Our opinion on the current state of NORTHAM(NPH)
Northam (NPH) is a fully empowered platinum mining company operating in the Bushveld Complex. In the current difficult legislative environment, where the third mining charter is regarded as unfriendly from an investment point of view, Northam stands out as the only mining house actively acquiring new properties. It has come to an arrangement with Anglo American to exploit a property adjacent to its Zondereinde mine, which is the deepest platinum mine in South Africa. Additionally, it has purchased Eland Platinum from Glencore for R175m, with plans to re-start operations at a cost of R2bn.
On 29th October 2019, the company announced the acquisition of Maroelabult for R20m. This property, located west of the Eland mine with an analogous ore body, has accelerated the production timeline for Eland and required minimal capital. With the Eland acquisition, Northam also gained a concentrator plant capable of processing up to 250 000 tons a month. In return, Glencore secured the right to market all of Northam's chrome. To further enhance its processing capabilities, Northam recently commissioned a new smelter to address its platinum ore backlog, estimated to be worth about R2,5bn.
Zondereinde is a deep-level mine that faces challenges typical of mining at depth, whereas Booysendal is a shallow, mechanised mine that is easier to manage. Both mines are profitable; however, Northam consistently reports losses due to the preference dividends that must be paid under its empowerment structure. Once Booysendal is complete, the company is expected to generate strong cash flows. The appointment of Mcebisi Jonas (former South African Minister of Finance) and Jean Nel (previous CEO of Aquarius Platinum) as non-executive directors strengthens the board significantly.
The company has expressed its intention to double its workforce as it aims to become a major global supplier of PGMs. With plans to increase PGM production to 1 million ounces in the coming years, Northam is seen as one of the better options in the industry. It has also sold its Impala shares for R3,1bn, bolstering its financial position.
The PGM industry is currently facing challenges, including depressed PGM prices, high inflation, global geopolitical uncertainties, and Eskom load curtailment events in South Africa. In its results for the year to 30th June 2024, Northam reported revenue down 22,2% and headline earnings per share (HEPS) down 81,6%. However, in a production update for the six months to 31st December 2024, refined PGM production was up 3,7%, and chrome production increased by 7,5%. The company noted, "PGM production from Zondereinde remains on target, despite a stoppage during November as a result of a failure of a primary Eskom feed substation. Chrome concentrate production has benefitted from increased UG2 milling and further incremental improvements in chrome recovery."
Since April 2021, the share has experienced a steady decline, falling substantially. Despite this, Northam has a promising long-term future but remains a volatile commodity share. Investors are advised to wait for a clear break above the downward trendline before considering further action.
On 29th October 2019, the company announced the acquisition of Maroelabult for R20m. This property, located west of the Eland mine with an analogous ore body, has accelerated the production timeline for Eland and required minimal capital. With the Eland acquisition, Northam also gained a concentrator plant capable of processing up to 250 000 tons a month. In return, Glencore secured the right to market all of Northam's chrome. To further enhance its processing capabilities, Northam recently commissioned a new smelter to address its platinum ore backlog, estimated to be worth about R2,5bn.
Zondereinde is a deep-level mine that faces challenges typical of mining at depth, whereas Booysendal is a shallow, mechanised mine that is easier to manage. Both mines are profitable; however, Northam consistently reports losses due to the preference dividends that must be paid under its empowerment structure. Once Booysendal is complete, the company is expected to generate strong cash flows. The appointment of Mcebisi Jonas (former South African Minister of Finance) and Jean Nel (previous CEO of Aquarius Platinum) as non-executive directors strengthens the board significantly.
The company has expressed its intention to double its workforce as it aims to become a major global supplier of PGMs. With plans to increase PGM production to 1 million ounces in the coming years, Northam is seen as one of the better options in the industry. It has also sold its Impala shares for R3,1bn, bolstering its financial position.
The PGM industry is currently facing challenges, including depressed PGM prices, high inflation, global geopolitical uncertainties, and Eskom load curtailment events in South Africa. In its results for the year to 30th June 2024, Northam reported revenue down 22,2% and headline earnings per share (HEPS) down 81,6%. However, in a production update for the six months to 31st December 2024, refined PGM production was up 3,7%, and chrome production increased by 7,5%. The company noted, "PGM production from Zondereinde remains on target, despite a stoppage during November as a result of a failure of a primary Eskom feed substation. Chrome concentrate production has benefitted from increased UG2 milling and further incremental improvements in chrome recovery."
Since April 2021, the share has experienced a steady decline, falling substantially. Despite this, Northam has a promising long-term future but remains a volatile commodity share. Investors are advised to wait for a clear break above the downward trendline before considering further action.
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