Northam to purchase part of Amplats unit

Northam, a R24,6bn company, is on an aggressive drive to bulk up its portfolio, having bought the Everest South mine and concentrator from Aquarius Platinum for R450m cash to add to its Booysendal property, and has started building a R750m furnace at its Zondereinde processing complex as part of its growth strategy.

In a recent black economic empowerment transaction, Northam topped up its cash reserves by about R4bn, giving it a healthy war chest to pursue its "aspirational target" of producing 1m ounces of platinum group metals a year. Northam shares outpaced those of its peers, adding 4% and extending its gain so far in 2016 to 83%.

The nearly 17mounces of platinum group metal (PGM) resources it is buying from neighbouring Amandelbult would be accessed within 18 months of securing approval for the transfer of the mineral rights from the department of mineral resources in a process expected to take up to six months, CEO Paul Dunne said.

The new ground could be relatively cheaply developed and accessed using existing underground infrastructure starting at 1,4km below surface and close to the boundary with Amandelbult, he said. The purchase, once concluded, would take Northam's cash to R2,1bn.

The reefs, which include the highly sought-after Merensky Reef, would boost Zondereinde's production to 350,000oz of four PGM elements from 2016's forecast of between 280,000oz and 290,000oz, Dunne said.

The deepest part of Zondereinde was 2,2km - the deepest in the South African platinum industry - so mining would become more focused on the new, shallower, higher grade and lower cost part of the mine, he said.

The new 20MW furnace will be commissioned in December 2017, dovetailing nicely with increased output from across the company's mining operations at Zondereinde, Booysendal North and Booysendal South.

The latter two are mines near Steelpoort and Zondereinde is north of the Pilanesberg. Northam is swapping a shallower part of the Zondereinde deposit with 750,000oz of PGM resources, and which it had no intention of mining, with part of the farm owned by Amplats that overlies the resources it is buying.

"The transaction is mutually beneficial and allows us to exit resources for value which are outside of our life-of-mine plans and do not impact current mining or the future potential of Amandelbult," said Amplats CEO, Chris Griffith.