Diversified miner Xstrata’s entry into the South African platinum sector and its stated significant ambitions will drive the prices of platinum juniors up, but it will have its work cut out to grow volumes significantly, world number-three producer of the white metal Lonmin said on Wednesday.

“They have announced quite large ambitions for the sector,” Lonmin CEO Brad Mills said in a telephone interview, from London.

But growing its market share in platinum would not be a simple task.

“If you follow the platinum sector, then you will know that it’s an incredibly difficult sector to get much traction in,” Mills stated.

“The mine that they bought, for instance is a concentrate producer,” he added. “It sells the concentrate to Anglo Platinum under very tight contracts.”

Xstrata on Wednesday cleared the final hurdle of its $1-billion takeover of Eland Platinum, which owned the now-producing Elandsfontein mine and concentrator.

“So, in reality, they aren’t going to be producing any metal,” Mills stated.

He said that Eland could be compared with midtier platinum producer Aquarius Platinum. “They look a lot more like an Aquarius, a contract-miner to Angloplat, than anything else at the current point in time.”

“It’s not an easy market, obviously, to really grow significant volumes in, because so much of the ground is already held by others,” Mills highlighted.

Xstrata’s entrance and plans to become a major platinum producer would make potential acquisitions that Lonmin might look at more expensive, he added.

The diversified giant had previously said that it would like to be one of the world’s biggest producers of platinum, which was used in devices that reduce the amounts of pollution that vehicles emit.

To subscribe to Mining Weekly's print magazine email subscriptions@creamermedia.co.za or buy now.