Northam Platinum Holdings Limited (NPH) Earnings Call Transcript & Summary

Sorry, thank you. Good afternoon, everybody. It's Paul Dunne speaking, CEO of Northam Platinum; Alet Coetzee, CFO of Northam Platinum; Damien Smith, amongst other things, is the Chief Geologist of Northam Platinum, which is particularly relevant given our M&A strategy. Welcome to the roundtable of the -- media roundtable and welcome to everybody on the lines. I've got Felix in the room with me, and I'm not so sure who is on the line. So I'd like to ask who are we speaking to if that's okay. Danae?

Yes, sir.

All right. So a very broad introduction because I don't think you want to listen to me, you want to ask the questions. It's a good set of results. You will have seen the presentation, we're very pleased. It's the countercyclical growth strategy of Northam is clearly demonstrated in quite a large lift in profit. And you will have seen that we have now completed the purchase of the 34, and a little bit percent of RBP paid for. Obviously, that might be a subject of questioning. The markets are also tough at the moment. There's a heavy uncertainty reflected, probably best of all in the American and European banking systems, which are jittery. So prices for our metals have come off. In the period gone, we enjoyed ZAR 80,000 per platinum ounce was the old revenue divided by platinum ounces. That's how we express it and that, this morning, is down to ZAR 66,000 per platinum ounce, so I think that is quite relevant. The project work is going reasonably okay. We're excited about 3 shaft: Eland and Booysendal South, which are the 3 flagship projects that we have under our wing. So on that point, this is very quick, and I don't want to talk too much. I'd rather go straight to the questions, and then we'll talk more from there. So you can address questions to me or Damian or Alet, as you wish.

So let's go to Felix first. I can see Felix is on the line.

I just wanted you to get a bit more color on what you said earlier with regards to the relationship with Impala. And you said you have very much a lot in common and -- could you maybe explain what that means? Is there a possibility of a joint venture or at RBPlat as an outcome of this process?

No, I think what I was trying to say there is that it has been portrayed a little bit of a boxing match. And then unfortunately, we can't always talk all the time -- neither parties can talk all the time because it's a highly regulated environment, and there's only so much we can say. So -- now the narrative has been a boxing match, and that is probably, in the first instance, a fair assessment of it. We're both fighting over a very valuable asset. Personally, I don't see it as fighting each other, I see it as fighting over the asset, so it's a slight distinction. And the point I was trying to make about having a lot in common with Impala, we are both South African miners and both very -- I would like to believe in our case, but definitely in our case, very accomplished mining people and we respect them. And that's what I was trying to say. The common bit is that we have similar people, we have similar cultures, similar corporates in many respects. So the last part of your question, I will answer it as best I can. Pretty much the same as you said, it is our job to keep all options open as long as possible for the company and its shareholders. And in this case, of course, I'm talking about our company and our shareholders. So it's our job and this is what we do all along is to keep all options open.

[indiscernible] options, if you can maybe elaborate on them more, or what [indiscernible] options, is that JV, not that many you can control, or these are the considerations now? Because all along, we're under the impression that not once to gain color, you want to [indiscernible].

Yes. And we've reiterated that in my presentation -- we have reiterated that in the room. We would like to gain control of the asset, clearly. But so were the Impala's and again, clearly for them. So that's certainly -- both of those options are possibilities, Impala gains control, we gain control. But there are other possibilities, that's for sure. And we keep them open. That's the point we're making. And we're certainly not -- I made my point very, very clearly. We respect Impala. And if Impala and Northam remain as large shareholders of that asset, I think both companies have a lot of value to bring to bear on that ore body. The ore body, I think -- I know I've said this in the room, but just to reiterate, this is a very large shallow ore body. There is tremendous inherent value in the ore body. The quality and quantity of the ore body determines future outcomes. And Royal Bafokeng Platinum controls a big piece of the Western Bushveld as yet not fully exploited.

