This is a result of the global economic outlook and low US dollar metal prices which affect Northam Platinum as an exporter of platinum group metals (PGMs) to global markets.
In its half year results for the period ended 31 December 2015, the company said that management had undertaken initiatives to improve efficiency and to reduce costs as far as possible. It has also, where necessary, engaged external experts to assist. [quote]
“Based on the said interventions, management is of the opinion that the group remains a going concern despite the current difficult operating conditions,” the company said.
Northam Platinum recorded a loss of R272.96 million for the period ended 31 December 2015.
Revenue generated from sales increased by 5.4% to R3.2 billion from R3.0 billion in the first half of the year, reflecting the group’s increasing sales volumes.
Sales volumes were 19.3% higher, at 248 075oz on the lower basket price of R415 196/kg, which reflects the significant decline in the US dollar basket price.
The company’s cost of sales increased by 17.8% to R3.1 billion, in correlation with theincrease of 19.3% in volumes sold, while operating costs increased by 14.0% to R2.4 billion. The significant contributors to cost increases were labour, electricity and general mining inflation.
As a result, the group operating margin decreased from 13.1% to 2.9% which resulted in the operating profit declining to R93.4 million.
Zondereinde generated an operating profit of R50.0 million in the period under review, compared with R279.4 million in the first half of the year, whilst Booysendal made an operating profit of R43.3 million, down from R119.4 million.
Given the continuing difficult conditions in the mining industry, and the cash requirements for the development of the group’s assets, the board has resolved not to declare an interim dividend.
The company acknowledged that the outlook for the PGM industry remains challenging with persistent weak metal prices and poor economic fundamentals in developed economies.
The group’s financial performance will depend on achieving higher metal prices and a stable operating performance.
Despite the adverse market conditions, Northam believes that its strong balance sheet and prudent financial controls will enable the company to continue with strategic project development which will position the company to benefit from improving market conditions in the future.