Northam’s interims dominated by potential RBPlat takeover

Northam Platinum’s interim results were dominated by its potential takeover of Royal Bafokeng Platinum (RBPlat), with its CEO Paul Dunne holding steady in the firm’s long-term vision for this asset.

The share price fell 4.82% to close at R146 on the JSE on Friday after Northam’s board decided to withhold declaring an interim dividend as it pursued growth and despite record half year results.

In its interim financial results for the six months ended December 31, 2022, operating profit of R9.1 billion, a 55% hike from the previous corresponding period.

"Northam remains at a critical juncture in pursuance of the group’s growth strategy, with various potential alternative outcomes that remain to be determined, " Northam said.

Dunne, presenting the results, made clear that gaining control of RBPlat was a “significant next step for Northam”.

Northam owns almost 34.5% stake in RBPlat. It had fully funded its offer for the remaining shares it did not own and remained committed to obtaining control for what it said was a “unique asset”.

It has offered a cash consideration of R17bn and an offer consideration of R172.70 per share. Dunne emphasised the value and sustainability of RBPlat’s assets, which was a sizeable ore asset.

Dunne said market conditions permitting, there was potentially a 100 years of mining in RBPlat’s ore body, with 68m ounces in resources, with roughly 45m ounces coming to market.

The group is in a bidding war with Impala Platinum (Implats) for RBPlat. Implats is the biggest shareholder in RBPlat, with a 40.71% stake.

Dunne said the demand for platinum group metals (PGMs) would remain robust over the course of the decade and that resource depletion, under investment and cost inflation were placing increasing pressure on primary supply.

“A growing premium will accrue to those of scale and quality. The barriers to entry for new and replacement ounces have become extreme. We view our own assets in this light and we see RBPlat as a unique opportunity to add long-life high quality resources,” he said.

Northam also said it would also consider a joint venture with Implats.

Dunne said: "We would like to gain control of the asset, and so would Implats. So both of those options are possibilities. If Impala and Northam remain as large shareholders of that asset, I think both companies have a lot of value to bring to bear on that ore body".

Earlier this month RBPlat said the uncertainty caused by the delay in finalising its takeover bid by Implats and Northam was becoming a risk in its operations.

In its results for the year ended December 31, 2022, RBPlat said the battle to gain its control, which has been going on for over a year, posed a key risk to managing its people, their morale, and retention.

In its results, Northam reported headline earnings per share grew to R16.09, up 67.35%, boosted by high platinum group metal (PGM) production, sales revenue rose 44% to R20bn, and operating profit increased by 55% to R9bn.

Northam said it produced 393 303 refined PGM ounces from its operations during the reported period, an increase of 11.9% from the corresponding period of the previous financial year.

However, Northam warned that the risk of more severe power curtailments by power utility Eskom could impact the production of PGMs.

The group said it had muddled through 42 electricity curtailments during the reported period.

Dunne said at this latter level, Northam would lose the use of its blast furnace.

“The risk to the country cannot be overstated,” he said.

The group said self-generation facilities had been installed, or were on order, to sustain operations amid Stage 4 and 5 power curtailments.

Dunne said Northam would spend an additional R300 million in capital expenditure this year rolling out renewable and diesel power.

The group said these efforts included 1.25MW diesel generators for Booysendal South mine, three 1.6MW diesel generators for Eland mine, and six 4.2MW dual fuel generators at Zondereinde.

“The group is looking to further augment generation capacity,” Northam said.

Total capex for 2023 is estimated to be R5.4bn, a R300m year-on-year increase.

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