NORTHAM Platinum will be able to “withstand the current down cycle better than many of its larger peers”, said credit rating agency GCR Ratings.
Citing GCR, an affiliate of Moody’s Investor Services, the platinum group metals (PGMs) producer said today its rating was supported by strong liquidity as well as its production expansion. GCR reaffirmed a national scale long-term and short-term credit rating of A+ and A1 respectively for Northam. The outlook was maintained as stable.
“Compared with peers, Northam is most able to sustain earnings at spot prices and will continue to improve its balance sheet,” said Adrian Hammond, an analyst for SBG Securities. “For these reasons, we reiterate Northam as our top pick.”
Northam continues to grow production which helps offset inflation. For financial 2024, guidance for Northam’s refined metal sales is as much as 990,000 ounces, against 738,000 oz in financial 2022.
Northam is also best placed to benefit from the recent improvement in the price of chrome, which is produced as a by-product of PGM mining. Chrome this year will account for 12% of Northam’s top line but 6% for Sibanye-Stillwater, and far less for Implats and Amplats.
According to a recent report by RMB Morgan Stanley, chrome will contribute R4bn-R5.3bn in revenue for Northam’s financial 2024 at its current spot price, rivalling rhodium which will contribute R6.5bn at current prices.
Northam’s decision to bail out of its 34.5% stake in Royal Bafokeng Platinum had benefits, analysts said. Though it sold at a loss, Northam still walked away with R13bn in cash and shares. This enabled it to declare a maiden dividend, launch a share buyback programme, and commit to a dividend policy for which investors had been clamouring.
