| Thu 18 Aug 2011, 8:00 | | NHM - Northam - Reviewed preliminary announcement of the results for the year |
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NHM
NHM
NHM - Northam - Reviewed preliminary announcement of the results for the year
ended 30 June 2011
Northam Platinum Limited
(Incorporated in the Republic of South Africa)
Registration number 1977/003282/06)
Share code: NHM
ISIN: ZAE000030912
("Northam" or "the company" or "the group")
Reviewed preliminary announcement of the results for the year ended 30 June 2011
Key features
- Booysendal construction and development on track
- Progress in Booysendal funding arrangements
- Disappointing performance from Zondereinde
- Modest dividend of 10 cps declared
Change *Year ended **Year ended
% 30 June 2011 30 June 2010
R000 R000
Consolidated statement of comprehensive income
Sales revenue (9.5) 3 571 048 3 945 083
Cost of sales 0.8 3 185 754 3 160 108
- Operating costs 1.3 2 258 548 2 230 369
- Concentrates purchased 787 316 735 090
- Refining and other costs 68 804 92 972
- Depreciation and impairments 147 838 167 346
- Change in metal inventories (76 752) (65 669)
Operating profit (50.9) 385 294 784 975
Share of profits and
distribution from associate 7 248 12 440
Investment revenue 85 520 167 655
Net sundry income 53 148 9 557
Profit before taxation (45.5) 531 210 974 627
Taxation 182 001 333 601
Profit and total comprehensive
income for the year
attributable to shareholders (45.5) 349 209 641 026
Reconciliation of headline
earnings and per share
information
Profit for the year
attributable to shareholders 349 209 641 026
Loss / (profit) on sale of
property, plant and equipment 2 572 (822)
Insurance claim (36 267) -
Tax effect 9 435 230
(49.3) 324 949 640 434
Earnings per share - cents (45.9) 96.2 177.9
Fully diluted earnings per
share - cents (45.9) 96.2 177.8
Headline earnings per
share - cents (49.7) 89.5 177.8
Fully diluted headline
earnings per share - cents (49.6) 89.5 177.7
Dividend declared per
share - cents 15.0 40.0
Weighted average number of
shares in issue 0.8 363 087 830 360 291 885
Fully diluted number of
shares in issue 0.7 363 150 282 360 464 496
Number of shares in issue
at year-end 6.0 382 416 190 360 642 000
* Reviewed
** Audited
Preparation - These preliminary reviewed results have been prepared under the
supervision of Financial Director Mr A Khumalo, CA (SA). These results are an
extract of the annual financial statements of the group which will be published
on the website early in the second quarter of the financial year.
*Year ended **Year ended
30 June 2011 30 June 2010
R000 R000
Consolidated statement of cash flows
Cash flows from operations 785 195 862 411
Profit before taxation 531 210 974 627
Depreciation and impairment 147 838 167 346
Discontinuation of investment
in escrow 91 458 -
Change in short-term provisions 6 073 9 111
Taxation paid (228 022) (281 756)
Change in working capital 182 018 (90 675)
Other 54 620 83 758
Cash flows utilised in
investing activities (212 946) (395 965)
Property, plant and equipment
- Additions to maintain operations (268 852) (231 481)
- Additions to expand operations (688 030) (145 510)
- Disposals proceeds 6 678 5 243
Cash distribution received from
associate 792 10 205
Township and land development
- Additions (235) (4 460)
- Disposals proceeds 8 121 -
- Increase in investments held
by Northam Platinum Restoration
Trust Fund (4 333) (2 366)
- Increase in investments held by
Environmental Guarantee Fund (8 709) (4 868)
- Increase in investments held by
Toro Employee Empowerment Fund (16 136) (22 728)
Cash and cash equivalent acquired
at date of acquisition of subsidiary 757 758 -
Cash flows utilised in financing
activities (61 105) (200 640)
Proceeds from issue of shares 29 097 15 518
Dividends paid (90 202) (216 158)
Net increase in cash and
cash equivalents 511 144 265 806
Cash and cash equivalents at
beginning of period 1 186 709 920 903
Cash and cash equivalents at end
of period 1 697 853 1 186 709
* Reviewed
** Audited
*Year ended **Year ended
30 June 2011 30 June 2010
R000 R000
Consolidated statement of financial position
