Edited Transcript of NHM.J earnings conference call or presentation 28-Feb-20 9:00am GMT

At Booysendal, the conclusion of a 5-year wage settlement will contribute to secure labor relations, particularly, in the course of the manufacturing buildup on the South mine. And I might wish to take — firstly, earlier than we contact on the outcomes, to recap the strategic journey that has taken place right here during the last 5 years. And this slide, in fundamental type, depicts what the corporate has been making an attempt to do.

We think about the technique in Four phases. In 2015, we raised cash, and on the identical time, solved for empowerment by way of the Zambezi construction. I need to say and reemphasize, the Zambezi transaction has been completely transformational for Northam in each sense of the phrase. It is one of many basis stones, on which at the moment’s Northam has been constructed. Secondly, we utilized a few of the monies by way of an acquisition section whereby we have been capable of safe property at favorable costs at what has proved to be the underside of the cycle. The western extension of Zondereinde, Everest mine, Eland mine and the U.S. recycling enterprise are measured acquisitions, and are very complementary to the Northam enterprise.

The third crucial section is venture execution, which continues in any respect Three of the mining websites. It is one of many key substances to our success, the truth is. We consider we’re fast, revolutionary and capital environment friendly. These qualities, we consider, differentiate Northam, offering a singular progress and funding alternative for shareholders to think about.

The ultimate section of our present technique is returning worth to shareholders. This can be a crucial section for administration. The way in which Zambezi is structured provides us a really apparent and highly effective technique to return worth to shareholders by way of the acquisition of the choice shares. As talked about, this course of has began, and we are going to proceed doing this by making use of all free money over and above our focused internet debt place to this finish. Simply to remind you, we focused internet debt-to-EBITDA ratio of 1:1, and as we stand right here at the moment, we’re comfortably in that vary.

The subsequent few slides will reveal a few of what we have achieved in the course of the previous 5 years. However earlier than that, let’s take a look on the market. One of many principal drivers, the truth is, for our technique was our sturdy conviction that PGM costs would rise appreciably as South African provide contracted, because of underinvestment by producers throughout an prolonged interval of value weak spot put up the 2008 monetary disaster.

We have constructed new manufacturing capability in the course of the downturn in a capital-efficient method to make the most of what we believed can be a rising market. Northam holds the agency view that PGMs are essentially industrial metals and are topic to regular provide and demand dynamics. The demand aspect of the equation, significantly for palladium and rhodium, has been boosted by the introduction of stricter emission automotive laws, particularly, China, India and Europe. The market deficits in these 2 metals have resulted in important value appreciation over the last 6 months. I do wish to stress the primary physique of the appreciation occurred proper on the finish of this era.

In our view, there’s a clear funding case for platinum. Platinum, in our view, as soon as once more, is the one answer to stability this market, and we consider platinum can have it at the moment. Rhodium wants palladium. Palladium wants platinum. All roads lead again to platinum. The common U.S. greenback basket value in the course of the interval elevated by 42% to $1,443 per 4E ounce. Simply as an apart, at the moment’s basket value is round $2,600 per ounce, this equates to over ZAR 1.2 million per kilogram, and these costs bode properly for the group’s monetary efficiency for the complete 12 months.

This slide clearly illustrates how Northam has invested by way of the cycle. Since 2015, we spent ZAR 1.Eight billion on acquisitions. That has introduced us just below 49 million ounces of extra assets, plus 2 concentrated crops and with mixed milling capability of 500,000 tonnes per thirty days, along with different high-quality mining infrastructure. If one considers the assets alone, the acquisition price equates to $2.50 per ounce. We consider this represents distinctive transaction effectivity. The cumulative expenditure to this point creating these property is ZAR 8.Three billion. And we are able to see from the graph that for Booysendal this peaked in 2018 and is now beginning to taper. The venture focus will now begin shifting to Eland and the Zondereinde Western extension ore physique.

The cumulative expenditure — sorry, excuse me, the capital forecast for the complete monetary 12 months, our 2020 12 months, is estimated to be ZAR 2.7 billion, which incorporates for Eland at full tilt and a provision for the beginnings of what is going to turn into the Quantity Three shaft complicated at Zondereinde. On the again of our acquisitions, the useful resource base has grown 25% since 2015. Our reserve standing has elevated by 51% because of the planning and venture execution. To place this in context, this permits a manufacturing of 1 million ounces for over 30 years.

Over the previous 5 years, the execution of our progress technique has resulted in a 53% improve in manufacturing from personal operations. The newbuild profile is unparalleled in our view and gives, as soon as once more I might wish to repeat, a singular funding proposition for shareholders to think about.

Mining is a main business and sits on the backside of the financial triangle. Now we have an enormous financial multiplier impact and a excessive dependency ratio. Very importantly, at the moment in our nation, the funding we’ve got made has already resulted within the creation of an extra 5,340 new significant mining and engineering jobs, largely in economically depressed areas of the nation the place the necessity is nice. These are properly paid, first rate jobs. A lot of the coaching we’ve got performed has transferred new abilities to individuals with no earlier work expertise.

Northam has not too long ago returned important worth to shareholders, as I discussed, and all strange shareholders are benefiting from the rise within the Northam share value, together with our empowerment companion Zambezi. The Zambezi subset of strange shareholders has accrued ZAR 4.9 billion price of worth by December. And at the moment, that quantity is considerably greater.

I will now transfer on to the meat of the presentation, the operational overview, and Alet will comply with me with the financials. By the way in which, this image is an image of the verify on the big elevate bore machine on the Zondereinde Three shaft.

