Northam warns of "inevitable depletion" for PGM industry
Northam warns of “inevitable depletion” for PGM industry
By David McKay
SOUTH Africa would be unable to sustain 3.9 million ounces in annual platinum group metals (PGMs) production owing to the slump in metal prices over the past two years, said Paul Dunne, CEO of Northam Platinum
“Current prices remove the incentive price for new mines which will see a depletion of South Africa’s resource base. The damage has been done and depletion is inevitable,” he said in response to questions at the firm’s full year results presentation today.
Dunne’s comments are similar to those made by Impala Platinum CEO Nico Muller on Thursday. Speaking at his firm’s full year results he said new projects were impossible in the current price environment.
“It is highly improbable we will see new investment in new prospects especially if they don’t have processing capacity. New projects are highly improbable,” he said.
Dunne said a base seemed to have formed at around R33,000 per ounce for the metals the firm produced. While now stable, he said his price level would have “significant consequences for the world’s PGM industry.” He leavened his comments however a bit later in his presentation, saying: “these cycles are not uncommon.
“I’ve been in the industry since 1987. It will resolve itself”.
That time can’t come quick enough, however. Dunne pointed to multiple interest rate cuts in the US as a possible trigger while the reduction of speculative long positions in the forward market was also a good sign. But he warned the market to hold fire on calling the end to customer destocking.
He also said a 10% deterioration in the rand basket price for metals would see the company implement a harvesting strategy on its Eland mine in order to protect its Zondereinde and Booysendal mines.
To this end, Northam today unveiled an increase increase in its revolving credit facility by about R1.3bn to R11.335bn. Northam said this was to protect it given poor market conditions and “in the event that these circumstances prevail for a sustained period of time”.
As previously flagged Northam reported a decline in basic earnings of some 29.6% to R4.61/share for the 12 months. On a headine basis, Northam reported an 81.6% year-on-year decline to R4.45/share.
A final dividend of 70 South African cents was declared taking the total dividend for the 12 months to R1.70/share (or R277.4m), equal to 26.6% of headline earnings. Northam paid a total dividend of R6/share for the previous financial year.
Northam ended the 12 months with R3.1bn in net debt down from R9.4bn as the close of the previous financial year. It repaid R4.3bn in domestic mediium term. Cash on hand totalled R7.5bn as of end-June.
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