Non-current assets 9 203 655 7 971 624
Property, plant and equipment 2 792 457 1 938 061
Mining properties and mineral
resources 5 706 478 5 722 659
Interest in associate and joint ventures 505 327 129 741
Unlisted investments 6 6
Township land and development 55 918 63 805
Long-term receivables 27 292 -
Investments held by Northam Platinum
Restoration Trust Fund 31 591 27 259
Environmental Guarantee Investment 29 471 20 763
Toro Employee Empowerment Trust 55 115 69 330
Current assets 2 725 916 2 117 683
- Inventories 604 647 521 462
- Trade and other receivables 410 621 318 054
- Investment in escrow - 91 458
- Cash and cash equivalents 1 697 853 1 186 709
- Receiver of Revenue 12 795 -
Total assets 11 929 571 10 089 307
Share capital and share premium 8 596 082 7 638 486
Retained earnings 1 363 194 1 081 862
Equity compensation reserve 156 076 112 806
Shareholders` equity 10 115 352 8 833 154
Non-current liabilities 639 595 581 490
Deferred tax 477 145 447 212
Long-term provisions 162 450 134 278
Current liabilities 1 174 624 674 663
- Receiver of Revenue 118 268 33 886
- Trade and other payables 972 350 562 844
- Short-term provisions 84 006 77 933
Total equity and liabilities 11 929 571 10 089 307
* Reviewed
** Audited
Share Share Equity Retained Total
capital premium compen- earnings
sation
reserve
Consolidated statement of changes in equity
Balance at
1 July 2009 3 599 7 619 369 55 177 654 041 8 332 186
Credit in respect
of share based
payments - - 60 582 - 60 582
Profit and total
comprehensive income
for the year
attributable to
shareholders - - - 641 026 641 026
Dividends - - - (216 158) (216 158)
Transfer of equity
compensation reserve
to retained earnings - - (2 953) 2 953 -
Issue of new shares 7 15 511 - - 15 518
Balance at
30 June 2010 3 606 7 634 880 112 806 1 081 862 8 833 154
Credit in respect of
share-based payments - - 65 595 - 65 595
Profit and total
comprehensive income
for the year
attributable to
shareholders - - - 349 209 349 209
Dividends - - - (90 202) (90 202)
Transfer of equity
compensation reserve
to retained earnings - - (22 325) 22 325 -
Issue of new shares 218 957 378 - - 957 596
Balance at
30 June 2011 3 824 8 592 258 156 076 1 363 194 10 115 352
*Year ended **Year ended
30 June 2011 30 June 2010
R000 R000
Capital commitments
Booysendal mine
- Authorised but not contracted 3 111 449 3 630 960
- Contracted 762 336 13 040
3 873 785 3 644 000
Zondereinde mine
- Authorised but not contracted 325 127 330 499
- Contracted 59 125 16 318
384 252 346 817
Note: These commitments in respect of Zondereinde mine will be financed out of
operating cash flows. The Booysendal commitments will be funded from a
combination of internal retentions and debt.
*Year ended **Year ended
30 June 2011 30 June 2010
R000 R000
Other commitments
Information Technology
Outsource Service Provider
- Due in one year 13 432 11 241
- Due in two to five years 31 026 21 418
Operating lease rentals -
office equipment
- Due in one year 1 182 214
- Due in two to five years 575 8
Operating lease rentals - premises
- Due in one year 3 872 459
- Due in two to five years 11 504 -
- More than five years 14 855 -
Employee housing development
- Contracted - 2 395
Bank guarantees issued 49 250 60 457
* Reviewed
** Audited
Change *Year ended **Year ended
% 30 June 2011 30 June 2010
R000 R000
Operating statistics ***
Merensky
- Development metres (33.5) 5 899 8 864
- Square metres mined (30.3) 140 501 201 569
- Tonnes milled (20.8) 793 490 1 002 208
- Head grade
(g/tonne - 3PGEs + Au) (5.1) 5.6 5.9
- Available ore reserves
- months 18 20
UG2
- Development metres (36.2) 1 720 2 694
- Square metres mined (24.3) 125 726 166 129
- Tonnes milled (23.0) 797 355 1 036 017
- Head grade
(g/ton - 3PGEs + Au) (4.4) 4.3 4.5
- Available ore reserves
- months 24 24
Combined
- Development metres (34.1) 7 619 11 558
- Square metres mined (27.6) 266 227 367 698
- Tonnes milled (21.9) 1 590 845 2 038 225
- Head grade
(g/ton - 3PGEs + Au) (5.8) 4.9 5.2
Financial statistics
Precious metals in
concentrates produced + kg (22.2) 7 779 9 999
Precious metals in
concentrates purchased + kg 6.6 2 244 2 106
Precious metals sold + kg (19.8) 9 872 12 313