Again, just a follow-up [indiscernible] consequence of not getting opportunities to talk to you throughout the period. So what you're saying is if Northam doesn't gain control, you would want to be part of RBPlat even as a minority shareholder? Is that what you're saying?

Felix, the way I'd answer that question, we're not a seller. We're not the seller. There's too much value. There's too much future value here.

Ed Stoddard with Business Maverick -- Daily Maverick. So just what you were saying there, budget, I take it that the ore body obviously lends itself easily to mechanization, I mean.

Yes. At the standard portion of the ore body, you will know that there's a tale of 2 cities that as the older the mine, I don't want to call it an old mine because it's not that old. It only began in the mid-'90s, actually. The old refer to that mine as [ Bosch ] copies, if you're old fashioned, or BRPM. That is the old mine. And that mine consists of shafts south and north, there are two shafts system there. They are declines, by the way. That's one mine. So north and south shafts, [ Bosch ] copies or BRPM, it's the more mature mine. That's the best way of saying it, a bit like you yourself are more mature. The other mine is Styldrift, and Styldrift is a very large ore body. So to put numbers to it, of the 68 million ounces, and then you will correct me if I'm wrong, but 50 of those ounces -- and [indiscernible] nothing we said, 50 of those ounces, 50 million ounces are situated in the Styldrift block. 50 million ounces. The remaining 18 million ounces are in the more mature mine. Can you see how large the Styldrift block is? And this is why it's important. The value of the company is the asset. It's the ore body, and it's very, very large. And Styldrift 1, as it is sometimes referred to, is only just -- it's in its infancy. It's only really just been commissioned, to be honest. So you've got a very, very large block of ground there with a brand new shaft that has been paid for. And you heard me say to build that shaft today will cost you about ZAR 25 billion in our view today, we have to build it today. It's brand new, and you've got this very large ore body, which will accommodate more than just Styldrift 1 because it's so big. So there's a lot of future value. And this is perhaps why -- perhaps sometimes, our motivation is myth. I'll make it very, very clear. We value the ore body. It's an excellent ore body. It's well understood. It was drilled by Anglo Platinum, the best in the business. Those ounces are there. And they're very shallow in our context. Again, to reiterate, would you rather be mining at 2.3 kilometers of going under, or would you like to mine 600 meters below surface at Styldrift? I know which one I would pick. And it's fully mechanizable, as you point out against.

Just to make the point that -- so the Styldrift, 50 million ounces is mechanizable. The more mature mine, BRPM is a conventional mine. But essentially, it's a new mine because it was built, as Paul said, back in the '90s to mine Merensky reef. They're now converting that mine to mine the UG2 reef, which has been untouched to date. Now the benefit of that is that, that mine has developed out to its boundary, so all the tunnels are in. All they need to do is to mine ore from the stopes. So -- and you see the benefits of that coming through in RBPlat's numbers as they reported, that they're seeing very good productivity from BRPM, and have seen very good cost outcomes. Styldrift, the mechanized mine, is the mine that we think we can add significant value to our mechanized experience and we developed or boxed over the last 10 years.

So we see this as, to some extent, not completely true what I'm going to say now. But it's all -- you can think about it as a virgin ore body, to a large extent. So the UG2, BRPM and the whole of the Styldrift ore body is pretty much a virgin ore body. It's only just begun to mine. So in the context of depletion across the rest of the industry, you saw our depletion curves. There is rapid depletion happening in the older portion of the Bushveld. You can't mine the same ground forever. Shafts ultimately close. And this is what is happening: Shafts are closing through natural processes, not forced closure. The ore body is exhausted. When your ore bodies are exhausted, you cap and close the mine. And that is what is happening in the western limb, the older portion of the western limb. So that reduces ounces to the rest of the world. According to our graphs, as you've seen, those graphs are well researched by our geologists, well put together. And in the face of depletion, you have this, what I would call, a lovely piece of the Bushveld, sort of colloquial, sort of Northam terms, if you are -- more than language, it's a lovely piece of ground. It's a pink diamond, actually, to be frank about it. And pink diamonds are very rare.