And firstly, security. Regrettably, in December 2019, Mr. Batswana Solomon Kalaote misplaced his life in a fall of floor accident at Zondereinde. Batswana was 58 years previous. He was married with Three dependents. An accident of this nature is deeply distressing to all our staff members and our ideas stay along with his household, his associates, and naturally, his colleagues on the mine. Shortly earlier than this incident, Zondereinde recorded 2 million fatality-free shifts. The mine has additionally not too long ago been awarded ISO 45001 accreditation. And the misplaced time harm frequency price did enhance to 1.14 accidents per 200,000 hours labored. At Booysendal, the great security efficiency continued and the mine recorded for the primary time, 5 million fatality-free shifts in the course of the interval. The misplaced time harm price regressed to 0.3. Nevertheless, this continues to be a fully world-class efficiency. Eland is in start-up mode with a brand new workforce and remains to be bedding down its work practices and procedures we have to enhance right here because the mine matures.

The security and well being of our workers continues to be on the forefront of the whole lot we do, and we take our obligation of care extraordinarily significantly, each as a Board and as a administration staff.

a few of the key operational highlights. As talked about, Zondereinde had a troublesome begin to the 12 months. Had a troublesome 6-month interval, the truth is. And in July, we had a hearth on the jap aspect of the mine, which is an previous part of the mine. It is a disused part of the mine. There was no harm to tools or harm to individuals. Nevertheless, it did trigger us a enterprise interruption in July. This was exacerbated later within the interval by Eskom’s incapacity to generate adequate energy in early November and all through December. Regardless of these points, we’ve got managed to mitigate on manufacturing volumes, which elevated by 5.4%. Nevertheless, we weren’t capable of mitigate price.

Developments within the western extension continues as deliberate, and the pilot gap for the Quantity Three shaft has now reached 760 meters beneath floor.

At Booysendal, manufacturing volumes elevated by 26%, with the North mine performing exceptionally properly. And the buildup from the South mine is constant just about as deliberate. The South concentrator has additionally now been absolutely commissioned to obtain run of mine ore.

Eland has produced its first PGMs, however not at full margin. The concentrator was partially commissioned and improvement has began at Kukama shaft. The acquisition and integration of the Maroelabult property and the adoption of the cellular tunnel borer will necessitate a overview of the Eland improvement and mining plan and can transfer by way of this 12 months’s budgeting course of. We’ll talk the brand new parameters of Eland on the August outcomes presentation.

Our growth technique is unfolding as deliberate just about, and we’re on observe to attain our 1 million-ounce manufacturing goal in the end.

Northam’s manufacturing profile will, the truth is, speed up within the very subsequent 2 years because the Booysendal South venture ramps up. We have truly — we — this 12 months, we have simply begun to stope or to start mining extraction, and now the venture focus will shift to the western limb property. Trying on the numbers themselves. So this slide provides a snapshot of the group’s consolidated working efficiency. Mill tonnage elevated to three.Three million tonnes, together with the primary manufacturing from Eland. This resulted in a delightful 20% improve in PGM manufacturing to 307,000 4E ounces. As well as, we additionally produced 19,000 ounces from third celebration materials.

The whole refined steel produce was up 6% at 319,000 ounces and PGM gross sales have been greater, once more, at 330,000 ounces. The manufacturing of chrome in focus elevated by 28% to 469,000 tonnes. With the majority of the extra manufacturing coming from the tailings retreatment operations at each Booysendal South and Eland Platinum mine. Regardless of decrease costs, chrome stays a cloth contributor to Northam’s income. Whole income per platinum ounce was 45% greater at ZAR 39,864 per platinum ounce. That is all income expressed per platinum ounce produced.

Unit money price elevated to ZAR 24,780 per platinum ounce, and we wish to stress as soon as once more that it is a full mine-to-market price with no byproduct income offset. In our ebook, price is price, income is income.

Trying intimately at Zondereinde, and regardless of the hearth and the Eskom-related stoppages and naturally, the deadly accidents in December, manufacturing of equal refined steel elevated by 5.4% to 162,380 4E ounces. So it is the results of a 2.2% greater mill head grade, coupled with improved recoveries and the remedy of floor materials which made up for the influence of the hearth.

Working unit price elevated by 9.6% to ZAR 25,890 per platinum ounce, and we consider that Zondereinde stays in a really aggressive place relative to its friends. With an improved working efficiency and a better basket value, working revenue at Zondereinde elevated by over 300% to ZAR 1.Eight billion.

The net capital expenditure for the half 12 months was ZAR 325 million, which included ZAR 237 million for personal venture expenditure. The stability, ZAR 88 million, sustaining capital. The forecast capital expenditure for the complete monetary 12 months at Zondereinde is predicted to be ZAR 865 million, together with a provision for the institution of Quantity Three shaft complicated.

Improvement throughout the Western extension itself, underground has progressed very properly on ranges Three by way of to 12. Footwall strike drives has superior previous the second mining line and developments of elevate connections is in progress, as you may maybe see on the mining plan. Stoping continues within the first mining line and is presently producing round 40,000 tonnes per thirty days of Merensky ore. Floor circumstances in each stoping and improvement ends are good. Planning and early work on accessing the additional Western extension through the Quantity Three shaft complicated continues. This will probably be a elevate bore shaft and, as I stated, pilot drilling is predicted to achieve its deliberate depth of 1,430 meters on the finish of this monetary 12 months, it is a 16-inch gap. Improvement of the entry tunnels to the underground elevate bore place on Three degree is forward of schedule.

Booysendal recorded a superb manufacturing end result with a really sturdy efficiency from the North mine, which is the working mine working at full nameplate successfully and a rising manufacturing profile within the South mine. The whole mill feed was 27% greater at 1.7 million tonnes, together with 250,000 tonnes of Merensky ore. The DMS circuit is working optimally, with total recoveries above 86%. Metals in focus elevated by 26%, very pleasing at 132,000 4E ounces. Unit money prices rose to ZAR 18,714 per platinum ounce, following the start-up of the South concentrator and the commissioning of the two declines. Please keep in mind that, that mine within the south has been commissioned, along with its concentrator at very low volumes in the mean time. You can not count on the identical unit price within the south as we presently have on the north in the mean time, very, very early days there.

