Northam Platinum has added R300m to its capital expenditure budget for next year as mining input cost inflation puts pressure on the group’s growth ambitions.
The company is battling to bring its Eland mine to a profitable level of production as rising electricity and labour prices drive up input cost inflation.
Northam racked up just shy of R3bn in electricity costs in the year to end-June, which is nearly R500m higher than the previous year’s power bill. Employee costs were well above R9bn — nearly R767m higher than the previous financial year.
These headwinds reflect broader trends in SA’s PGM mining sector, which has recorded the highest increase in input costs in recent months, driven largely by elevated labour expenses.
The sector, which employs about 171,000 workers, spent nearly R20bn on compensation in the first quarter of 2025 alone, according to the Minerals Council SA.
Against this backdrop, Northam reported a narrower operating margin of 10.9% in the 2025 financial year, from 15.7% previously.
The pressure on its balance sheet is likely to put strain on the miner's growth ambitions, which hinge on bringing its Eland mine up to speed with its other two operations.
The group has high hopes for Eland, a shallow PGM and chrome asset acquired from mining giant Glencore in 2017 for R175m, which it sees becoming a significant chrome producer in the coming years. It is expected to start breaking even once it reaches an excess of 100,000oz.
However, the operation has been bleeding cash as it ramps up to planned steady state, with operating losses of nearly R585,000 in the 2024 financial year deepening to a R768,000 loss in 2025.
In its latest annual results, Northam said Eland still required “heavy lifting” to bring its mining operations up to speed. Work was also needed on the processing front, it said.
The company now plans to spend R5.2bn in the coming financial year, in the hope of lifting its output to 910,000oz-930,000oz of platinum group metals (PGM). In the year to end-June, it delivered just shy of 900,000oz.
Amid surging electricity and labour costs, it reported a slump in annual earnings, with operating profit down 25.5% year on year at R3.59bn.
Platinum prices have rallied 50% this year as SA’s dwindling supply of the metal worked its way into the market. In the build-up to its annual results, however, Northam CEO Paul Dunne warned that a low price environment continued to constrain earnings across the entire sector, particularly amid elevated input costs.
“The sector’s ability to respond to lower PGM prices by suspending or reducing costs is limited, as the majority of mining costs are fixed in nature. This is consequently constraining cash generation across the sector, requiring ever more prudent management of liquidity,” said Dunne.
In an effort to shelter investors from the gloomy outlook, the miner declared a final dividend of 200c per share, nearly triple the amount awarded to shareholders in the 2024 financial year.
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