Just on that note. Looking at your graphs, we're seeing a very significant drop in PGM supply and production by 2040. That's in 17 years' time. Where could ounces come from beyond that? Because there are only -- the South Africa, Zimbabwe, Russia, Stillwater Canada, bit Finland. People talk about there being PGMs in Antarctica, but that's off limits until 2048 when the certain treaty expires and then we'll see after that. Where I mean, I'm just wondering where would PGMs come from then? And what do you think -- it's a long way out, but what would be demand for PGMs by then, given the EV revelation and things like that, expectations around that?

That's a big question.

Yes. But I'll take the second, But I don't need that. And I'll take the second bit. let Damian talk. Damian, remember, is a geologist, a very experienced geologist. He knows the PGM industry inside out. And to begin with, there are only 4 countries in the world that you can get PGMs from in the first place on a net basis.

That's correct. So South Africa, Zimbabwe, Russia and Canada, U.S.A. That's it. There's 5, but it's 4. You're right Dunne. But if you look at that spread that is dominated by the Bushveld, 75% of global resources housed in the Bushveld, 80% of global supply. If you look at rhodium, that's [indiscernible] at the moment, then 90% of all rhodium mined in South Africa. So South Africa is the key to ongoing supply into the long future of PGMs. There are resources in the ground, many, many, many millions of ounces sitting in the ground, which are untouched. [indiscernible] deeper resources and the more challenging resources. And as Paul has mentioned in his results presentation just now, barriers to entry to reduce from those resource ounces are growing all of the time. The time to build new mines is extensive. We're just at the point of getting to steady state in our Booysendal sales operation. That is about as quick as you can start to mine. We started from our [indiscernible]. And when did we start out for? 2015 to 2022. 7 years went like a flash, but it's 7 years. Now if you wake up tomorrow and say, you want to build a mine, when you're looking at something like 2030 before, you've got a chance of producing significant ounces into the market. But that work must be done if we're going to bridge that gap, if we're going to flatten the depletion curve that you see. And as a consequence of that depletion curve, and maybe Paul will talk to the continued demand for metals that we see into the future, then it has to have an impact on price. And if price is affected positively, then there's more incentive for people to build new mines. But it takes money and it takes a lot of time and it takes a lot of expertise.

Now strangely enough, I would say that time is more valuable than the money. The capital across the world is available. But time is for the miner. And this is why we tried to make the point. This also applies to a copper miner. So electrification of the world, the decarbonization of the world, requires huge amounts of copper. There's simply not enough mines being built today to satisfy that demand. It's exactly the same in our business and our point of view. So this is a common problem in mining. We're not the most popular sector in the world. We are somewhat considered as people with big holes in the ground very simplistically, it's a highly complex undertaking, capital intensive and it takes a huge amount of time to bring a mine to book. Again, coming back to Styldrift now and the greater BRPM, we've got a brand-new miner that has been built and paid for in a very large ore body. And this is why it has inherent value. And it's inherent value that attracts more than -- there are very few of these opportunities left at that depth from 0 to 1,000 meters in the Bushveld.

The magnitude to scale of the 68 million ounces at Styldrift, which could yield 45 million ounces of saleable metal at a current production rate of 450,000 ounces -- or 45 million ounces could be extracted from Styldrift over time and the core producing about 450,000 ounces per annum. So that mine at that rate could operate for the next 100 years, or it could operate at a higher rate. You see so there's metal in the ground, but people need to apply capital and they need to apply expertise to that to bring it to book.

And maybe just to add to what Damian has said, you need a board with full size and who looks at the long term of the company, and not just sort of the next 6 to 12 months. Because you're going to have an extensive period where you're spending a lot of capital to develop that mine, but not necessarily getting the benefit. So you need a board with long-term views on PGMs to actually, I almost want to say, to be brave enough to make that decision to say let's go.