The net capital expenditure was ZAR 700 million, of which ZAR 112 million was spent on sustaining capital. And capital expenditure for the complete monetary 12 months at Booysendal is predicted to be in complete, ZAR 1.5 billion.

At Booysendal South, building of the shaft head infrastructure and the central UG2 complicated is forward of schedule. And the final parts will probably be commissioned this quarter. Underground improvement continues, as you may see, with the manufacturing construct as much as 220,000 tonnes per thirty days, nonetheless on observe for 2023. You might be able to make out on the plan on the display screen that stoping has commenced fairly not too long ago to the north and the south of the decline programs.

Building of the central Merensky boxcut is on schedule and portal improvement for underground entry will start earlier than the top of the monetary 12 months. Recommissioning and equipping of what we time period, BS4 decline has began, and this can present entry to the unmined floor adjoining and beneath the previous Everest mine.

Earthworks and foundations for the north rope conveyor — that is the second rope conveyor, has began. Mechanical building will start in July. And this conveyor will transport Merensky ore from the north and central Merensky mining modules to the massive gross sales concentrator. General, the South mine venture stays on schedule and complete capital forecast stays at ZAR 5.6 billion escalated.

Transferring on to Eland. Processing of service PGM and chromite materials commenced throughout this era — excuse me — how did I do this? Simply give us a second, all people, please, could possibly be [up not now]. The pc is on. Humorous the pc is on. There we go. There we go. Thanks. Thanks very a lot, man.

So starting, once more, shifting on to Eland. Processing of floor PGM and chromite-bearing materials commenced with the partial recommissioning of the concentrator there, and we produced 16,000 ounces in focus, PGMs, in fact, and 38,000 tonnes of saleable chrome.

Unit money prices at these low volumes was ZAR 29,227 per platinum ounce. Allowing for, as soon as once more, that this operation is in very early ramp up. In parallel to the processing operations on the concentrator, developments of the declines at Kukama shaft — it is the following slide, started with the refurbishment and commissioning of underground tools.

We have adopted the tunnel boring know-how, and this unit has been superior — is getting used to advance the belt decline barrel. A complete of 528 meters has been developed, which is presently forward of schedule. Revised mine planning, incorporating the adjoining Maroelabult part and the tunnel boring machine will probably be concluded earlier than the top of this 12 months, monetary 12 months, that’s, and we’ll inform our revised capital program from subsequent 12 months.

In abstract, the operations are performing properly. The upper basket value has resulted in an growth of the money revenue margin from 20% within the prior 12 months — or the prior interval to 38%, and we are able to count on extra to return. As an apart, if you happen to have a look at that fundamental enterprise equation there, which is price — income minus price equals money revenue, we are able to see in spherical numbers, we received 40 minus 25 equals a 38% margin or in nominal phrases, ZAR 15,000 per platinum ounce spherical numbers. We at all times spherical numbers. Alet may be very particular, however we spherical this. Manufacturing, we particularly spherical up, by the way in which.

The fundamental enterprise equation on this interval, ZAR 40,000 per platinum ounce minus ZAR 25,000 per platinum ounce. In order an apart, the value this morning surpassed ZAR 70,000 per platinum ounce. I might not, for one second, recommend you mannequin this, but it surely does point out the leverage within the enterprise. It additionally signifies our pure rand hedge. These are greenback property.

This slide is a really detailed breakdown of group stock in comparison with 6 months in the past. So we’re now evaluating June to December. The inexperienced bars signify the place on the finish of December, whereas the blue bars signify the place on the finish of June. I will undergo this in fairly some element. I believe it is fairly necessary.

There have been — that is very dynamic. It is crucial to know, that is very, very dynamic, and there was important actions of inventory between the weather this 12 months, and naturally, as the corporate has grown. Ore stockpiles have diminished by 13,000 ounces with the partial sale of the UG2 stockpile at Zondereinde.

Focus in course of is at regular ranges for the present run price, in fact. Focus forward of the smelter has elevated by 12,000 ounces owing to very excessive deliveries in December, coinciding with important energy interruptions from Eskom. Not a simple circumstance for smelters generally.

The smelter and BMR inventories have diminished by a mixed 21,000 ounces and now roughly are at anticipated ranges. The refining pipeline has elevated resulting from elevated deliveries from South Africa to Germany. And in Germany, there is a important Christmas break that — the place no refining takes place successfully for a time period. Let’s simply bear that in thoughts.

Regular inventories, on the present manufacturing price, are roughly 165,000 ounces. And what we have endeavored to do with the little dotted strains is to indicate you the place we count on regular stock ranges ought to be on the present run price. It is also crucial to do not forget that the work in progress will develop as the corporate grows — bodily that’s. The bodily working portion will develop together with the expansion within the firm. You may’t embark on a progress profile, resembling Northam, and never count on the work in progress to extend, crucial realization. Mixed with this, for the monetary guys, it is a rising market setting. So simply please bear that in thoughts.

Alet, may I hand over to you for the monetary overview? Thanks.

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Aletta Helena Coetzee, Northam Platinum Restricted – CFO & Government Director [2]

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Thanks, Paul. Good morning, all people. Our interim monetary outcomes have been distinctive. My first slide highlights a few of the key monetary options. We achieved an all-time file working revenue of ZAR Three billion in comparison with ZAR 1 billion within the first half of final 12 months and ZAR 2.Four billion for the complete monetary 12 months. That is on the again of a rise in income of 57% to ZAR 7.Eight billion because of a rise in volumes, the weakening of the rand and important value appreciation.

EBITDA amounted to ZAR 3.2 billion, which represents a rise of 184%. The group additionally made an IFRS revenue of ZAR 1.1 billion versus a earlier lack of ZAR 63.Eight million, and in step with our technique, we’ve got began to return important worth to shareholders.

