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

We would have longer view for platinum because on the industrial side, also AI, also fiberglass and also robotics, I'll give you a good example in robotics, just to digress slightly. It's an interesting one. The skin which is silicone that the best quality silicone that one can use for the skin of a robot, if I can -- it's obviously not skin, but you understand what I'm saying, you need platinum to cure the silicone to make it like it is the highest quality silicone.

What do you mean, for the humanoid robotic.

Humanoid robotic, yes. So hands and faces and wherever you might want skin, the best quality skin is produced from silicone, which is cured using platinum, which is -- so again, I'll just give that as an example. So we're also quite keen on platinum from because of not just automotive, but the industrial uses of it, very keen on the minor metals, as you picked up. The one we are more concerned about, of course, is palladium because palladium, 90% of palladium is used in automotive. So that's a very -- it's a big chunky percentage of the palladium market is automotive. So palladium is a little bit more exposed to the ultimate penetration of BEVs. So however, having said that, if it was a disaster, let's say, I'm using -- there's the wrong word, I'm saying you wouldn't have palladium sitting at $1,350. It would be much, much lower. And the reason this is happening is because the forecasted penetration of BEV as was -- has not happened. It's much, much lower than what historically has been forecast. So the penetration of BEVs has slowed down, which gives us some encouragement as to the longevity of internal combustion engines, and therefore, the longevity of palladium in particular, in that application. But having said that, there is still a question mark, we're not done yet in terms of ultimately where will be the finish line in terms of their share of the car market. What is also interesting though is the advent of lower priced in general, lower-priced Chinese cars, which have hit the export market, and South Africa is a really good example of that. You may know that South Africa is selling cars at the record rate absolute record, right? I think year-on-year, we're up like over 15% year-on-year in terms of the number of cars being sold. The reason that is happening you would be surprised if you think the economy because we know the economy is only a 1% economy. And your car sales are absolutely booming. And what it demonstrates is the appetite or the desire to have mobility. It's a very strong thing. People want cars. And if you bring down the price point, we sell more volume, and it's exactly what's happened, which is very interesting.

So do you foresee future supply shortages in platinum or not?

Yes, we do. Platinum is already in deficit as we speak. It's only being satisfied by liquidation of the ETF and the exchange metal at the moment. And we believe, our long-held beliefs and I'll repeat it again for everybody's benefit, the primary production of platinum has fallen and has fallen quite a bit repeat in SA at 5.7 million ounces of platinum per annum produced. Last year, we produced 3.9. Just have to think about the magnitude of that decrease. You heard me on the call say if we continue on that trajectory, we'll be down at 3 by 2035. This is a 7.5 million ounce market. And if the world's greatest supplier of platinum is at 3 and the only way to make up then the balance is then recycling, you can see that presents quite an interesting equation. And that's certainly our firm belief, and this is why we're so strong in our in our belief that to grow into that market, not only is it absolutely required, but it's very good for business as far as Northam is concerned.

And you said you're effectively the only company that is growing into the...

Of the majors.

Why is Platinum so good for robot skin. A question I never though I would ever ask.

I would have to find what -- I can explain the mechanism. So it's like for the silicone molecules, when they set, they call it curing if it's done in the presence of platinum, apparently, the end result is such a beautiful quality, soft and consistent and not rough. That's my understanding of why it is like that.

So maybe 10 years now, we're not going to be talking about recycling, we're going to be talking about robots that are being recycled too.

I don't know, also I will say is recycling of electronic scrap is not so easy because of the mish mash of metals involved. But nevertheless, you're not wrong. I mean I'd say that a little bit tongue in cheek, but recycling is really, really important because you've heard me indicate the potential gap in the market that let's look out to 2035 against primary supply, if it's still the 7.5 million ounce market and SA is producing 3, recycling will have to make up the balance. That's quite a tall order.

I'm just so fast on buying this robot stuff. I mean the terminator. It was -- Arnold Schwarzenegger was covered in platinum.

So Paul, given your outlook on the platinum market, given your company's growth profile, clearly, you think your share price is undervalued. Just how undervalued do you think the Northam share price is?

