Big South African platinum miner feels the pressure

Northam Platinum reported a significant downturn in its operations for the last six months of 2024, as weak metal prices and global inflationary pressures saw the mining giant’s profit more than halve.

Northam is a South African company focused on the mining, processing, and marketing of platinum group metals (PGMs), primarily platinum, palladium, and rhodium.

It is considered a mid-tier producer, smaller than giants like Anglo American Platinum but still significant.

The company’s main operations are centred around two mines – Zondereinde Mine and Booysendal Mine.

Northam released its interim results for the six months ended 31 December 2024 – the first half of its 2025 financial year – on Friday, 28 February 2025.

These results revealed a weak performance for the miner, which reported that sales revenue decreased by 3.1% to R14.5 billion, whilst the cost of sales increased by 6.9% to R13.4 billion.

This resulted in the miner’s profit for the period dropping from R532.62 million in the first half of its 2024 financial year to R239.87 million in the 2025 financial year – a 55% decrease.

The company’s basic earnings per share also fell by around 55%, from 136.5 cents per share to 61.5 cents.

The miner attributed this decline largely to weak PGM pricing. It explained that PGMs are priced in US dollars while operating costs are denominated in South African rands.

Therefore, exchange rate and commodity price volatility results in significant financial exposure. 

“Northam is a price taker, with no ability to influence the price of its commodities or the exchange rate offered, therefore impacting cash flows and profitability,” it said.

The miner explained that it operates a largely fixed-cost business. It considers increasing production and doing so efficiently its best defence against current global inflationary pressures and persistently weak metal prices. 

In the first half of its 2025 financial year, Northam reported a 3.7% increase in equivalent refined metal from own operations.

“Our capital allocation and treasury decisions have been guided by our growth strategy, and our results have benefitted from our consistent approach to growing our production base down the industry cost curve,” the miner said.

The miner’s operations generated cash to the value of R419.2 million, impacted by negative working capital movements amounting to R1.2 billion relating to a build-up of inventory and the settlement of trade and other payables.

As at 31 December 2024, Northam’s gross cash balance amounted to R4.0 billion.

The miner also announced that, in the six-month reporting period, it increased its existing revolving credit facility (RCF) from R10.0 billion to R11.3 billion (RCF Increase). 

Northam proactively implemented the RCF Increase to further enhance liquidity and balance sheet flexibility in light of the current weak PGM pricing environment and in the event that these circumstances prevail for a sustained period of time.

Northam’s total available banking facilities now amount to R12.3 billion, comprising the RCF of R11.3 billion and existing general banking facilities of R1.0 billion. Both these facilities remain undrawn.

Looking forward, Northam said cost containment is essential to the group’s sustainability. The miner also committed its management to setting realistic but stretched performance targets for the business.

“The successful execution of Northam’s strategy will positively affect shareholders and stakeholders alike,” it said.

“The group has a focussed capital expansion programme in place to secure its future through the creation of long-life, low-cost sustainable operations.” 

“Successful project execution is key to creating a sustainable business for the long-term benefit of all of Northam’s stakeholders.”

Northam declared an interim dividend of 15 cents per share, down from the 100 cents interim dividend it reported the year earlier.