I will unpack these highlights, however firstly, earnings. Now we have progressively improved our returns. As an instance this, I’ve included Three comparable intervals on the graph on the underside of this slide. I believe you may clearly see the continuing enchancment. Normalized headline earnings, which is our principal measure of efficiency, has elevated by 241% to ZAR 1.9 billion. This equates to a normalized headline earnings per share of ZAR 3.696. Due to our IFRS revenue, our earnings per share elevated to ZAR 3.28 (sic) [328.0] versus a lack of ZAR 18.2 in December 2018, and headline earnings per share elevated to ZAR 328.Three versus a earlier lack of ZAR 0.19.

Transferring on to income generated. As talked about, income elevated by 57% to ZAR 7.Eight billion, representing a progress of ZAR 2.Eight billion. The rise is essentially attributable to a 42.4% improve within the common 4E basket value to $1,443, which added ZAR 1.Eight billion. This value motion was primarily pushed by the stellar efficiency of each palladium in addition to rhodium, growing by 54% and 102%, respectively. These metals are persevering with their upward pattern with costs this morning at $2,872 and $12,950 per ounce. As well as, we bought 11.9% extra steel to simply beneath 330,000 4E ounces which contributed an extra ZAR 786 million. And lastly, we realized a 3.7% weaker trade price at ZAR 14.72 to the U.S. greenback, including ZAR 259 million to income.

Income may be very delicate to costs achieved, and as an example this, if the group realized the present 4E basket value in U.S. greenback phrases of round $2,600, utilizing the identical volumes and the identical trade price, income for the interval would have been ZAR 13 billion.

price of gross sales and the elements impacting unit money price. On the again of our improved income, the group generated an all-time file working revenue of ZAR Three billion, 187% improve, equating to an working revenue margin of 37.8%. Value of gross sales elevated by 23% to ZAR 4.9 billion.

A few of the key actions within the particular person parts making up price of gross sales embrace: due to our elevated manufacturing based mostly, mining price elevated by 30% attributable to a 10% internet improve within the variety of workers, a 12% improve within the sq. meters mined in addition to simply common mining inflation. Concentrating prices elevated by 71%, with the commissioning of the concentrators at Booysendal South and Eland. Each these concentrators should not but working at full capability, however carry a excessive related mounted price.

Smelter and BMR price elevated, owing to each the rise in the price of electrical energy in addition to extra energy consumption for the remedy of elevated volumes of focus acquired from Booysendal South and Eland. Included in promoting and administration overheads are prices regarding the company workplace and group companies. This contains our advertising and marketing contributions to the WPIC, the PGI and the IPA. Royalty fees elevated in step with the rise in income generated from personal operations, taking into consideration unredeemed CapEx accessible for setoff towards EBIT.

Share-based cost bills and revenue share scheme prices associated bills incurred in respect of the group’s share plan, together with the shares regarding the Zambezi lock-in mechanism, which is essentially influenced by the motion within the Northam share value. Additionally included our prices related to the Toro Worker Empowerment Belief. With the rise within the profitability of the group, the contribution to the belief has elevated by greater than ZAR 60 million.

Concentrates, metals and recycled materials buy elevated by 531%, with a corresponding improve within the volumes of 144%. In the course of the present interval, high-grade materials in addition to completed product was bought, which carry greater premiums.

Refining price, together with sampling and dealing with fees, elevated by 20% because of a rise in refined volumes, but in addition the institution of a bunch lab at Eland. Depreciation relies primarily on the unit of manufacturing methodology. With a rise in manufacturing and extra capital expenditure incurred by the group, depreciation elevated. Depreciation has additionally commenced on a lot of new parts regarding Booysendal South and Eland. The discharge in steel portions was offset by the rise in the price of manufacturing, which is mirrored within the change in steel inventories.

Let us take a look at the assertion of revenue and loss, and in our case, revenue. Consolidated within the group’s outcomes are quantities regarding the Zambezi construction, which incorporates the choice share dividends of ZAR 619 million in addition to the loss on derecognition of the choice share legal responsibility of ZAR 108 million. The loss pertains to the distinction between the truthful worth per Zambezi choice share and the value we paid on transaction date, taking into consideration all transaction prices incurred on the purchases of those prefs. The distinction between the truthful worth and what we paid amounted to a mean premium of two.8%.

After taking into consideration the Zambezi fees, the group generated a revenue earlier than tax of ZAR 2 billion. Tax is calculated on a statutory foundation, thus resulted in a tax cost of ZAR 820 million. The majority of this pertains to deferred tax which is noncash. The group additionally began paying tax on mining revenue because of the complete utilization of unredeemed CapEx regarding Northam Platinum Restricted, the statutory entity by which the Zondereinde mine is housed. Booysendal, nonetheless, nonetheless has ZAR 6.Three billion price of unredeemed CapEx accessible to setoff towards future taxable mining revenue. All of this resulted in a considerable after-tax revenue of ZAR 1.1 billion compared to a lack of ZAR 63.Eight million for the earlier corresponding interval.

Transferring on to the group’s money movement, in the course of the interval, the group generated ZAR 2 billion from working actions and invested ZAR 1.Three billion in capital expenditure, which generated a free money movement of ZAR 695.Eight million. That is the primary significant free money movement generated because the graduation of the group’s progress technique, which required important quantities of capital expenditure during the last 5 years.

Bearing in mind our estimate full 12 months CapEx of ZAR 2.7 billion in addition to the continued improve in costs and our manufacturing progress profile, it is anticipated that the group’s skill to generate free money movement will probably be positively impacted.

