Embattled platinum needs ongoing marketing, with producers needing to invest in the promotion effort and ensure that the metal does not continue to be demonised by the antidiesel hype, Royal Bafokeng Platinum (RBPlat) CEO Steve Phiri told investors, unionists, analysts and journalists last week.

“You’ve got to market and market and market,” the RBPlat CEO told Mining Weekly.

Speaking in an interview after presenting 2016 financial results that saw the company return to profitability after last year’s loss, the head of the black-controlled JSE-listed platinum mining company congratulated Anglo American Platinum for the leadership it was showing in marketing platinum-catalysed hydrogen fuel cells.

“We’re joining in and it’s gaining traction,” said Phiri, who added that he was encouraged by South Africa’s Trade and Industry Minister Rob Davies talking up fuel cell technology and equally encouraged by the Japanese government manufacturing fuel cell generator sets for use during the upcoming Olympic Games in Tokyo in 2020, where fuel cell buses and cars will also be in action.

Platinum-group metals have just come off a 2016 roller-coaster ride, when the industry staved off what was expected to be a sharp decline in the automotive market, owing to pervasive anti diesel sentiment.

But the decline turned out to be mild, after being offset by more use in the off-road truck market and the application of Euro 6 emission standards.

The big loser on economic factors in China was the platinum jewellery sector.

Envisaged is a continuing platinum and palladium supply deficit mainly on antidiesel sentiment, especially in small engine cars.

“When Volkswagen cheated, palladium benefited because there was a shift especially in small engines to petrol engine cars. That’s where platinum lost its market share,” Phiri outlined.

But he expressed the belief that platinum’s loss of market to palladium would be short-lived, owing to the absence of a scientific approach and the predominance of a sentimental antidiesel approach.

He slammed the motor industry for failing to reinforce the reliability of diesel engines and responding by producing more petrol-driven cars.

He commended the International Platinum Association for educating, particularly municipalities in the eurozone, about the efficacy of platinum-catalysed diesel engines fitted with gadgets to halt nitrogen oxide (NOx) emissions.

Phiri expressed a change of mind about platinum exchange-traded funds (ETFs) representing dubious demand on the basis that ETF metal was likely to return to the market and increase supply.

His current contention is that physical metal-backed ETFs amount to real removal of physical platinum from circulation and an investment held increasingly by long-term investors.

“You cannot ignore 900 000 platinum ounces that have been removed from the market and that are being held in vaults, which are generating revenues and cash flows for companies. This is real demand,” Phiri said.

Asked to expand on the overhyping of antidiesel sentiment, he condemned the automotive industry for failing to insist that their diesel engines with platinum- catalysed emission control comply fully with global standards.

At the Investing in African Mining Indaba, held early in February, Ivanhoe CEO Robert Friedland flashed onto a big screen graphics of platinum- catalysed fuel cell vehicles eliminating the curse hanging over major urban cities of tiny particles in the air that enter the lungs, get into the blood stream and then go permanently beyond the blood-brain barrier.

“In fact, the closer you live to a major urban road, the higher the chances of dementia, and air pollution particles are definitely linked to higher cancer and death risk,” Friedland said in his outline of the efficacy of fuel cell vehicles that he said the world should be demanding for health reasons.

Instead, the automotive industry has shifted to petroleum-fuelled combustion engines that make use of palladium.

Phiri condemned government and local authorities for failing to do their homework on diesel, the Euro 1 and Euro 4 versions of which are admittedly below standard when it comes to NOx emissions, but said the Euro 6 version had taken care of that.

Because of this, the International Platinum Association, of which RBPlat is a member, is going all out on a campaign to point out to municipalities the error of their ways.

“We’ve got to protect platinum. It should not be demonised for what it is not . . . it has been proven that it is quite efficient in anti-NOx emission,” he told Mining Weekly.

Beyond that, new markets had to be created for platinum, which should not be entirely autocatalyst dependent.

The industry needed to invest in platinum jewellery promotion across the world – not only in China – which was being done through the Platinum Guild International, particularly in India. Further, the World Platinum Investment Council was assisting platinum to break into the investment market with ETFs.

“But we’ve also got to market other uses,” he said of the fuel cell.

Meanwhile, the South African platinum mining industry was being confronted by the triple threat of subdued price, rising costs and uncertain “radical” government policies, which made substantive investment difficult with only a few high-quality orebodies, such as RBPlat’s Styldrift, able to attract investment in a tough economic environment.

“We can still speak of growth investment while others speak of survival,” Phiri commented.

This year, the company would invest R3.1-billion into its operations as it proceeds to grow Styldrift 1 to sustainably provide 150 000 t of platinum-bearing ore a month.

The company expected to deliver up to 2.9-million tonnes a year at grades of between 3.9 g/t and 4.04 g/t.

The South shaft of the company’s Bafokeng Rasimone Platinum Mine (BRPM) continues to be marginal and its transition from Merensky reef to upper group two (UG2) reef is placing margins under additional pressure.

The company is thus considering a wide range of options to alter the structure of the combined BRPM and Styldrift business this year to ensure that it impacts positively on margins while remaining stable as growth takes place.

“The year going forward is not going to be an easy one but, hopefully, it is not going to be as bumpy as the previous years . . . we believe we are going to be up to the task,” Phiri enthused.

Questioned on funding, RBPlat CFO Martin Prinsloo said the company had been pursuing robust funding solutions for the company, which has R835.5-million in cash reserves.

The solutions were being sought to secure the funding for the ramp-up of Styldrift 1 to the 150 000 t operation, even in the current environment.

Part of that was a debt facility of R2-billion currently being negotiated and assessment of various capital market alternatives.

“We will not allow our balance sheet to fail us but, on the other hand, we are not going to be overloading the balance sheet unnecessarily if the market is not conducive. “We are treading very carefully and cautiously,” said Phiri, who added in response to Deutsche Bank mining analyst Patrick Mann that the review that had begun on BRPM’s South shaft would be publicised “quite soon” and that Sibanye had been happy to receive the UG2 ore from the company.

In the 12 months to December 31, earnings before interest, taxes, depreciation and amortisation, as a percentage of revenue, increased from 9.8% in 2015 to 14.7% in 2016, which represents a 50% improvement.
Headline earnings grew by 204% to R166.7-million with headline earnings per share of 87c, compared with a headline loss of 83c per share for the previous comparable period.
BRPM’s average cash unit cost per tonne milled increased by 10.4%, from R1 066 in 2015 to R1 177 in 2016. The cash unit cost per platinum ounce increased by7.8%, from R14 504 to R15 639, owing mainly to above-inflation increases in labour, contractor and utility costs.

Net cash flow generated by operations reduced marginally from R619.2-million to R585.3-million in 2016.

Cash and near-cash investments amounted to R835.5-million, compared with R917.6-million at December 31 last year.

During 2016, RBPlat funded 74% of its R1.1-billion capital expenditure (capex) from cash generated by operations and Styldrift I on-reef development revenue receipts, well up on the 30% of capex that was funded from cash generated by operations in 2015.

Total capex was reduced by 44% year-on-year to R1.126-billion, given the scaling down of activities at Styldrift in response to the flat markets. At BRPM, replacement capex was 78.5% lower, owing to the completion of certain projects and the deferral of others.

Stay-in-business capex was only marginally down by 1.8% to R110-million – 40% of operating expenditure (opex) – which is expected to increase to between 4% and 6% of opex.