Sometimes for miners, and again generalizing to the broader mining community, there is a clear mismatch in timing here, and it's natural. I'm not saying there's something wrong here. But the investment community has a shorter investment timeline inherently than a mining company. We are very long thinkers, very long thinkers and very long doers. And unfortunately, in a way, it's our cross to bear as miners. It's a hard job to convince the investment community of something that might happen in 10 years' time. But that's mining.

Maybe explain why there is -- why we are in such a situation where, I mean, because of this is already developed -- has already developed assets. And it was mechanized, why there's such -- a boxing match, to use your own words.

Yes, I think that's exactly right, Felix. We see it as natural competition. Competition is healthy. Yes, it creates a lot of excitement and we accept that. But it is a natural competition. There's only one of these pink diamonds in that area. Both companies want it, both companies value it, and we're going to fight for it, in the corporate sense. Please don't think we're boxing. It's really, as you know -- I know you're...

It's Paul in the Bushveld.

I can see him in the final ring.

When is this boxing going to end? I'm asking this because when RBPlat received -- released their results, I mean, they were quite clear that they're starting to feel the impact of this, let's say, the prolonged confrontation.

Yes, I accept that, Felix.

Are you saying that is something that needs to come to mind?

Yes. I think I would share that concern. I mean one can imagine now, if you are the subject of the battle, of the fight, you are the one that people are fighting over, let's say, fighting again in the corporate sense, please don't misquote me on that. It's going to create uncertainty, as it does in the investment community. But it's the nature of what it is. We will endeavor to minimize that uncertainty as best we can. But of course, everything is not in our control. There is a third party as well. I mean follow my [indiscernible] as well I'm not going to -- please don't quote me on Impala, that will give you their own views. But yes, it's gone on a long time. I think that's a fair comment. And the reason also it's gone on a long time is because it's a tough fight. And the reason it's a tough fight, it's a valuable asset. It keeps coming. We must keep bringing it back to the asset. That's what it's all about. It's the ounces in the ground. They simply do not exist at that quality and that depth anywhere else. So available for sale, of course.

Just last question, Paul, and if you can just deal with the secular is going to come out at the end of April. And what sense are you getting from shareholders, your investors, what's their feeling around the offer if it comes out?

We've been in a closed period until today, and we will go on the road show in the coming, probably 3 weeks, we'll be on the it. We'll listen to the shareholders at that time.

[indiscernible] Yes. Just talking about timelines, I mean -- okay, so you've spoken to the fact that you sort of appreciate that it's a problem for RBPlat and that it is going on for long. But do you -- is there any impact on Northam? I mean how long can this go on? Because we've heard Implats saying at some point, they're going to have to potentially look at other options. I mean, for Northam, how -- is there a sort of a deadline, a cutoff?

Probably the best way to answer that one, Lisa, is we not even opened our account yet. The account opens on the issuance of the circular. So we sort of -- from our process point of view, we're at the beginning rather than the end.

Okay. Were the -- so the complaints that you lodged with the TRP, I suppose we're also sort of making our own assumptions around the strategy. But I mean, was that intended to frustrate Impala of the process? Could you comment on that?

So the TRP has already ruled, Lisa, some time ago. I mean, that is a public document you can -- the TRP has a website. You can read out the finding. The TRP has ruled some time ago, which is pretty clear, by the way. Really clear. I would really encourage you to read the TRP judgment.

Okay. Just on the PRC, there's a sense that they are -- I mean at one point, they weren't going to sell to anyone or at least that's what Bloomberg report said. Now we -- Implats is saying that they are going to make a decision from where you sit and your engagement with PRC. Is their shareholding for -- up for grabs for yourself?

We've been informed by the PRC in writing that at this point in time, they are not selling. I mean, Lisa, I just want to -- again, it's not for me to quote the PRC, but our understanding is, at this stage, the PRC are not sellers. I can't say they won't change their mind, but that's our understanding.

