JOHANNESBURG (miningweekly.com) – A platinum price of more than $1 900/oz was required to provide producers with the incentive to invest the substantial capital required to maintain long-term production, Anglo American Platinum (Amplats) CEO Neville Nicolau said on Monday.

At price levels currently in the $1 600/oz range, there would be a gradual moving away from investing, which would mean a dropping off of supply, Nicolau told Mining Weekly Online in a video interview.

Although Amplats would be shaving R1-billion off its capital expenditure (capex) programme, it remained at an advantage to its peers in being able to pursue low-capex projects, including an upper-group two near-surface opportunity in Rustenburg, the debottlenecking of the openpit Mogalakwena mine in Limpopo and the benefit of the Unki project emerging in Zimbabwe.

“Our concerns are more along the lines of the industry. If the industry falls apart, we will not be able stand in this industry on our own,” Nicolau explained.

Up to the end of last year, the platinum industry was driven by the fundamentals of supply and demand, but from mid-2011, it became sentiment-driven.

“We think that the current price is down on sentiment from the European sovereign debt crisis that is flowing over into our industry. It’s not in the fundamentals.

“Our real concern is that if this sentiment continues and the fundamentals are not respected in our industry, it may damage our industry in the long term,” Nicolau commented.

The platinum-group metals markets remained in balance in 2011 as a small increase in recycled metal and a 5% increase in mining production supplied the increased demand.

The demand increase occurred despite the depressed global economy through the impact of the eurozone debt crisis on investor sentiment and the impact on car production of the earthquake in Japan and the flooding in Thailand.

The strong increase in industrial demand, driven by capacity increases in the glass and petroleum sectors compensated for the lower investment demand.

Negative investor sentiment in the last quarter and the associated reduction in commodity exposures resulted in an exaggerated fall in the platinum price and continued to keep prices at depressed levels.

From a South Africa perspective, the lower US dollar prices and the extraordinary strength of the rand resulted in a rand basket price, which was below the incentive price for the majority of the primary producer.

The depth of mining was increasing, as was the complexity of mining lower-grade metals and as a result Amplats believed that in today’s rand environment a price of more than $1 900/oz was needed as an incentive price. Platinum was trading at $1 664/oz at the time of the interview.

One market segment that was key to the future of the platinum industry was that of the fuel cell, where market developments overlapped with the company’s beneficiation strategy.

“This is a business imperative,” he said.

The demonstration of Ampats’ 150 kW platinum-based fuel cell at the United Nations’ seventeenth Conference of the Parties meeting in Durban highlighted the high-efficiency of fuel cells in low-carbon energy.

Wider applications of fuel cells in South Africa were under way and Amplats would introduce fuel cells into various mining-equipment-related applications in 2012.

Liberum analyst Dominic O’Kane said that underlying earnings to Anglo American, which owned 79.7% of Amplats, was lower than Liberum had forecast, and would take 1.5% off Anglo’s expected underlying earnings to $5 683-million.

Amplats, which produced 2.6-million ounces of platinum in 2011, has lowered its 2012 platinum sales target from 2.7-million ounces to between 2.5-million ounces and 2.6-million ounces.
 

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