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Send  Print  Share  RSS  Twitter  28 Feb 2011

RESULTS: Northam Platinum

 

Johannesburg, Feb 28 (I-Net Bridge) - Northam Platinum (NHM) on Monday reported diluted headline earnings per share were down 65% for the six months ended December 2010 to 20.9 cents as H1 results were adversely impacted by the effects of a protracted six-week strike, the associated slow production build-up post the strike and work stoppages on account of safety-related incidents at the company's Zondereinde mine.

Sales revenue was down 7.1% to 1.6 billion rand, while operating profit was 71.3% lower at 67.1 million rand. Headline earnings declined 65% to 78.8 million rand.

Reflecting the company's need to conserve cash, the board declared a reduced dividend of 5 cents per share, down from 20 cents a year ago.

The company said in total 31% of available production days were lost during th strike and the overall effect on production was a drop of 33% to 116,665oz (3,629kg).

A total of 34,797oz of concentrate purchases helped to mitigate the decline in sales ounces from 197,206oz in H1 2010 to 150,527oz for the current period.

With the lower output Northam was unable to take advantage of the effects of the higher average basket price.

Although the cost performance at Zondereinde was disappointing, the effect was also skewed by the significantly lower output. This was reflected in both operating and cash costs, in rand terms rising by 43.9% and 42.6% respectively to 313,026/kg and R279,936/kg.

In spite of the lower production volumes, the cost of sales was 3% higher, due mainly to the 19.8% increase in the cost of concentrates purchased. Given the significant drop in production volumes, the mere 3.3% decline in total operating costs reflects the relatively high contribution of fixed costs to total mining operating costs that continue to be affected by inflationary pressures.

The share of profits from Northam's 7.5% interest in the Pandora joint venture amounted to 1.4 million rand, while investment income declined by 53.4% to 50.4 million rand, owing primarily to the redemption and payment of the investment held in escrow to Anglo Platinum, as well as to lower interest rates.

Cash flow from operations was 47.3% lower compared to the previous period, in line with the decline in Northam's profitability, the lower interest earned and the increase in working capital, mainly attributable to trade and other receivables.

Looking ahead, the group said maintaining the 1:1 ratio of Merensky reef to UG2 reef is expected to continue to be a challenge at the Zondereinde mine. Given the stoppages and the restrictions associated with ore reserve availability, production for the full year is anticipated to be significantly lower than what was achieved in F2010.

Associated with the anticipated lower volumes, production costs will be difficult to contain. Even at normalized levels, operating costs are expected to increase at a higher rate than inflation, given the restrictions associated with accessing available resources and the effects of higher wage demands and other input costs generally in the mining industry, such as power, chemicals and steel. These costs and the expected lower production in F2011 will negatively impact unit costs in the second half of the financial year, it saud.

Group earnings will be largely determined by these costs and by the average rand basket price received in F2011. This is currently at a higher level than the average price realised of R308,886/kg during this reporting period.

I-Net Bridge, Tel: +27-11-280-0644, newsdesk@inet.co.za

Copyright 2011 I-Net Bridge. All Rights Reserved


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