Average price realised + R/kg 12.4 323 899 288 255
Operating costs + R/kg 28.1 307 203 239 769
Cash operating costs + R/kg 29.3 279 118 215 900
Precious metals in
concentrates produced + oz (22.2) 250 110 321 475
Precious metals in
concentrates purchased + oz 6.6 72 146 67 709
Precious metals sold + oz (19.8) 317 392 395 879
Average price realised + US$/oz 21.4 1 439 1 185
Operating costs + US$/oz 38.7 1 363 983
Cash operating costs + US$/oz 39.9 1 238 885
Average exchange rate realised
US$1.00 = R (7.4) 7.01 7.57
Operating cost per
tonne milled R/tonne 27.7 1 502 1 176
Cash cost per tonne
milled R/tonne 28.9 1 365 1 059
* Reviewed
** Audited
*** Not reviewed or audited
+ (3PGE+Au)
INTRODUCTION
The 2011 financial year is characterised by five main features:
- The start-up of construction and development at the new Booysendal mine on the
eastern limb of the Bushveld Complex.
- The corporate action which led to the group`s acquisition of the entire issued
share capital of former major shareholder Mvelaphanda Resources Limited (Mvela
Resources) through a scheme of arrangement.
- The disappointing performance of the Zondereinde division, owing largely to a
six-week strike in the first half of the year and safety-related stoppages in
the second half.
- The proposed sale of the southern portion of the mineral resource at
Booysendal to Aquarius Platinum South Africa (Proprietary) Limited, a subsidiary
of Aquarius Platinum Limited, subject to conditions precedent.
- The launch of a sponsored level 1 American Depositary Receipt (ADR) facility
in the United States of America.
FINANCIAL RESULTS
The six-week strike at the Zondereinde division in the first half of the
financial year had a major negative impact on the annual results. This was
compounded by safety-related stoppages continuing into the second half of the
year, exacerbating the already compromised production position. Lower production
also negated the effect of the slightly stronger rand basket price received over
the year of R323 899/kg (F2010:R288 255/kg).
In spite of the additional metal concentrate purchases, 6.6% higher year-on-year
at 2 244kg (72 146oz), metal sales remained depressed, falling 19.8% to 9 872kg
(317 392oz). Consequently, total sales revenue was 9.5% down on the previous
year at R3.57 billion.
In total, operating costs were 1.3% higher at R2.26 billion compared to the
previous year. The lower output at Zondereinde had a negative effect on unit
costs. Unit costs also continue to be driven by mining input costs, primarily
labour and power, increasing above the rate of inflation. The net effect was a
significant increase in unit costs with operating costs in R/kg and cash costs
in R/kg higher by 28.1% and 29.3% respectively. The equivalent increases in
US$/oz were 38.7% and 39.9% respectively as a result of the strengthening of the
Rand against the Dollar during the course of the year.
The net result of the above was lower operating profit at R385.3 million.
Northam`s share of profits from its associate, Pandora, was 41.7% lower than the
previous year at R7.2 million owing to the decline in production. Investment
revenue was 49.0% lower at R85.5 million owing to the decrease in cash balances
as a result of higher capital expenditure. Sundry revenue however, was higher at
R53.1 million reflecting the proceeds of R36.2 million from an insurance claim
following repairs to the precipitator. Profit before tax declined by 45.5% to
R531.2 million. Tax payable is correspondingly lower at R182.0 million,
resulting in a profit after tax of R349.2 million.
Earnings per share for the June 2011 financial year end was 45.9% lower at 96.2
cents per share compared to last year`s 177.9 cents per share. This takes into
account a 6.0% increase in the number of issued shares to 382 416 190 shares
during the year.
The result of all operating, investing and financing cash flow activities was a
net cash inflow of R511.1 million (F2010: R265.8 million). Operating cash flows
were 9.0% down compared to the previous year mainly as a result of a decline in
profit before tax and lower investment revenues.
