JOHANNESBURG (miningweekly.com) – The dire straits of South Africa’s platinum sector is a consequence of high costs, says Northam Platinum consultant Bernard van Rooyen, who also wants greater marketing effort.
Van Rooyen, 78, first became involved in the platinum industry when the metal was trading at $100/oz and the other platinum-group metals did not feature in the sales basket.
Of the current $1 400/oz price, he says: “This is not a bad price in terms of cyclicality.”
On costs, he says: “We’ve lost a grip of costs.”
On marketing, he chides: “We’re doing very little on the marketing front.”
He believes that some platinum miners will be forced out of the industry because of their inability to cover their cash costs.
He calculates that 60% to 70% of platinum mines are currently not covering their costs plus their stay-in-business capital and points out that forward development for a mine is really just an operating cost, and failure to invest in stay-in-business capital will ultimately result in mines having to close down.
“Either the price goes up because demand increases or the price goes up because there won’t be any supply if it doesn’t. The problem is that there is an awful lot of pain in the interim,” he adds.
Labour unions, Van Rooyen reminds, have consistently demanded and received increases well above the inflation rate; Eskom has trebled the electricity prices and wants further increase; the high oil price has pushed up the prices of chemical consumables; steel has gone up, and in general costs have run way ahead of price increases.
“You eventually reach a point of not being able to afford the labour; the solution then is you cut production and lose people,” Van Rooyen says.
He recalls that during the gold crisis when gold traded at $250/oz, the industry lost 200 000 jobs and the unions went along with the job loss on the basis that they would rather survive with a smaller membership than die.
Eventually the lack of supply influenced the price.
Regarded as one of the lower-cost platinum producers, Northam reports costs all the way to refined metal while most others report costs to concentrate production stage.
But even Northam is “sweating like hell to make a margin at the moment”, Van Rooyen confirms.
MARKETING PUSH NEEDED
He believes that new markets must be created for platinum and existing ones nurtured.
He recalls that the platinum industry created the platinum jewellery industry in China from nothing.
“I think we only spent $100 000 on a campaign in Shanghai and it took off, and the Chinese now consume two-million ounces a year,” he says.
He believes that the industry should target diesel engines on ships as these do not have catalytic converters.
“They’re steaming merrily around the ocean polluting the atmosphere,” he points out.
He sees a big potential use of fuel cells in the automotive industry, but points to the need for a hydrogen industry to be established to drive it.