Money flows utilized in financing actions amounted to ZAR 756 million. This contains ZAR 247 million paid in money curiosity and ZAR 350 million, which was repaid on the revolving credit score facility. It additionally contains ZAR 2.Four billion, which was raised by way of the difficulty of home medium-term notes and used to buy Zambezi choice shares. The online influence was a closing money stability of ZAR 875 million. I wish to refer you to Web page 105 of our outcomes booklet, which makes reference to the truth that subsequent to the interval finish, we have repaid an additional ZAR 800 million on the revolving credit score facility, growing the accessible facility to ZAR 2.5 billion.

internet debt, the assorted funding services in addition to the debt maturity profile of the group. The online debt place elevated to ZAR 5 billion while sustaining the online debt-to-EBITDA ratio in step with our self-imposed conservative goal ratio of 1:1. Northam adopts a prudent strategy to managing its long-term funding services. The group’s enlarged operational footprint and elevated working capital necessities have necessitated a rise in accessible debt services. In the course of the interval beneath overview, Northam refinanced it is ZAR 3.5 billion 5-year revolving credit score facility on extra favorable phrases, extending the maturity date from November 21 to September 24. Curiosity will now be charged on a utilization foundation, with the bottom price at JIBAR plus 220 foundation factors versus the earlier settlement of JIBAR plus 330 foundation factors.

The rate of interest on the final banking facility was additionally renegotiated from prime much less 150 foundation factors to prime much less 175 foundation factors. This has enabled the group to enhance the typical price of borrowings by 107 foundation factors from 10.63% to 9.56%.

As well as, the Board accepted a rise within the home medium-term notes program from ZAR 2 billion to ZAR 5 billion. Based mostly on our necessities, we’ve got issued ZAR 4.2 billion price of DMTNs to this point. Trying on the maturity profile of the present issued DMTNs, as indicated on the underside of this slide, the repayments are properly unfold over the following 5 years, and administration intends to roll the ZAR 750 million price of DMTNs that may mature within the subsequent 12 months. That is to facilitate the method of returning worth to shareholders.

As well as, Northam’s credit standing was additionally reaffirmed with our outlook upgraded to optimistic. This acknowledges Northam’s bettering traits in earnings, our manufacturing profile in addition to our conservative debt metrics. In keeping with our technique, a key focus for administration is the suitable allocation of capital to return worth to shareholders. Now we have began to generate significant free money movement, and we’ve got elevated and optimized our funding services. This has put us ready to now return worth. In the course of the interval beneath overview, we did this by way of the difficulty of acquisition of 32.5 million choice shares. We now maintain 22.9% of the entire issued variety of Zambezi choice shares, making us the third largest shareholder. Going ahead, we are going to proceed to focus our consideration on returning worth.

I’ll now hand you again to Paul for the remainder of the presentation.

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Paul Anthony Dunne, Northam Platinum Restricted – CEO & Director [3]

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Thanks, Alet. Now that image, by the way in which, is the Eland concentrator, to provide you an thought of how — simply how large a 250,000 tonne processing plant appears to be like like, and it is also in fine condition, as you may see.

One of the severe threats dealing with our enterprise and the nation, and in reality, the Southern African area, is the lack of Eskom to offer a dependable supply of vitality. The risk that unplanned — particularly, unplanned outages pose to underground employees, significantly in deep degree mines, is just unacceptable. As well as, the manufacturing interruptions and the final lack of financial alternative is having a devastating impact on the welfare of the nation. We’re doing our greatest to handle the scenario, and we are going to do this at our operations. And we are going to proceed to emphasize to each authorities and Eskom simply how severe this subject has turn into for all of us.

Regardless of these challenges and others, the mining operations are performing properly, and we are able to count on to ship additional manufacturing progress as the brand new tasks come to ebook. Alet and I’ll proceed to concentrate on price to be able to develop our margin and preserve our relative price place.

Our greatest safety is the stretch in the associated fee curve, and we are going to function Northam properly into the decrease half. The total 12 months end result will ship additional margin growth. Efficient venture execution is completely key. A variety of laborious work has been performed, and execution danger has diminished considerably, significantly at Booysendal. The principle venture focus, as I discussed earlier, will now shift to Eland and the Western extension block.

We’re more and more assured that we will ship the tasks on time and on price range to make the most of the rising PGM market. The automotive business wants these metals, and we are going to do the whole lot we are able to to fulfill that demand.

Final time we reported, we did say we’d return worth to shareholders, and we have performed simply that. For absolute readability, we intend to proceed with this program by making use of all free money over and above our focused internet debt degree at which we’re at at the moment, and that is successfully a share buyback by proxy. The pref is underpinned — each pref is underpinned by 1 Northam oath.

To conclude, the operations are performing properly. The expansion technique is on observe, the basket value this morning is at an all-time file excessive, and we are going to sit up for reporting a really sturdy set of outcomes for the complete 12 months in August.

Women and gents, that concludes our presentation.

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Questions and Solutions

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Paul Anthony Dunne, Northam Platinum Restricted – CEO & Director [1]

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If we are able to take some questions, please. Firstly, from the ground, then we’ll go to the strains on the webcast. And may I simply ask for the sake of particularly, the individuals on the strains that while you do pose the query, you’ll simply launched your self in a standard trend. Leroy?

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Leroy Mnguni, HSBC, Analysis Division – Analyst of Metals and Mining [2]

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Leroy Mnguni from HSBC. My query is actually simply round you talking about persevering with to use your extra money to purchasing again the pref. At what level do you’re feeling that you have purchased again sufficient prefs to begin introducing dividends?

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Paul Anthony Dunne, Northam Platinum Restricted – CEO & Director [3]

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So Leroy, I’ve to reply the query sensitively. You’d think about that we’ve got performed our calculations as to the place we predict the suitable degree is of buy of the pref. It is actually not all of them. So with out giving the precise reply, if we have been to purchase 50% of the prefs, we would be very, very completely satisfied. And our mannequin clearly exhibits that at that degree, the construction is totally derisked.

Dividends, in fact, can be a consideration for the Board, and the administration staff would advocate accordingly someday sooner or later.

