Northam's interims halve amid soft PGM prices

Northam Platinum saw its earnings nearly halve in the six months ended December 31, 2024, battered by soft platinum group metals (PGM) prices.

Headline earnings plummeted 49.7% to R238.24 million. Northam cut its interim dividend (tied to a 25% headline earnings policy) from R1 by 85% to 15 cents per share. 

Despite Northam's CEO, Paul Dunne, presenting the interims on Friday, saying the South African mining firm is poised for growth when demand rebounds, the market was spooked.

Platinum counters were bludgeoned lower on the JSE at the close: Northam's shares tanked 4.28% to R96.79. Anglo American Platinum shares bled 4.73% to R562.84, while Impala Platinum shares fell 3.81% at R88.13.

Sales revenue fell 3.1% to R14.5 billion from a year earlier, stung by an average PGM basket price thatDunne said “had stabilised over the past 18 months,” settling at a floor of around R32 000 per 4E ounce - close to the current spot of R33000. Cost of sales also rose 6.9% to R13.4bn driven by escalating energy costs, slicing operating profit to R1.1bn from R2.4bn. Ebitda dropped to R1.8bn from R3.2bn.

Despite challenging conditions, the company has boosted output at its Zondereinde, Booysendal, and Eland mines, sharpened efficiency, and leaned into sustainable energy, betting on a market upswing it deems inevitable.

Production was ramped up. Equivalent refined 4E metal - platinum, palladium, rhodium, and gold - climbed 3.7% to 451 213 ounces from 434,977 ounces. Chrome concentrate output surged 7.5% to 716 622 tons, propelled by higher UG2 throughput and doubled yields at Eland.

Dunne, in a webcast, said: “Each of the mines has performed well despite a very challenging operating environment. In addition, we’ve continued to progress our project pipeline, particularly the development of Eland mine, the 3 shaft project, and upgrades to our metallurgical facilities.”

 He outlined how capex spend is positioning the mining firm for growth. At Zondereinde, the 3 shaft project - part of a R4.6 billion Western extension push since 2021 - nears a 2026 finish. 

“The combination of an exceptional ore body, together with the logistical benefits that 3 shaft will bring, bodes well for this world-class operation,” he said.

Booysendal exceeded steady-state volumes, boosting mill tonnage 3.4%, while Eland’s ramp-up lifted output 15% to 37 000 ounces.

Dunne said guidance for PGM production, costs, and sales from own operations holds steady from August, but third-party purchases are bumped to 90 000 to100 000 ounces on better yields. Chrome sales are now forecast at 1.5 million tons, up from 1.45 million tons, with 4E sales eyed at 1.02 million ounces, up from 0.98 million ounces.

Dunne said, “This market will turn." He forecast a 1 million-ounce platinum deficit - 15% of 2025 demand - as South African output slips from a historic 5.4 million ounces to 3.8 million, recycling margins erode, and demand holds in autocatalysts, industry, and jewelry.

“The longer these challenging market conditions persist at this price, the greater the correction will be,” he added.

Meanwhile, in response to a question in the Q&A, Dunne dismissed American PGM tariffs as “highly unlikely” given South Africa’s 80% grip on global platinum reserves and the US's need for the metal.

In response to another question, he said while skilled staff are being lured by rivals in this PGM price trough, succession planning has minimized productivity or morale hits.

Looking ahead, Dunne outlined five sustainable strategies for Northam's growth.

First, renewable energy will trim a 12% electricity cost share by 25% by 2027, with 900 000 megawatt hours - 60% of usage - from solar and wind, saving R700 million annually. An 80 MW solar farm is due mid-2026 wtih a 140 MW wind deal for 2027.“We aspire to further reductions by decade’s end,” Dunne said.

Second, chrome yields target 1.8 million tons by 2029, with 1.6 million tons set for 2026; Zondereinde’s chrome plant, now at 40% yield, aims for 490 000 tons this year. Third, milling excess UG2 from Zondereinde at Eland aims to relieve concentrator strain. Fourth, group-wide procurement taps scale for savings. Fifth, Northam says contractor headcounts will ease post-growth, cutting overheads without denting output.

 BUSINESS REPORT