The next question we have is from Daniel Foggo from Sunday Times.

I'm just wanting to ask you, maybe if you can reflect on the performance of the share price today? And then also, you talked about the 7-day week, how will it work? And will there be any plan to move it to other operations as well?

Daniel I haven't seen the share price today is down. As it's just showing me, it's a 1-day share price movement. We don't really comment on those things. You need to give it time. No, no. Now the answer to the second part of the question is no. It's specifically to secure and retain mechanized skills. And we don't have mechanized skills at [indiscernible]. So not elsewhere no, if I understand the question correctly.

The final question we have is from David McKay from MiningMX.

Thanks for the opportunity. Paul, I mean, last year, you were quite, let's say, assertive in saying that you were desirous to control this asset. And now -- you seem to be talking at a little bit more the optionality of the joint venture. I mean that sounds quite conciliatory. What's changed?

Yes. David, I must stress we still desire to control the asset, but we will keep all options on the table.

I mean, yes, are you concerned of Impala coming back with that? They've got deeper pockets than you. I think it's fair to say are you concerned they come back with a matching offer? And if they were to do so, what do you do? What's the plan?

Concern is probably the wrong word. But Impala are a bigger company than we are, that's for sure, both in physical size and in resources. You're quite right about that. But our actions are not really -- our actions and options will not really be based on that. We will do the best for the Northam shareholders and Northam as a company. That's our -- that's our drive on this thing. We will get the best outcome for Northam and Northam shareholders. You can be sure of that. That's the way we've behaved all along is to make sure that Northam is protected, the shareholders are protected. And we want to secure as much of this asset as we can, and we would prefer to control it, and that remains.

In the event of a joint venture, who can -- who makes the final decisions? Whoever has the high stake?

Well maybe I can talk around generally. Generally, if there's a joint venture, there would be a shareholder's agreement governing the terms and conditions, how you actually manage a JV like that. So there will be a strict sort of agreement in place on how you manage day-to-day operations. There will be a Steering Committee that decides, et cetera, with a number of members. So it will be properly run if one should have a JV. And I mean a lot of mining companies at these JVs and they work very well over the years.

I just note in your intention to make an offer, if you reserve the right to increase the cash elements of the offer. I want to go back to the previous question I asked about whether you were entering to a further bidding war. Is that why that provision is there?

Well, I think there is no bidding more. That's a misrepresentation. Impala has a price, and we have a price, and those prices have not changed.

So if they make a matching offer, I'll come back to what you do, is that provision there in order that you actually can respond?

We'll deal with that when we see it, David. I can't comment on it. It's very dangerous for me to comment on that.

Okay. Just last question. Just in terms of developing Styldrift 2, you just kind of have dangled that as a carrot. It's definitely what Impala wants to do from their next-door infrastructure. How do you mine Styldrift 2 in the event that Impala sells into your offer and steps away from the asset? How do you mine in such a way that you get a return?

Yes. Styldrift 2 is very similar to three shafts that's on [indiscernible]. It's exactly the same. It's an expansion of an existing mine. We would use the raise bore technique to create the same shaft system as we've done, or similar shaft system that we've done at Zondereinde. It's technically proven what we would do. You'd mine and coke the extension at Styldrift 1 now.

Okay. You're confident you get a return on that project?

Absolutely. The quality of the ore body is -- I can't stress how good that ore body is. It's a top class ore body. And ore bodies are all relatively numbered. So if you've got a better ore body than a worse ore body, you will get worse unit cost outcomes on the worst ore body than you would on the better ore body. Again, my language there wasn't great, but you understand what I'm saying. Let me say it in a nice way: The quantity and quality of ore body in your cupboard determines your future commercial outcomes, including unit cost of production and therefore, profitability. Okay. Thanks very much, everybody. We've still got a few minutes. But I think if we can close down the line, at least, makes everybody happy and we can relax. Thank you. Thank you. Thanks, everybody. Thank you, everybody on the lines.

Thank you.