion BEE ownership deal.

A ten-year lock-in was sweetened by an immediate R400-million to Zambezi BEE shareholders.

Zambezi simultaneously made R4-billion in cash available to fund Northam growth, one already realised with the acquisition of Everest Platinum, now Booysendal South.

The special BEE vehicle issued tradable preference shares, in which a broader public beyond Northam shareholders have the opportunity to invest.

Northam CFO Ayanda Khumalo reported 5.1% higher normalised headline earnings of R444-million.

Revenue increased by 1% to R6.1-billion on lower prices but higher volumes.

Operating costs rose by 15.3% to R5-billion on higher production volumes, but unit costs decreased by 1.5% to R365 485/kg.

Northam shares rose 1.3% on the JSE to R48.35 a share by mid-afternoon.