In the event you look — simply to fill out the query, to exemplify maybe the place we’re and with out supplying you with inputs to your mannequin — which I do know you’ll do very comprehensively, however in spherical numbers, once more, the fundamental money equation for our enterprise because it was on this interval, ZAR 40,000 minus ZAR 25,000 of price which is ZAR 15,000, multiplied by quantity in platinum ounces.

So let’s take a view, and once more, with out giving absolute route, let’s assume the costs for 12 months 2020 are available in at about ZAR 50. I believe that is most likely a very reasonable evaluation. Prices, once more, that is, in a manner, steerage, round about ZAR 25, there is a 50% money margin on this enterprise, multiply it by the platinum quantity, and you can also make an evaluation of that. And you will notice that there’s important money technology properly above the capital necessities of the rising enterprise. And that may give us a possibility to make massive inroads in a really quick time period into the choice share, after which it’s going to free us as much as take different capital allocation choices past that.

However once more, I do wish to be very, very, very clear. As we stand at the moment, our complete focus is each rand and cent of free money will probably be utilized to buy the pref.

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Leroy Mnguni, HSBC, Analysis Division – Analyst of Metals and Mining [4]

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After which, I suppose, it is turn into customary so that you can give us your 6 month-to-month rhodium value forecast. The place can we count on it to be in August?

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Paul Anthony Dunne, Northam Platinum Restricted – CEO & Director [5]

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Good attempt, Leroy. That is a superb query, in fact, and it is very troublesome to reply, given what’s occurred. However the rhodium market — if I can flesh it out and speak concerning the market slightly than the value ranges, the rhodium market is closely focused on each demand and provide. And once more, I’ll speak in spherical numbers, if I could, for ease of dialog, in very, very spherical numbers. The rhodium market is 1 million ounce market and it is a 80-20 market: 80%, main manufacturing, 20% recycle. Very, very spherical numbers. The demand for rhodium is growing, in our view, by at the very least 20% on the 1 million ounces by way of legislated demand internationally, particularly, in these Three areas, Europe, China and India. So the 1 million-ounce demand will develop. The 800,000-ounce provide is sadly concentrated in just one ore physique, just about on the planet, which is UG2 — South African UG2. There’s nothing in Merensky, there’s nothing to talk of within the northern limb, little or no in Zimbabwe, little or no in North America. The Russians have gotten some, which is the balancing portion. 90%, in spherical numbers, of all rhodium provide comes from South African UG2. 90% of all rhodium demand is one utility, which is the management of NOx, nitrous oxides, within the catalytic converter inside a automobile or a truck. Very closely focused on either side of the equation.

In a manner, it isn’t a troublesome market, if I can say it that manner with tongue in cheek. The problem comes, it is a bit of bit opaque, however demand is rising for positive. Main provide is beneath a whole lot of stress as a result of that South African UG2, it is largely western limb items, that are aged, and that’s resulting in tightness within the bodily marketplace for rhodium. Rhodium is just not simply substituted. And actually, the substitute, as we perceive it for rhodium is palladium on round a couple of 4:1 ratio, and that may deliver its personal issues for the palladium market, which can also be tight.

So this is the reason we use that expression. Rhodium wants platinum — sorry, excuse me, rhodium wants palladium, and in flip, palladium wants platinum. All roads lead again to platinum. That’s the answer to stability this market.

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Patrick Mann, BofA Merrill Lynch, Analysis Division – VP & Analysis Analyst [6]

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It is Patrick Mann from Financial institution of America Securities. I simply needed to ask possibly to push you a bit of bit extra round palladium wants platinum. So for a very long time, individuals have been on the lookout for when substitution is available in, significantly in gasoline autocats. So possibly if you happen to may simply give us your view on the place you assume the auto OEMs are in that course of, and the way lengthy it may take?

After which the second query was, you’ve got clearly commissioned new concentrators, employed extra individuals to extend manufacturing and you are not but at full utilization. So I suppose from right here, how a lot do you count on actual unit prices? How do you count on that to evolve as your manufacturing grows? I imply have you ever put in a lot of the mounted price base at this level? And we should always count on actual price to return down? Or is there nonetheless a little bit of mounted price to be added?

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Paul Anthony Dunne, Northam Platinum Restricted – CEO & Director [7]

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Okay. Thanks, Patrick. Let me reply the second first. It is most likely the simpler one. As manufacturing grows towards the mounted price base, in fact, the unit price — and it is the unit price, I believe we’re all referring to will come down. There is no doubt about that, and we have put fairly a little bit of mounted price on this explicit interval. We have successfully commissioned a brand-new mine with a — with 2 declines. So to distinguish Booysendal South from Booysendal North, Booysendal North has a single decline, Booysendal South in mining phrases, is successfully twice the scale. We have simply commissioned with little or no quantity. Clearly, the unit price will probably be suboptimal, there is no doubt about that. However you shouldn’t be anxious about that, that is the purpose we make. It’s extremely, crucial to not get blinded by that subject. The quantity will come because the manufacturing ramps up and the manufacturing ramp-up will take about Four years.

The identical applies at Eland. We took a whole lot of mounted price with a view to supply, and the manufacturing will come. Our tendency and the tradition at Northam may be very clear, we expense shortly. We expense shortly the — once more, I believe the fellows will know what I am speaking about — the analyst neighborhood will know. We don’t simply capitalize. We expense shortly. This can be a superb self-discipline and it holds administration’s toes to the hearth by utilizing that methodology.

On the primary a part of the query, Patrick, the — our view at this stage? Now we have not seen — and it doesn’t suggest to say we — there is not, however we’ve got not seen laborious proof of substitution platinum for palladium at this cut-off date.

So our view stays that the market will probably be led by palladium, adopted by rhodium by way of relative energy, if I can put it that manner, and sadly, for the second, platinum will stay the laggard till the market, and we, in fact, and all people else sees actual proof of substitutes. We’ve not seen it but. It is not a simple technical answer, that is our understanding, and we have spoken to not solely TSF, JM and Umicore, but in addition on to a few of the OEMs. Technically, it isn’t really easy. Specifically, within the hard-core utility, which is a factor often called a close-coupled catalytic converter, which is a mouthful, which sits very near a contemporary gasoline engine, and it sees very excessive temperatures. Palladium performs a lot better at excessive temperatures relative to platinum, and till that technical answer is solved, the substitution equation is just not really easy.

