Amidst a year of formidable trials for South African metal and mining enterprises, Platinum Group Metals (PGM) experienced a significant dip in prices. Notably, Platinum prices saw a downturn of nearly 10%, while Palladium witnessed a substantial decline of almost 33%. Consequently, Northam Platinum Holdings (JSE: NPH) saw a decrease of 26% in its shares over the past twelve months. Despite this challenging scenario, it’s essential to highlight that Northam Platinum Holdings has weathered the storm better than its counterparts. Impala Platinum Holdings, for instance, faced a substantial loss of nearly 60%, and Anglo American Platinum Limited contracted by 35% over the same period.
There is a glimmer of optimism surrounding Northam Platinum Holdings, attributed to the strategic move of selling a stake in Royal Bafokeng Platinum to its rival Impala. This transaction not only strengthened its cash position but also enabled the company to declare a dividend of R6.00 per share in its latest earnings report, offering a silver lining to its shareholders. The resilience of the company is evident in its financial performance, with a 16% increase in revenue to R39.5 billion for the year ending on June 30, 2023. This growth translated into a 3.8% rise in operating profit, reaching R15.4 billion.
However, this positive trajectory is counterbalanced by escalating costs, leading to a contraction in the operating margin from 43.7% to 39.1%. This shift underscores the formidable impact of lower PGM pricing and a challenging operational landscape on the company’s earnings.
On the 4H chart, an ascending channel is present, with the crossing of the 25-SMA (green line) above the 50-SMA (blue line) and 100-SMA (orange line) confirming the presence of buyers. However, the RSI is in overbought conditions, signalling the potential for a pullback in the upcoming sessions.
The supply zone at R140.80 could be the critical level to watch as we advance. If the resistance there holds, a pullback can occur, with support established at R136.54 and R134.16, where the dynamic support of the channel becomes vulnerable. If a breakdown occurs, the price could trickle toward R131.71 and R128.97 before potentially converging with the 25-SMA near R128.10.
However, should the supply zone at R140.80 fail to contain the buyers, a breakout could occur. In this case, the uptrend could continue, with higher resistance established at R144.78 in the longer term.
Northam Platinum Holdings has faced some challenging conditions in the PGM market in 2023, causing a 26% contraction in its share price. However, it ended the year on the front foot, pushing for a breakout above the supply zone at R140.80, which could trigger a continuation of the current uptrend.
Sources: Koyfin, Tradingview, Northam Platinum Holdings
Piece written by Tiaan van Aswegen, Trive Financial Market Analyst
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