Cash flows utilised in investing activities absorbed a net of R212.9 (F2010:
R396.0 million). This comprises the net of principal outflows of capital
expenditure of R268.9 million (F2010: R231.5 million) at Zondereinde, R688.0
million (F2010: R132.4 million) on the Booysendal mine with the build-up to
mining operations, increases of R13.0 million in respect of the funding of
environmental obligations and R16.1 million (F2010: R22.7 million) in respect of
the Toro Employee Empowerment Fund, and principal inflows comprised of the cash
and cash equivalents of the Mvela Resources group at the date of acquisition
amounting to R757.8 million.
Cash flows utilised in financing activities fell to R61.1 million compared to
last year`s R200.6 million reflecting the lower dividends paid as management
conserved cash for the Booysendal mine development.
INTEGRATED REPORTING AND KING III
Northam is fully committed to timeous, relevant and transparent communication of
issues relevant to all stakeholders, and has adopted an integrated approach to
reporting and the guidance provided by King III.
During the year the board commissioned a King III gap analysis by Ernst & Young
Inc. A number of areas have been identified for improvement. Management is
currently putting action plans in place to deal with these issues.
Good progress has been made with the implementation of systems to integrate
sustainability data into the broad reporting framework. The company once again
undertook an assessment of its material sustainability issues both from the
company`s and stakeholders` perspectives. Critical amongst these are:
- Operating the Zondereinde mine and its concentrating and smelting operations
efficiently and cost-effectively. More detail on the way in which the group is
undertaking this may be found in the operational review of Zondereinde on page 9
of this document.
- Ensuring the safety of employees and contractors. Over the past ten years
safety at Zondereinde has shown a steadily improving trend. It is with sadness
therefore that the company advises that there were five fatalities during the
year. Investigations into the causes of these accidents have been undertaken in
close co-operation with unions and the DMR. An intensive safety campaign has
been launched to reverse the recent disappointing performance.
- Establishing and maintaining constructive relations with unions. Industrial
relations have again been challenging. 37 days were lost during the year owing
to industrial action at Zondereinde. A concerted effort was launched during the
year to improve communication and relationships.
- Achieving legislative and regulatory compliance. The Zondereinde mine was
granted new order mining rights, having applied for conversion of its old order
mining rights in 2006. Zondereinde has an exemption to operate without a water
use licence, which was applied for in June 2005. All mining rights and permits
have been awarded to the Booysendal operation following the allocation of its
water use licence on 17 May 2011.
- Delivering the Booysendal project at an acceptable cost of capital, to turn to
account its extensive resources for a broad range of stakeholders. A detailed
account of the progress made at the Booysendal operation is discussed on page 10
of this document.
- Implementing the ISO14001 environmental management system and to achieve
certification against this standard. The Zondereinde mining operation was
awarded ISO14001 certification on 28 February 2011. Application for this
standard and certification of Zondereinde`s metallurgical complex is underway.
The ISO14001 standard will also be implemented at Booysendal.
- Optimising water usage both at Zondereinde and at Booysendal. Water is
fundamentally important for Zondereinde mine, not just from an environmental and
permitting perspective, but also because the mine uses water as its primary
source of energy for underground operations through a shaft-based hydropower
system. Zondereinde`s operations do not source water through abstraction, and
the division aims to achieve zero discharge into the surrounding environment.
At Booysendal, water allocation too, is of critical importance. Construction
operations at Booysendal have been fast-tracked following the allocation of the
water use licence. Northam has considered the risks and opportunities relating
to water availability in its voluntary submission to the Carbon Disclosure
Project (CDP) Water Disclosure for the second consecutive year. The CDP Water
Disclosure 2011 Global Report may be viewed at:
http://www.greenbiz.com/sites/default/files/CDP-2010-Water-Disclosure-Global-
Report.pdf
- Optimising energy consumption and investigating potential and cost-effective
alternative sources of energy. At Zondereinde, electricity accounts for 10.4% of
total operating costs. This is expected to increase as Eskom`s rates continue to
reflect the NERSA-approved tariff increases. At Booysendal, optimisation studies
undertaken during F2010 resulted in a revised mine design and higher rate of
production at full capacity, which may result in electricity consumption
exceeding the initially allocated 20MVA during peak demand periods. These
requirements will be fulfilled by self-generation power on site (5MVA) during
peak times. The revised design also makes provision for an energy management
system, which is still to be formally approved by Eskom, and the introduction of
energy recovery strategies.