The opposite factor is price mentioning that the main target of the OEMs minds is just not actually on that time in the mean time. It is actually all about compliance with the brand new laws, backing out a few of the — I may be well mannered, a few of the unhealthy conduct, and likewise getting automobile fashions by way of real-world driving emissions check work, particularly, in Europe. So the bandwidth of the corporate may be very a lot targeted on these points versus the substitution impact. So at this stage, that is our view, that is how we perceive it. However we do make the purpose that if that’s the case, and it stays so, then we consider you will notice continued value appreciation in each palladium and rhodium. And sadly, for the second, platinum will stay an funding case on the potential for substitution. And I believe that is most likely what we’re seeing by way of the value motion in platinum. Platinum, as I stated within the speech, has clearly received an funding case as a result of it is relative value. It appears to be like — once more, I will use my cheeky expression is reasonable as chips relative to it is sister metals and gold.

So I do assume there is a sturdy funding case for platinum, and we do consider that the one possible way sooner or later to resolve the conundrum that palladium and rhodium signify is, the truth is, adoption of platinum.

Chris?

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Christopher Nicholson, Morgan Stanley, Analysis Division – Analysis Analyst [8]

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Paul, it is Chris Nicholson from RMB Morgan Stanley. I’ve received 2 questions, I will ask every in flip. First one, hopefully, is kind of easy. Third shaft at Zondereinde, how a lot is that going to price in totality? And is that — that is without doubt one of the the reason why CapEx this 12 months at Zondereinde has been guided up from what you beforehand stated?

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Paul Anthony Dunne, Northam Platinum Restricted – CEO & Director [9]

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Sure, that is right. We have made a provision for this 12 months, and we are going to do the identical for subsequent 12 months. A provision, Chris, for a possible shaft system at Quantity Three shaft, what we name the Quantity Three shaft web site.

Now there’s a sure diploma of technical danger related to a elevate bore at that depth, and this is the reason we’re being a bit, let’s say, cautious by way of our steerage for you — for the second. We’ll come again to you most likely solely in about 18 months as to what we might or might not do at Three shaft.

Within the meantime, we’ll proceed with the pilot gap. As I stated, it is a 16-inch gap, it is crucial that the outlet is completely straight as a result of it will likely be a hoisting shaft. It is not simply the vent shaft or a ore go. So technically, it is difficult. At depth, it is difficult.

So till we’ve got the pilot gap in and we have begun to rein the big diameter from that Three degree place, and we make some headway there, we have not received a shaft, if I can put it very clearly as that. However within the meantime, we’re busy, and we’re spending some, what I might name early monies, if I can put it that manner. And for the second, it is a provision and we’ve got technical cease factors alongside the way in which towards the success of that individual initiative. So it is early days, if I can say it that manner.

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Christopher Nicholson, Morgan Stanley, Analysis Division – Analysis Analyst [10]

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The second query and absolutely respect. This sounds fully loopy towards the place costs are this morning, however your main buyer is Heraeus, which I perceive they predominantly use the steel for industrial makes use of exterior of the auto business. Is there a danger towards that offtake, if the world enters a protracted financial progress downturn? Or may they name drive majeure or one thing towards that? I do know this sounds fully loopy, however sure.

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Paul Anthony Dunne, Northam Platinum Restricted – CEO & Director [11]

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In all our contracts, we’ve got a drive majeure provisions on either side of the contract is — it is fairly normal follow internationally in our business. It — firms are very loath, extraordinarily loath, to invoke that sort of provision as a result of it is reputationally extraordinarily damaging, not simply on the factors of core, however in fact, for the long run.

We’re — we’ve got a really sturdy relationship with Heraeus, and that partnership goes manner again to the late ’80s, early ’90s when Northam was in its infancy, and we received very a lot confidence within the Heraeus. The construction of the contract is successfully an offtake of 30% of what we produce. After all, if there is a main downturn, and we do not produce something, 30% of nothing is nothing.

So I believe it isn’t a nominal quantity of offtake. When it comes to the refining course of itself, which is the bodily aspect, our materials is the baseload for the Heraeus refinery in Hanau. We’re the baseload. So when a drum arrives from Northam, it’s instantly handled into that refinery as a result of it varieties the operational base on which they themselves can leverage. So we’re very, crucial for Heraeus, and Heraeus may be very, crucial for us. René?

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René Carlo Hochreiter, NOAH Capital Markets (Pty) Ltd – Mining Analyst [12]

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A query about that is the (inaudible).

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Paul Anthony Dunne, Northam Platinum Restricted – CEO & Director [13]

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Is the mic on for René? Simply to verify or can we swap the mic?

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René Carlo Hochreiter, NOAH Capital Markets (Pty) Ltd – Mining Analyst [14]

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Sorry, René Hochreiter from NOAH Capital. The COVID virus and the impact on the PGM demand, particularly palladium and rhodium, I believe — what do you — properly, I do know what I believe, however what do you concentrate on the potential for the virus truly easing the stress on the deficit of palladium and rhodium? And what kind of quantum do you assume it could possibly be, possibly by way of automobile gross sales coming down for this 12 months whereas that virus is an issue?

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Paul Anthony Dunne, Northam Platinum Restricted – CEO & Director [15]

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Sure, I believe René, there’s an excellent unknown there in the mean time as to the final word influence. One in each Four automobiles on the planet is made in China, 25%, plus/minus, and it is considerably down, very considerably down within the final couple of months. So it is an uncertainty. It hasn’t, at this stage, impacted the metals markets. In a manner, this explicit interval in time is a check for the metals markets within the sense that if the palladium and rhodium markets have been speculative in nature, one would have thought that the hypothesis would have been out and run for the hills by now, and that hasn’t been the case. It is also our understanding that these markets are true within the sense that it is correct bodily demand, particularly, pushed by the automotive business.

