Northam falls on JSE after R800m loss from RBPlat share deal

Northam Platinum Mine. Photo: Supplied.

Northam Platinum Mine. Photo: Supplied.

Published Feb 20, 2024


Northam Platinum plunged 8.1% in opening trade on the JSE yesterday as investors responded negatively to the company’s R800 million loss on its disposal of Impala Platinum shares, following the world number two PGM miner’s mandatory offer to Royal Bafokeng Platinum shareholders.

In afternoon trade on the JSE, Northam’s price gap narrowed and it was trading 4.84% weaker at R106.07. The stock is 15.18% weaker in the past 30 days, and softer by 20.63% in the year to date.

“Northam dropped 8.1% on the open thanks to the trading update. The market will never miss an opportunity to punish a share for managements’ stupidity (RBPlats deal),” said market analyst Martin Rogers.

Northam disposed of all of its shares in RBPlat after Implats made a mandatory offer amounting to R90 per share to shareholders in the company.

Northam Holdings received about R9 billion in cash and 30 065 866 Implats shares after the scheme, with the Implats shares subsequently disposed of for R3.1bn, representing a weighted average price of R103.95 per Implats share.

“Due to the decrease in the value of Implats shares from the date of the acceptance of the Implats Mandatory Offer to the date of sale, a loss of R799.7m was recognised on the sale of the Implats shares,” Northam Platinum explained.

Despite mounting criticism over the R800m loss, Northam Platinum continues to defend it, saying the Implats offer “presented a unique and attractive opportunity to lock in substantial value” against the backdrop of “a strong cash underpin that was not adversely affected by the steep decline in PGM equity valuations”across the sector.

Northam Platinum said: “This also presented an opportunity to significantly strengthen our balance sheet and liquidity position, which in turn provides additional flexibility and optionality.”

In the half-year to end December 2023, Northam Platinum recorded a 25.5% dip in sales revenues to R15bn despite sales volumes picking up 10.4% to 457 357 ounces. The company also had a 0.6% increase in refined 4E ounces from own operations after a solid performance from all of its mines.

A 42.3% decrease in the rand price per 4E ounce to R24 269 was worsened by a 6.7% increase in group unit cash cost per equivalent refined 4E oz.

This resulted in a 73.3% decrease in gross profit to R2.4bn while Ebitda was also 68.1% lower at R3.2bn. The company is now expecting basic earnings per share for the interim period to fall by between 86.4% and 96.4%.

Capital expenditure stood at R2.4bn. Net debt amounted to R2.4bn.

“Net debt as at 31 December 2023 improved to R2.4bn with a rolling 12-month net debt to Ebitda ratio of 0.24, and cash and cash equivalents of R11.8bn, with additional available undrawn facilities of R11bn,” Northam Platinum said.

It said all of its operations had been subject to Eskom load curtailment, although a combination of the company’s load management protocols, as well as increased on-demand self-generation capacity, was helping to limit “consequential” production losses.

Northam Platinum’s programme to further increase self-generation capacity was now “well advanced and will assist in mitigating potential losses resulting from Eskom load curtailment” events.

Due to depressed PGM prices, Northam Platinum has decided to prudentially manage liquidity. As a result of this, the company will focus on growing production down the industry cost curve by developing shallow, mechanisable orebodies, optimise existing operations and utilise its balance sheet to grow the business, with pipeline projects being funded through cash generated from operations as well as utilisation of the R11bn in available bank facilities.