- To debate, monitor and manage our climate change strategy and, as part of
that, to reduce our CO2 emissions. Climate change presents moderate risks for
Northam on a physical and regulatory front. However, climate change also
presents an opportunity as PGMs are used in technologies that bring about
reduction in noxious gases. Indeed, the global trend of tightening emissions
legislation continues to stimulate PGMs usage in autocatalysis. For more
detailed information on GHGs and Northam`s assessment of the risks and
opportunities presented to the company as a result of climate change, view
Northam`s submission to the Carbon Disclosure Projects 2011 annual survey which
may be found at www.cdproject.net.
- To identify conservation priorities in its areas of operation and, where
necessary, to work with local authorities and conservation professionals in
developing appropriate offsets. Given that Booysendal is located in a
biodiversity-sensitive region, the company has developed a unique and
progressive structure that will see oversight of land under management as a
distinct and equal role to that of the management of the mine. Further,
Booysendal is in the process of establishing an offset trust to be funded during
the life of mine, for conservation in perpetuity.
- Identifying and engaging with stakeholders on a regular basis, especially
community stakeholders. Stakeholder engagement and relationships are deeply
entrenched at the well-established Zondereinde mine. Zondereinde`s Social and
Labour Plans have been approved by the DMR and work is now underway to implement
these in conjunction with the Integrated Development Plans for local
communities. Stakeholder identification and engagement at Booysendal is a far
more complex undertaking, complicated by the scale, proximity and needs of local
communities. A stakeholder engagement action plan is currently being developed
and various forums have been set up to deal with concerns from stakeholders and
to facilitate the flow of meaningful benefits to communities. A particular issue
of concern at Booysendal in recent months has been the allocation of jobs; this
is expected to intensify as the project is located in a region with little
economic activity. Booysendal`s SLP seeks to address some of the needs here, but
it will be difficult for a single mining company to have a significant impact.
- To attract and retain investors in the company so as to maintain its relative
value for shareholders and to be able to raise capital cost-effectively to fund
growth. Over the years the group`s shareholder base has been relatively stable.
With the recent unbundling of its major shareholder, Northam has retained its
black economic empowerment ownership levels, and has acquired a strong new
shareholder base, with some 32% now comprising offshore shareholders (June 2010:
17%). Recent global economic turmoil, and
the ongoing debate on nationalisation have done little to support resource
stocks. Nevertheless, Northam`s appeal will continue to be underpinned by its
ability to produce these precious PGMs, for many years to come.
A detailed sustainable development report will be made available on the
company`s website at the time of the publication of the annual report.
ZONDEREINDE MINE
Operating performance
The six-week strike in September/October 2010 had a predictably adverse effect
on production results. In total 65 out of 301 working days available for mining
were lost due to strike action and safety-related incidents. A total of 1 590
845 tonnes were milled (F2010: 2 038 225), illustrating the effects of
stoppages, but also of the constraints on the Merensky horizon and ore reserve
position. The combined grade at 4.9/t (MR: 5.6g/t; UG2: 4.3g/t) was 5.8% lower
year-on-year owing to some unavoidable waste mining, mining the normal reef at a
higher average stoping width in order to maximise metal extraction, the
incidence of transition zone intersections and poor control of the UG2 reef.
This will be addressed through a tighter focus on mining width and grade
control.
Metals in concentrate produced declined by 22.2% to 7 779kg (250 110oz), due
largely to the loss of 22.1% of operating shifts. Purchased concentrate amounted
to 2 244kg (72 146oz).
The key to recovery at Zondereinde lies in the availability of the Merensky
reef. Some progress has been made in this area, but some challenges remain:
- On 14 level development has intersected the Little John Dyke on the eastern
side of the mine, and sealing is in progress. With high ground water yields
delays are anticipated until at least the end of Q1 of F2012.
- On the western side of the mine, at year-end, the 3, 4 and 12 levels were on
short rounds owing to adverse ground conditions. In traversing the 14 line
fault, delays on both 3 and 4 levels have affected the establishment of footwall
drives and crosscuts. On 3 level significant ground consolidation has been
required ahead of development.