So the markets are true versus purely speculative, if I can put it that manner. And secondly, I have not but received a solution for you on the primary half, what the final word influence will probably be. However financial exercise in China has been depressed, very depressed. In some industries, as little as 50%. Within the auto business gross sales half, very, very low. Retail has been very, very a lot impacted. However China are this morning and in prior days, encouraging all people to return to work. In some areas, we’re again at 80% already. The quantity — the share improve in new instances is now in single digits. So it does appear that the influence is slowing down in China, that is the most effective data we’ve got at this cut-off date.

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René Carlo Hochreiter, NOAH Capital Markets (Pty) Ltd – Mining Analyst [16]

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After which only one extra query to assist my modeling, I do long-term modeling. However what kind of long-term CapEx would you utilize for Zondereinde, for Booysendal and for Eland?

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Paul Anthony Dunne, Northam Platinum Restricted – CEO & Director [17]

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We usually refer to remain in enterprise CapEx at round about ZAR 1,000 per platinum ounce, ZAR 1,000 per platinum ounce. An excellent modeling quantity. Some individuals in current time, would possibly discuss an 8% of complete working price being utilized sustained enterprise capital as a superb benchmark. Sure.

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Arnold Van Graan, Nedbank Company and Funding Financial institution, Analysis Division – Mining Fairness Analyst [18]

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Paul, it is Arnold Van Graan from Nedbank. So I received 2 questions. The primary one pertains to your Eland mine plan, as you alluded to reviewing that. So I do not wish to preempt the method, however does it indicate a faster ramp up at Eland? In order that’s the primary query. And the second is, what’s your contingency plan relating to Eskom? Are you taking a look at some self producing capability? And I suppose, going again to the primary query, how does that influence your course of at taking a look at Eland and constructing that up, given the danger related to dependable vitality provide?

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Paul Anthony Dunne, Northam Platinum Restricted – CEO & Director [19]

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So the final bit, Eland is kind of energy-light, initially, given the character of that operation may be very, very shallow. So large — no large refrigeration tools refined, for example, or hoisting, no vertical shafts. So Eland is kind of gentle on energy, it isn’t essentially our main rationale for what we do with Eland. What’s encouraging as with respect to Eland, we have got a really excessive proportion of rhodium. I believe the prill splits or the steel splits we have produced on the final outcomes presentation, you may take a look at them, very excessive rhodium proportion, shallow, massive, virgin ore physique. And on this final interval, we have simply bought a second asset, which is contiguous or subsequent door, and we now have Three shafts. Kukama is — can be the center shaft and Maroelabult can be the Western shaft and Nyala can be the jap shaft. And we have initiated on Kukama, and now we are going to combine within the first occasion, Maroelabult, along with Kukama, and we’ll take a look as to how that impacts all the primary parameters, resembling working prices, capital requirement, and extra importantly, the income stream. The reply to the primary a part of your query is, sure, it does.

There’s one from Bruce on the entrance.

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Bruce Williamson, [20]

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Bruce Williamson, Integral Asset Administration. At present market costs, do you may have a tough estimate of what the price of the contained platinum — comprise PGMs in an autocat are in comparison with the typical price of the steel automobile itself?

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Paul Anthony Dunne, Northam Platinum Restricted – CEO & Director [21]

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Properly, platinum, not particularly. No, Bruce.

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Bruce Williamson, [22]

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No, if you happen to simply take the three metals collectively?

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Paul Anthony Dunne, Northam Platinum Restricted – CEO & Director [23]

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We’re taking a look at a giant auto in North America, round about $1,000, if I am understanding appropriately, one of many larger items. Sure, if I am right.

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Bruce Williamson, [24]

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So it is $1,000 versus a automobile that may price.

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Paul Anthony Dunne, Northam Platinum Restricted – CEO & Director [25]

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And a smaller automobile in Europe, possibly $300, $400. Once more, I am guessing a bit of bit, however René desires to — Damian desires to reply the query for me.

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Damian Stephen Smith, Northam Platinum Restricted – Group Geologist [26]

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Sorry, can I enable you? For palladium rhodium catalysts, it is the approximate price in the mean time is $600 a catalyst. For platinum, the identical platinum working, it is about $400, okay? In order that $400 or $600 compares to the price of a automobile.

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Paul Anthony Dunne, Northam Platinum Restricted – CEO & Director [27]

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Sure. And naturally, platinum itself is primarily used within the diesel items, primarily. Palladium, rhodium within the gasoline items, primarily. So any extra questions from the strains? Maybe we are able to go to the strains of the — are we the clear on that aspect? Any extra questions within the room? Okay. There’s yet another from Arnold. Have a look at [chance there].

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Arnold Van Graan, Nedbank Company and Funding Financial institution, Analysis Division – Mining Fairness Analyst [28]

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A query for Alet on the pref. So I imply, taking a look at these numbers, you would possibly get to your goal of shopping for again the prefs fairly shortly. What is the subsequent step from there? What’s probably the most tax and environment friendly manner to try this? Is that paying a dividend? Or is there any construction or any technique to revise the construction we are able to simply service the coupon?

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Aletta Helena Coetzee, Northam Platinum Restricted – CFO & Government Director [29]

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Properly, it is dependent upon what occurs to the pref value and our free money movement technology. However as soon as we get there, our Board will reassess how greatest to return worth to shareholders, and that may embrace the cost of a dividend. However time will inform.

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Paul Anthony Dunne, Northam Platinum Restricted – CEO & Director [30]

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Okay. Thanks very a lot, women and gents, please be a part of us for a sandwich and a cup of tea, and there is additional alternative for questions. Thanks.