https://www.miningweekly.com

Unyielding platinum dip forces miners to cut costs

LOW COST Amplat's Mogalakwena mine

MINING CRISIS Several mining houses, largely platinum producers, have released plans to cut about 14 000 jobs

21st August 2015

By: Dylan Stewart

Creamer Media Reporter

  

Font size: - +

Owing to weakened demand for plati- num, the platinum price, currently at a six-year low of about $980/oz, is not expected to rise significantly in the near future, says geology and mineral resources consulting services provider MSA Group head of mining studies Andre van der Merwe.

Faltering platinum demand can largely be ascribed to slowing demand from the automotive industry, which uses platinum in catalytic converters. As with iron-ore, platinum’s price dip can be ascribed to the slowdown in China’s economic growth, notes MSA head of geology Brendan Clarke.

In addition, to decrease their dependence on platinum, car manufacturers are generating technologies that will use more palladium and nickel, which are prominent by-products of platinum mined outside South Africa.

Van der Merwe states that recycling of platinum continues to increase and there is no medium-term promise in terms of price outlook – hence, mining companies face two options: either reduce costs of operations or get rid of nonprofitable operations and assets. Profit-generating cutbacks are particularly pertinent at the current price, with most mines’ operating costs exceeding the platinum price, states Clarke.

At the end of last month, the ruling African National Congress appealed to South African mining houses to reconsider their plans of widespread retrenchment, after several mining houses, largely platinum producers, released plans to cut about 14 000 jobs.

“For the past three years, there have been murmurings in the mining community about significant cutbacks on jobs,” states Van der Merwe.

This indicates that mining companies are aiming to stop their lossmaking operations. Halting certain mining operations will help push the price of platinum back up and assist companies in creating a positive cash flow, he adds.

However, Van der Merwe notes that this is not an attractive or simple scenario for any mining head office, since it is very difficult and expensive to bring a mine back on line once it has been mothballed. To complicate the situation, it is difficult to find a buyer for a mine in the current economic climate.

“There are good reasons for the majors wanting to sell certain mines,” says Clarke, with Van der Merwe adding that mining companies will be concerned about the State “taking away” their mines if they are not used.

Although some companies have been showing interest in buying platinum mines, such as Sibanye Gold showing interest in platinum miner Anglo American Platinum’s (Amplats’) Rustenburg operations, there is yet to be agreement over the appropriate selling price for the mines, states Clarke.

Van der Merwe suggests that the platinum industry will undergo a similar process to that of the gold industry in 2008, when smaller companies bought some larger companies’ operations.

This has a chance of success because smaller companies have a leaner business model, with lower head-office costs; they also employ a strategy of deferring ongoing capital, which allows for their surviving at lower price levels, he adds.

However, deferring ongoing capital entails the risk of incurring massive downtime in the future, which might or might not result in favourable consequences, Van der Merwe notes.

Unlike South Africa’s gold industry, which has shrunk to about a quarter of the size it was ten years ago, its platinum industry benefits from South Africa’s hosting about 78% of the world’s platinum reserves.

Outlook
Van der Merwe stresses that, while South Africa’s platinum industry has future prospects, one should expect changes in the way it operates.

He expects a trend towards mechanisation, arguing that, by 2021, very few labour-intensive platinum mines will exist, and that even current labour-intensive mines will be retrofitted, albeit at a higher cost.

South Africa’s upcoming platinum mines, including the Western Bushveld Joint Venture between Platinum Group Metals and Wesizwe Platinum, have plans to start up as more mechanised operations.

Amplats’ Mogalakwena opencast platinum mine, in Limpopo, is a further example of successful mechanisation.

Van der Merwe and Clarke agree that mechanisation will not necessarily result in fewer community benefits from such operations.

Clarke points out that mechanisation might help keep the industry afloat, as jobs are essentially saved – albeit fewer jobs – by making mines more capital intensive. More- over, the operation of a machine is a more specialised job, which requires more skill and, therefore, demands higher wages.

Van der Merwe points out that mining companies must truly be committed to ensuring communities benefit from their operations and integrating a mine into a community so that it does not operate in an alienated manner – this is crucial to the sustainability of mining in South Africa.

Historically, this is an aspect in which most South African mining houses have come short and it remains a very difficult area in which to negotiate, he adds. Nonetheless, the enterprise development aspect of empowerment can be a powerful way of leveraging local economic development around mechanised mines.

Edited by Leandi Kolver
Creamer Media Deputy Editor

Comments

Showroom

Magni SA
Magni SA

Magni SA is committed to developing the safest Telehandlers available to our customers for underground and surface mining, construction, forestry,...

VISIT SHOWROOM 
Weir Minerals Africa and Middle East
Weir Minerals Africa and Middle East

Weir Minerals Europe, Middle East and Africa is a global supplier of excellent minerals solutions, including pumps, valves, hydrocyclones,...

VISIT SHOWROOM 

Latest Multimedia

sponsored by

Hyphen, Eva mine, ferrochrome price make headlines
Hyphen, Eva mine, ferrochrome price make headlines
27th March 2024
Resources Watch
Resources Watch
27th March 2024

Option 1 (equivalent of R125 a month):

Receive a weekly copy of Creamer Media's Engineering News & Mining Weekly magazine
(print copy for those in South Africa and e-magazine for those outside of South Africa)
Receive daily email newsletters
Access to full search results
Access archive of magazine back copies
Access to Projects in Progress
Access to ONE Research Report of your choice in PDF format

Option 2 (equivalent of R375 a month):

All benefits from Option 1
PLUS
Access to Creamer Media's Research Channel Africa for ALL Research Reports, in PDF format, on various industrial and mining sectors including Electricity; Water; Energy Transition; Hydrogen; Roads, Rail and Ports; Coal; Gold; Platinum; Battery Metals; etc.

Already a subscriber?

Forgotten your password?

MAGAZINE & ONLINE

SUBSCRIBE

RESEARCH CHANNEL AFRICA

SUBSCRIBE

CORPORATE PACKAGES

CLICK FOR A QUOTATION







sq:0.585 0.619s - 108pq - 2rq
Subscribe Now