Northam to "withstand earnings pressures" of cyclical downturn ...

NORTHAM Platinum said today its balance sheet and cash generation were sufficiently strong to see off the cyclical downturn in platinum group metal prices (PGM).

Commenting on a credit rating assessment, the miner said: “Northam’s low-cost production profile and substantial access to liquidity will provide the necessary cash flows and financial flexibility to withstand the earnings pressures caused by the cyclical downturn in PGM prices”.

Johannesburg-based GCR Ratings, an affiliate of Moody’s, reaffirmed Northam Platinum’s national scale long-term and short-term credit ratings at A+(za) and A1(za), respectively, with the outlook maintained as stable.

GCR’s assessment was based on Northam having reached steady-state production at its Booysendal North and South mines. It also acknowledged progress at Eland, a rhodium-rich mining project which is being accelerated.

Northam has forecast equivalent refined metal production of between 880,000 to 910,000 ounces at a unit cost of R25,500 to R26,500 per 4E oz for the current (2025) financial year compared to R23,811/oz last year. Of its cost guidance, Booysendal is by far the most competitive at R18,000 to R19,000 per 4E oz.

Northam also said its credit rating was based on recent efforts to bolster the balance sheet. In August, the firm increased in its revolving credit facility by about R1.3bn to R11.335bn.

South African asset manager Coronation reportedly returned to the PGM market by buying a 5% stake in Northam after previously criticising the PGM sector’s poor capital allocation. But analysts remain cautious on PGM equities in general.

UBS analyst Steven Friedman said that while negative earnings momentum had dissipated, and further downside risk to PGM prices was limited, the PGM sector valuation metrics “do not look compelling”.

“While PGM fundamentals continue to look supportive and we characterise the sentiment as cautiously optimistic, we believe investors need to see improvement in real data (macro & physical commodity demand) to support a further recovery in the PGM basket price and drive further upside in the miners,” he said.

Commenting in its annual report on investment in gold, silver, platinum, palladium and rhodium, UK metals research company Metals Focus forecast a 13% increase in the average price for platinum in 2025 of $1,070/oz. The palladium price would improve 3% to $1,010/oz. Rhodium was expected to average $4,000/oz in price – a 16% year-on-year increase, Metals Focus said.

“The biggest headwind for PGMs remains the outlook for battery electric vehicles’ penetration of global car production and sales,” said the report’s authors. “This, coupled with sizeable above-ground inventories of PGM bullion, has been keeping prices under pressure, in spite of all three PGMs estimated to be in deficit this year.”