JOHANNESBURG (miningweekly.com) – The soaring prices of rhodium and palladium have put new focus on the upper group two (UG2) reef, for long the poor cousin of Merensky reef in the hierarchy of platinum group metals (PGMs) mining.
Merensky's predominant platinum content has made it the preferred reef for decades but UG2 is currently the new optimal because of its greater palladium and rhodium content, with chrome thrown in as a valuable co-product.
This was driven home by Sibanye-Stillwater CEO Neal Froneman on Thursday, when he extolled the value to Sibanye of its UG2 abundance – and also took steps towards entering the world of new age metals with the acquisition of SFA Oxford, the UK consultancy that assesses strategic investment opportunities in future technologies.
The company has also done a strategic tolling deal that enables it to get its hands on its own refined metals.
Since Sibanye began mining PGMs in 2016, the price of rhodium has risen by 300% and the price of palladium by 150%, which reflects on its timing astuteness in entering the PGMs fray and foresight around projected surging demand for palladium and rhodium.
At the time of going to press, rhodium was trading at $2 645/oz, palladium at $1 488/oz and even iridium’s $1 460/oz was trading at a far better price than platinum’s current doldrums figure of $822/oz.
“Mining UG2 currently has significant benefits,” reiterated Froneman, who described rhodium as “almost the unsung hero of the changes in the PGM markets".
Sibanye’s UG2 reef at its Rustenburg mine gives it 10.53% exposure to rhodium; the Kroondal mine gives 9.9% exposure to rhodium “and, of course, the chrome credits are very, very significant and make a big difference to the business”.
Sibanye, with Lonmin that it is in the process of acquiring, will run neck and neck with Impala Platinum in the number of rhodium ounces it will be producing.
Sibanye’s South African PGM mix is 77% UG2 reef and 23% Merensky reef and the strength of the rhodium and palladium prices have seen a surge in UG2 basket prices.
Sibanye, with the Lonmin transaction concluded, will become the biggest platinum producer in the world at a total cost of under R40-billion.
“The reason we’re able to do that is because we called the market exactly right,” said Froneman, with Sibanye's entry beginning in April 2016 with the acquisition of Aquarius for R4.3-billion.
That was followed by the acquisition of Rustenburg in November 2016 for R3.75-billion, Stillwater in the US for R25.6-billion in May 2017 and the proposed all-share Lonmin transaction, which is estimated to be worth R4.1-billion.
FAST-TRACKING PGM TECHNOLOGY
For the longer term, Sibanye is positioning for participation in appropriate drive train and battery metals growth and setting out to understand the new age metals and to prepare for the new world.
“Things are changing rapidly. We want to be a mining company that’s going to be a new world mining company and we think that the new world is really going to be using high-tech minerals and metals," said Froneman.
Because it does not have all the insights, it has acquired PGM consulting analyst firm SFA Oxford, which assesses strategic investment opportunities in future technologies. The UK consultancy is chaired by Stephen Forrest.
Froneman sees the acquisition as an enabler to fast-track PGM market opportunities and to access PGMs-using intellectual properties.
“Everybody associates electric power trains with batteries but they are also associated with fuel cells and hybrids, and SFA Oxford has developed really good knowledge in terms of some of these future technologies,” he said.
This follows Sibanye securing a toll agreement with Anglo American Platinum that gives it access to its metals, which opens the way for the company to involve itself in downstream and supply chain aspects of the PGMs market.
“This will be an 18-month to two-year process of developing the right knowledge to identify the right targets. Our immediate priority is really about getting our business firing on all cylinders,” he said.
Asked by Standard Bank analyst Adrian Hammond whether the SFA Oxford acquisition was indicative of Sibanye wanting to get involved in metals like cobalt and lithium, Froneman said the company believed that new technology would be moving so fast that it was no longer obvious that those two “obvious” metals would be part of the future stream.
“But it’s those type of metals that are of interest to us, yes,” he added.
Sibanye Southern African PGM operations head Robert van Niekerk reported a successful operational turnaround, with Kroondal platinum mine achieving its best year ever. Production at the Mimosa mine in Zimbabwe remained consistent, Rustenburg’s production was lower and Platinum Mile, which treats tailings from Rustenburg, was negatively impacted by improved Rustenburg recoveries.
He presented a graphic that showed how leveraged the company’s South African operations are to a higher PGMs basket price, with a steady 600 000 oz a year rising sixfold from 2016 to 2018.