Platinum miner Northam Platinum announced last week that its short term credit rating has been upgraded from A2 to A1 by credit rating agency, Global Credit Rating (GCR).
This credit upgrade reaffirms the company’s long term rating of BBB+ with a stable future outlook.
Northam’s upgrade in its short term credit rating was obtained despite the industry outlook remaining negative on account of depressed platinum group metal (PGM) prices and cost inflation, illustrating the benefits of the group’s liquid balance sheet and strong shareholder support.
The basis of the rating was formed on the impact of Northam’s fully funded R6.6 billion black economic empowerment transaction, which raised Northam’s empowerment levels to 35.4%, on a secured basis for 10 years, and incorporated a cash injection of R4.6 billion, notably enhancing Northam’s liquidity and flexibility.
Increased production supported the uplift in PGM sales, which saw the group’s revenue increase to over R6 billion for the first time in the 2015 financial year also lead to the rating.
Further, higher output and general cost rigour at the Booysendal mine underpinned a recovery in the group’s operating profit margin and increased the group’s operational stability, while reducing the concentration of risk.
The mine is set to reach steady production in the second half of calendar 2015.
A reduction in capital expenditure during the 2015 financial year both deliberate and occasioned by the virtual completion of the Booysendal North, Phase 1 also contributed to the rating, while Northam’s redemption of the R1.4 billion in three-year domestic medium term notes also reduced the group’s debt to negligible levels.
A three-year wage agreement recently concluded at Northam’s Zondereinde mine with the National Union of Mineworkers also added to the upgrade by GCR.