Yes. Brendan, we don't -- We have a view very simply the share price will look after itself. It's not -- Northam doesn't set the share price, as you know. It's the investment community that sets the share price. And what we need to do is give the investment community the necessary information so that they can evaluate themselves. And of course, the more solid high-quality, well disclosed information we can give plus a storyline, why do we do this, enables the investors then to should I buy that company or that company. And if they buy this one, maybe that one will do better than this one. It's -- so the mechanism is not in Northam's control itself. Our controlled ability is to make sure the information is correct and of a high-quality and consistent nature that the investment community can make a decision for themselves, both the private individuals, of course, and the institution. And that's why the book, which we used to call the bookie, I'll let -- talk about that. Historically, this book was a few pages thick, historically, something like that. Look at this thing now. I mean the information in here is in terms of evaluating Northam, this is all you need. It really is a powerful suite of information. And of course, we do also -- the reason we put all the photographs in, David, is sometimes when you're trying to explain things, a picture speaks a thousand words, did you grasp what we're actually talking about.

So one last quick one. So do you think the investment community right now has the correct assessment of your company?

I think the investors know the company very well. Perhaps what they didn't know, what they haven't known until this week is perhaps that the growth -- there is further growth to come from the company, which we have not yet explained until this week, which we embody in a phrase or vision of 2031, which encapsulates a whole range of individual projects, and David went through a few, a new mill at Booysendal and upgraded mill at Zondereinde, 4 Shaft, the smelter upgrade, the BMR upgrade, the new modules at Booysendal, -- shaft at Eland. Whole range of projects together, we could get to this one project. Now historically, the community knows this is a 1 million-ounce producer. Now there's a big difference between 1.5 and 1, it's like night and day in terms of the physical size of -- and that is new information today, I think, and this week that we presented to the investment community. And then, of course, we've been subject to an approach which I think is lot of information for the investment community. And you must digest that as they will.

I didn't have the impression from your statement that the approach was that you were selling the business model. I had the impression on the fact an asset or 2.

Well, we don't question -- what we will say, Ed, we will engage with third parties, credible third parties on deal structure and value. We're not being what you call it stuck in one particular direction. We're not prescriptive here. That's absolutely correct. Sorry, I lead to the line. Can we go to the lines, please?

Question comes from Dineo Faku of Sunday Times. .

I'm going also back to the announcement about the offer. I just wanted to...

I must correct you immediately, they're not an offer, an approach. Please, very important to get this language correct. Sorry to jump in so strongly there, but it's approach, an exploratory approach. Back to you.

The work that you are undertaking as a response to this approach, how long do you think it will take before you come back?

Yes, thanks for that one. So we've set in the announcement that if there is an interest that the interest parties have until the 1st of December to formally indicate that, which is the first part of the process. The second part of the process, we will then evaluate approaches and move it into a more solid discussion about value and structure. And that will move into next year for sure.

And then also, I mean, it does signal if it goes according to plan or if you do accept this offer, is it does signal further consolidation of the industry, doesn't it?

All right. Let me just correct once again, there is no offer at this stage. It's an exploratory approach. But if there was to be a transaction, you're quite right by saying that would lead to potentially further consolidation. I agree with your point there. I just want to stress that word potentially, please, before you take me literally, potentially, can't be so precise on this. We can get ourselves in a lot of trouble if we say the wrong word. So it's important for us that we -- our language is more precise than perhaps in a general conversation. On this subject, we have to endeavor to be extremely precise, otherwise we can get ourselves in a bit of dodo.

And then I think we just take one last question. .

We'll take 2. We'll go Brendan, and then David. Go David and then Brendan, just to be fair.

I know your target was 150 4E metals. And I saw some in your Vision '31 that you now squeeze it up to 180.

Yes. With the inclusion of Neal -- so the current profile is Kukama shafts and Marula built and the 180 is Neala -- on top, which is a third shaft access point in the same one.

A short question also on working capital management. There's 3 boxes, and I was just trying to work out is one the cost and the revenue of the inventory?

The ZAR 7.4 billion is what it's valued in our -- on our balance sheet. The ZAR 18.7 million is should we apply the sales values, that 32, that would have been the sales value of that inventory. Now subsequent to our appliances have picked up. So that value you have increased.

Thank you. Last word to Brendan, please, if I may.

Paul, the company, which made the initial approach to you know you are going to throw the process open the way you have?

No.

Are they happy about it?

You would have to ask the company themselves, Brendan. I'm not going to comment on a third party, it's not appropriate for me to do that.

But no, they didn't know what you were going to do in terms of opening it up.

It was an internal board decision by Northam's Board. It would be very difficult for somebody else to know what Northam's board was going to do. That is true. Thanks, everybody. Thanks for the lively one. We will go -- we will be downstairs if anybody wants to chit chat still.