Northam Platinum has increased its revolving credit facility, a move meant to increase the group’s financial muscle as it fights to remain stable amid falling platinum group metal (PGM) prices.
“Our main defence against softer metal prices is to control internal unit cost inflation. To this end, we have instituted various initiatives across the group, targeting both operating and capital expenditure,” CEO Paul Dunne said as the group reported full-year earnings to end-June on Friday.
“These measures, together with our increased production base, have allowed us to limit our increases in unit cash costs to below that of general mining inflation.”
The mining house said it had increased its revolving credit facility from R10bn to R11.335bn. The proactive measure bolsters Northam’s liquidity, with the aim of ensuring sustained operational resilience.
“Northam has proactively implemented the [facility] increase to further enhance its liquidity position and balance sheet flexibility in light of the current depressed PGM pricing environment and in the event that these circumstances prevail for a sustained period of time,” the company said.
With net debt of R3.1bn as at June 30, the group’s banking facilities remain fully undrawn and available. This is in addition to Northam’s cash on hand of about R7.5bn at the same date.
Northam says this gives it the flexibility to continue settling its domestic medium term notes as and when they mature.
For the year to end-June, the group decreased its outstanding debt through the settlement of notes with a nominal value of R4.3bn, as these matured in the ordinary course of business; R4.2bn worth of notes will mature in the present financial year.
Northam CFO Alet Coetzee said: “The revolving credit facility increase provides Northam with additional liquidity and balance sheet flexibility in line with the group’s continued focus on proactively and prudently managing these aspects [amid lower PGM prices]. Northam remains appreciative of the continued support and additional commitment from its consortium of lenders.”
The facility move comes as the company reported falling PGM prices caused a 22% drop in revenue from the previous year to R30.766bn. Cost increases were driven by rising energy prices and labour bills, which account for 40% of overall expenses.
Earnings before interest, taxation, depreciation and amortisation (ebitda), as well as impairments, stood at R6.270bn, down 62% from the previous year. This excludes the loss on the sale of shares it held in rival Impala.
At the half year, Dunne warned that market conditions were the worst in three decades.
As such, Northam said it would defer and temporarily halt some of its development projects to “preserve capital” as it and other platinum miners grapple with the price drops.
That trend continued in the second half of the year, with the mining boss saying “the combination of geopolitical issues, global inflation and the threat of a global recession, together with the penetration of battery electricity vehicles in China, have resulted in material declines in PGM prices. This difficult market condition has put strain on the PGM industry across the value chain”.
The group had also been saddled with high backup power costs to contend with load-shedding, which Eskom has kept at bay for the past five months.
The company declared a cash dividend of 70c per share for the period, down from 600c a year before, working out to a gross cash dividend of about R277.4m, to be settled from income reserves.
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