Northam Platinum to prosper as CEO forecasts hard slog
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A R320 per ounce decline in the average basket price of platinum group metals (PGMs) would derail Northam Platinum’s Eland project, described by the miner’s CEO Paul Dunne last week as among the best new PGM investments in the world.That’s how seriously difficult the market is for PGM miners currently. Happily for Northam, a 30% improvement in price or (more likely) Eland’s volume, or a combination of the two, would make it break-even.Commenting during the firm’s interim results presentation last week, Dunne said the average basket price had found “a floor” at about R32,000 per platinum oz. While that is good news, it’s also a sign of the difficulty for PGM miners. “This is placing pressure on the industry and the impact should not be estimated,” he said.“This is a very challenging price environment.”Yet there is hope. The longer this market condition persists the greater the correction will be, said Dunne. “As long as there is no further deterioration we will continue to invest in the cycle as we previousy did in the down-cycle.“The market will turn,” he said.Data from the World Platinum Investment Council on Wednesday supports the view of growing upward pressure for platinum, a metal that is already 9% stronger in price over the last 12 months. Above ground stocks are enough for only four months of demand cover, and contributing towards dwindling supply.“The ongoing decline in mine supply continues, potentially accelerating as stock release benefits taper further,” said Trevor Raymond, CEO of the WPIC. Global supply is set to fall 4% this year fuelling a supply defict of about 848,000 oz, the council said. Last year’s deficit of 995,000 oz was 46% higher than the WPIC first forecast.Set against this background, Northam thinks investing through the downcycle will be justified, in time. Even if the market doesn’t recover, it ought to produce a better second half to its financial year ended June 30.A stock release worth about R1.5bn will cut into net debt which rose to R6bn as of December 31 – partly a function of a working capital build but also down to Northam’s investments in projects like Eland which Dunne says will go on to be a highly successful mine for the next decade, and another – the 3 shaft extension at Zondereinde.Arnold van Graan, an analyst for Nedbank Securities said cash flows will be strong in the second half of Northam’s financial year. “Despite the increase in net debt, we believe Northam is well positioned to deal with the current lower PGM price environment.”“2H (second half of the financial year) should be like night versus day compared to 1H: we think production and sales could exceed guidance,” said Adrian Hammond, an analyst for Standard Bank Group Equities.Asked what he thought of Impala Platinum CEO Nico Muller’s call that the PGM sector in South Africa ought to pull back on unprofitable production, Dunne replied: “We are investing in new mines. All new mines have high upfront capital and long lead times before you get your money back.“That is the nature of mining. Upfront capital, long lead times and hard slog before you get the return”.The post Northam Platinum to prosper as CEO sticks to hard slog appeared first on Miningmx.Weiter zum vollständigen Artikel bei Mining.com Weiter zum vollständigen Artikel bei Mining.com
Quelle: Mining.com
