NORTHAM Platinum said on Friday it was working towards the early maturity of its empowerment transaction as it announced bumper profits for the half year ended December 2020.
Northam, South Africa’s fourth-largest platinum producer, said it had entered into discussions for a potential transaction to accelerate the maturity of the empowerment transaction with Zambezi Platinum, while maintaining its empowerment status.
Chief executive Paul Dunne said Northam had taken the initiative to enter into proactive discussions with Zambezi, with a view to secure a successful and sustainable outcome.
Dunne said more information would be provided to the market in due course.
Asked whether Northam’s empowerment status would remain intact after the potential transaction, he said: “I do believe we will remain empowered and should remain empowered in compliance with the Mining Charter 2 as it is known; for further commentary you will have to wait until the company makes an announcement.”
In 2015, Zambezi issued preference to buy a 31 percent stake in Northam in line with its empowerment ambitions.
Northam owns 87.5 percent of Zambezi’s preference shares after embarking on a share buyback strategy to reduce its preference share dividend expense and liability and to mitigate risks for dilution of shareholders at the end of the 10-year lock-in period in 2025.
Northam, which operates the Eland, Booysendal Zondereinde mines, did not declare an interim dividend, saying its board was of the view that the most efficient way to return value to shareholders was to purchase the Zambezi preference shares.
Dunne believed that platinum group metals demand would remain strong over the coming decade.
Financial highlights for the half year ended December include the 75.4 percent surge in operating profit to R5.2 billion, and 51.9 percent increase in sales revenues to R11.9bn from R7.8bn. The higher revenue was attributed to the 49.7 percent increase in average basket price to $2 160 (R31 757) an ounce from $1 443 an ounce a year earlier coupled with the 9 percent softening average rand dollar exchange rate and the 4.4 percent fall in 4E ounces sold.
Commenting on the results, Anchor Capital’s investment analyst, Seleho Tsatsi, said Northam had previously said it believed the best way for it to return cash to shareholders was by buying Zambezi preference shares.
“At this stage, Northam owns the vast majority of Zambezi preference shares. So in the future, we may see the company start to repurchase its own shares or pay dividends,” Tsatsi said.
Northam said that all projects that were suspended after the Covid-19 outbreak had been reinstated during the reporting period and the impact on its medium-term production target of 1 million ounces of platinum, palladium, rhodium and gold a year was minimal.
The group’s equivalent refined metal from its own operations grew by 15 percent in December, despite the ongoing phased restart of operations, particularly impacting the conventional Zondereinde mine, where 90 percent of mining crews had returned to work by the end of December 2020.
The group also recorded lower production volumes in the fourth quarter of 2020 due to logistical hurdles which resulted in reduced metal volumes.
The share price on Friday decreased 3.89percent to R244.76 on the JSE.
dineo.faku@inl.co.za
BUSINESS REPORT ONLINE