SOUTH AFRICA – Northam Platinum, an independent integrated platinum group metal (PGM) producer, has announced that it has increased its stake in Zambezi Platinum to 46.7% after buying R804.6 million (US$46.21m) worth of the company’s stock, taking its total shares in Zambezi Platinum to 74.7 million.

Zambezi Platinum was created and listed in 2015 after Northam Platinum was required to develop a new empowerment structure.

In so doing, it raised R4 billion (US$0.23bn) selling a stake in itself which was used to back convertible preference shares in Zambezi Platinum. The Zambezi preference shares fall due in 2025.

By buying preference shares in Zambezi, Northam says the company will limit its financial exposure when the preference shares mature and are converted.

The number of Northam shares in issue will also be reduced because as a shareholder in Zambezi, Northam will receive back its own shares when the preference shares are redeemed.

The face value of the Northam owned ‘prefs’ as of August 17, calculated as the initial issue price of the shares and the accumulated dividends that comes with them was R5.96 billion (US$0.34bn), the firm said.

Northam is scheduled to report a strong set of annual financial numbers on August 28, according to a trading statement last week in which normalised full-year headline share earnings were forecast to be between 624.53 to 690.27 cents per share. These earnings far outstrip the 270c/share reported for the 12 months ended June in 2019.

The chief mover was the market. Total revenue per platinum oz sold was 78.8% higher increasing the cash margin per platinum oz to about 40%.

Net debt as of June 30 increased R300 million (US$17.23m) to R3.3 billion (US$0.19bn) compared to net debt at the close of the previous financial year. Northam said its net debt to EBITDA ratio was below 1x and within its comfort zone. The increase was partly related to purchases of Zambezi Platinum preference shares.

The company lost about 108,000 ounces of platinum group metal production in the 12 months ended June 30 and incurred costs as a result of Covid-19 lockdowns totalling R977 million (US$56.11m), most of which related to worker salaries the company elected to pay despite lockdown.

Two of the company’s mines – Eland and Booysendal – had returned to full production before the year-end, but Zondereinde, which accounted for about 60% of refined production in the firm’s 2019 financial year, would not recover full production until the second half of the current financial year, affecting production for the period. It was at 80% capacity by the close of the period under review.

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