- Operations on the 1, 5, 6, 13 and 14 levels were temporarily halted to enable
ring covering and sealing.
- The lag on 6 and 7 levels has precluded connectivity between the upper and
lower levels. This will remain so until raise connections hole between 8 and 5
levels. On 1 and 13 levels sealing work has advanced well, and the fissure
appears to be less problematic on these two levels than on others.
- The deepening project has progressed, despite the slow introduction in the
first half of the year of the new mechanised equipment. These problems have been
largely overcome and the benefits of the larger equipment on the development
cycle were evident in the second half of the year. In addition, increased
volumes of normal reef are being mined from this area.
Mining options remained limited, particularly in the second half of the year.
These conditions are likely to persist for the next 18 months until the
additional stoping areas in the upper and central western portions of the mine,
together with the decline section, come on stream.
Metallurgical operations
Since the repairs to the electrostatic precipitator, completed in October last
year, the metallurgical operations continued to operate satisfactorily during
the year. Work continues on assessing future smelting options.
Costs and capital expenditure
The combination of lower production volumes and higher mining costs resulted in
unit cash cost increases of 29.3% to R279 118/kg compared to R215 900/kg in the
previous comparable reporting period. Capital expenditure at Zondereinde
absorbed R268.9 million (F2010: R231.5 million), with the major capital
expenditure item being the deepening project, within budget at R92.7 million.
Capital expenditure for F2012 is likely to be approximately R384.3 million with
the deepening project and the accelerated development accounting for about
R179.7 million.
Township land and development
In terms of the group`s strategy of assisting employees to acquire affordable
housing, management is pleased to advise that 100 houses were sold in the
Mojuteng Township of Northam town during the reporting period.
BOOYSENDAL MINE
Previously outstanding regulatory approvals for the Booysendal mine, including
an integrated water use licence, were received during the second half of the
financial year.
Progress on site has been satisfactory. Following completion of the boxcuts, the
on-reef and reverse declines have been handed over to the mining contractor and
development has started. The bulk earthworks for mining infrastructure and the
concentrator are largely complete with various terraces handed over to civil and
building contractors.
A total of R688.0 million (F2010: R132.4 million) was spent on capital
expenditure for the Booysendal mine during the 2011 financial year. In line with
planning, project expenditure is anticipated to peak at R2.2 billion during
F2012. Finalisation of the design of the slimes dam and certain scope changes to
the project, have resulted in the total projected project cost increasing to
R3.9 billion in June 2011 money terms.
Funding options
Management is in the process of securing additional funding in the form of a
revolving credit facility to supplement its internal financial resources for the
development of the Booysendal mine.
CORPORATE ACTIONS
Shareholders will be aware of the unbundling by Northam`s former holding
company, Mvela Resources of its holding in Northam, and Northam`s subsequent
acquisition of the entire issued share capital of Mvela Resources. Shareholders
were notified in a circular posted to shareholders, dated 18 February 2011, in
terms of which Northam was to acquire assets of Mvela Resources through the
issue of 20 912 190 shares (at the exchange ratio of 9.598 Northam ordinary
shares for every 100 Mvela Resources shares) through a scheme of arrangement in
terms of Section 311 of the Companies Act No 61 of 1973, as amended. This
transaction became effective on 6 June 2011.
This transaction resulted in Northam acquiring R757.8 million in cash along with
the following significant assets, viz:
- A 50% interest in the Dwaalkop platinum project, a PGM development opportunity
held in joint venture with Lonmin Plc as well as an initial participatory
interest of 51% in the Kokerboom exploration project (a greenfields iron oxide-
copper-gold and massive sulphide exploration project).
- A 20.3% interest in the issued share capital of Trans Hex Group Limited, a
diamond producing and marketing company listed on the JSE.
Various other assets valued at R3.4 million were also acquired as well as
various liabilities amounting to R202.2 million.
Shareholders are also reminded of the announcement dated 4 May 2011 in terms of
which Northam and its wholly-owned subsidiaries Micawber 278 (Proprietary)
Limited and Khumama Platinum (Proprietary) Limited concluded an agreement with
Aquarius and AQPSA to dispose of the mineral rights attached to the southern
portion of Booysendal to AQPSA for an amount of R1.2 billion, subject to
conditions precedent, net of value added tax and tax charges which may arise
from the disposal.
The proposed transaction is still in progress; the conditions precedent include,
inter alia, the written consent of the Minister of Mineral Resources in terms of
Section 102 of the Mineral and Petroleum Resources Development Act No 28 of
2002. Completion of this transaction is expected some time in 2012.
ADR PROGRAMME
The company launched a sponsored level 1 ADR facility effective in the last
quarter of the 2011 financial year. The shares trade with the ticker code NMPNY
on the over-the-counter (OTC) market in the United States.
AUDITOR`S REVIEW
The financial results of the group have been reviewed by Mr C Maongera of Ernst
& Young Inc., the group`s auditors. A copy of their unmodified review report is
available for inspection at Northam`s registered office.
Accounting policies - basis of preparation
The financial statements have been prepared on the historical cost basis, except
for financial instruments that are stated at fair value, in accordance with
IAS34 - Interim Financial Reporting. The consolidated group financial statements
for the year ended 30 June 2011 have been prepared in accordance with the
International Financial Reporting Standards of the International Accounting
Standards Board as well as AC 500 Standards, as issued by the Accounting
Practices Board or its successor, and incorporates the accounting policies which
are consistent with those adopted in the financial year ended 30 June 2010, with
the exception of the adoption of the following amendments, standards, or
interpretations with effect from 1 July 2010:
IFRS 1 - IFRS 1 First time adoption of International Financial Reporting
Standards - Additional exemptions for first time adoption (amendment).
IFRS 1 - First time adoption of International Financial Reporting Standards -
Limited exception from comparative IFRS 7 disclosure for first time adopters
(amendment)
IFRS 2 - Shared based payments - Group Cash Settled based Payment Transactions
(amendment)
IFRS 3 - Business Combinations - Transition requirements for contingent
consideration from a business combination that occurred before the effective
date of the revised IFRS (Annual improvements project 2010)
IFRS 3 - Business Combination - Measurement of non controlling interest (Annual
improvements project 2010)
IFRS 3 - Business Combinations - Un-replaced and voluntarily replaced share-
based payment awards (Annual improvements project 2010)
IFRS 5 - Non-current Assets (or Disposal Groups) Held for Sale and Discontinued
Operations - Disclosures of non-current assets (or disposal groups) classified
as held for sale or discontinued operations (Annual improvements project 2009)
IFRS 8 - Operating Segments - Disclosure of information about segment assets
(Annual improvements project 2009)
IAS 1 - Presentation of Financial Statements - Current / non-current
classification of convertible instruments (Annual improvements project 2009)
IAS 7 - Statements of Cash Flows - Classification of expenditures on
unrecognised assets (Annual improvements project 2009)
IAS 17 - Leases - Classification of leases of land and buildings (Annual
improvements project 2009)
IAS 27 - Consolidated and Separate Financial Statements - Transition
requirements for amendments made as a result of IAS 27 (Annual improvements
project 2010)
IAS 32 - Financial Instruments Presentation - Classification of rights issues
(amendment)
IAS 36 - Impairment of Assets - Unit of accounting for goodwill impairment test
(Annual improvements project 2009)
IAS 39 - Financial Instruments: Recognition and Measurement - Assessment of loan
prepayment penalties as embedded derivatives (Annual improvements project 2009)
IAS 39 - Financial Instruments: Recognition and Measurement - Scope exemption
for business combination contracts (Annual improvements project 2009)
IAS 39 - Financial Instruments: Recognition and Measurement - Cash flow hedge
accounting (Annual improvements project 2009)
IFRIC 19 - Extinguishing Financial Liabilities with Equity Instruments
Through the annual improvements project, changes have been made to various
standards, without the standards being issued as `Revised`.
The adoption of these amendments, standards and interpretations resulted in
changes only in the way in which the annual financial results statements are
presented as well as additional disclosures in the annual financial statements.
Related parties
The group, in the ordinary course of business, enters into various sale,
purchase and lease transactions with a large number of entities, some of whom
are related parties. All transactions covered in this set of results are
concluded at an arm`s length basis.
Segmental reporting
The group distinguishes between two operating segments, the Zondereinde mine and
the Booysendal mine.
Capital expenditure to the value of R688.0 million (F2010: R132.4 million) was
incurred for the Booysendal mine in this period, and interest to the value of
R12.5 million (F2010: R92.1 million), being the only revenue, has been brought
to account in respect of the investment in escrow. Profit for the period
amounted to R8.3 million (F2010: R66.3 million) for Booysendal, with the
remaining profit relating to Zondereinde.
Total assets in respect of the Booysendal mine amount to R7.42 billion (F2010:
R6.83 billion). These have been allocated to property, plant and equipment,
mining properties and mineral reserves of Booysendal.
All other assets to the value of R1.08 million (F2010: R0.83 million) relate to
the Zondereinde mine.
Impairment
Given the increase in the average Rand price realised, the long-term outlook for
PGM prices, supported by recovery in the automotive industry post the 2008
financial crisis, management believes that no impairment indicators were evident
during the 2011 financial year for the Zondereinde mine, despite the recent
volatility in the financial markets.
Management has also assessed the valuation of the Booysendal project as required
in terms of IAS 36 - Impairment of Assets, and has concluded that the project is
not impaired. The assessment was based on previous independent valuations taking
into account the current available future outlook of PGM commodity prices and
exchange rates and Booysendal`s ore reserves. None of Northam`s investments in
subsidiaries manifested any indicators of impairment requiring management to
perform impairment testing.
Going concern
The nature of all mining companies is finite, and their operations are dependent
on geological and technical factors, as well as other economic factors such as
commodity prices and exchange rates. Although the world economy has not
recovered to pre-2008 financial crisis levels, the outlook for commodity prices
and exchange rates, as well as the latest forecasts of the geology of the
group`s mineral reserves are still favourable. The directors therefore believe
that the group is a going concern, and accordingly the group`s consolidated
results have been prepared on this basis.
Subsequent events
No material changes have taken place in the affairs of the group between the end
of the financial year and the date of this report.
Prospects
At Booysendal construction and mining operations remain on track for first
production in the third quarter of the 2013 financial year.
At the Zondereinde mine however, production is still expected to be hampered by
difficult geology and restrictions associated with ore reserve availability, in
particular of the Merensky reef. The focus in the year ahead will be on recovery
- improving the ore reserve availability and controlling and improving the mill
head grade. Key to this is connectivity between levels on the west side of the
mine and the advancement of the deepening project in the medium and longer term.
In the current inflationary environment, management will be hard pressed to
contain costs which continue to rise faster than inflation. Without any relief
in this area, unit costs will continue to rise. The profitability of the group
will be affected by these factors, along with the average rand basket price
received in F2012. The current average rand PGM basket price is similar to the
realised F2011 price of R323 899/kg. This could augur well for some growth in
earnings in the next reporting period.
The information contained in this paragraph has not been reviewed or reported on
by the group`s auditors.
Directors
Mr BR van Rooyen was appointed as an executive director with effect from 1 June
2011. Mr van Rooyen will be responsible for business development.
Company secretary
Shareholders were advised of the appointment of Mr DL Swanepoel as company
secretary with effect from 22 November 2010.
Dividend
Dividend number 25 of 10 cents per share has been declared as a final dividend
in South African currency, in respect of the year ended 30 June 2011. In
compliance with the requirements of Strate the following dates are applicable:
Last day to trade (cum div) Friday, 9 September 2011
Last day to trade (ex div) Monday, 12 September 2011
Record date Friday, 16 September 2011
Payment date Monday, 19 September 2011
No share certificates may be de-materialised or re-materialised between Monday,
12 September 2011 and Friday, 16 September 2011, both days inclusive.
On behalf of the board
PL Zim GT Lewis
Chairman Chief executive officer
Johannesburg
16 August 2011
Directors
PL Zim (Non-executive chairman), (Alternate: AK Gupta), GT Lewis (Chief
executive officer) (British), AZ Khumalo (Financial director), ME Beckett
(British), CK Chabedi, Ms NJ Dlamini (Dr), R Havenstein, Ms ET Kgosi, AR Martin,
BR van Rooyen (Executive Director - Business development) MSMM Xayiya
(Alternate: MJ Willcox).
Company secretary:
DL Swanepoel
Registered Office
Block 1A,
Albury Park,
Magalieszicht Avenue,
Dunkeld West,
Johannesburg
PO Box 412694, Craighall
2024, Republic of South Africa
Sponsor:
One Capital
These results are available on the Northam website at www.northam.co.za
Date: 18/08/2011 08:00:11 Produced by the JSE SENS Department.
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