Mining Weekly

Platinum-group metals (PGMs) demand remains strong, despite the industry having lost more than one-million ounces of platinum production in 2014, owing to the five-month Association of Mineworkers and Construction Union strike, which pushed the global market into a significant deficit, says PGMs market researcher Johnson Matthey principal analyst Alison Cowley.

“Assuming that strike losses in South Africa are lower in 2015 than they were last year, Johnson Matthey believes that production losses in 2015 are likely to be lower than those of 2012 and 2014, which would result in the recovery of underlying South African platinum mining output.”

She states that platinum production in 2015 could outstrip the 2013 total of 4.21-million ounces, despite shaft closures in the intervening period, but that “this will depend on the extent to which mining is disrupted by safety, as well as technical and geological factors”.

Platinum production from the strike-affected mines, owned by platinum majors Anglo American Platinum (Amplats), Lonmin and Impala Platinum (Implats) resumed in July 2014 and the “post-strike ramp-up has proceeded more rapidly than many industry observers expected,” Cowley notes.

She highlights that Amplats and Lonmin reported production close to planned levels at the close of the third quarter of 2014.

However, Implats’ build-up was stalled by a series of accidents at its Rustenburg lease area, resulting in four fatalities and the mine being closed for two days in September 2014. However, Implats had said that it expected to improve production in the final quarter.

“Recent shaft closures, combined with delays in the ramp-up of replacement projects, mean that capacity at these operations is now considerably lower than it was five years ago,” Cowley states.

Meanwhile, she notes that the local production of rhodium is likely to increase at a higher rate than that of palladium that was affected by the performance of mines on the eastern and northern limbs of the Bushveld Complex.

Cowley adds that production recovery by strike-affected mines on the western limb of the Bushveld Complex is forecast for this year, as these mines produce significant quantities of platinum- and rhodium-rich upper group two ore.

However, she notes that there are uncertainties regarding platinum supply in 2015 and “any decisions to rationalise mining operations, by existing or future owners, have the potential to trigger industrial action”.

Cowley highlights that the uncertainties pertaining to supply are because of Amplats’ intention to either sell its Union and Rustenburg tenements, in the North West, or consolidate them into a separate company; Implats is reviewing its operations, with the results to be disclosed this month.

Rumours that diversified miner Glencore intends to sell its platinum interests, which include the Eland mine, in the North West; a 50% share in the Mototolo mine, in Limpopo; and a 25% stake in Lonmin, also in the North West, have also contributed to the uncertainty of platinum supply.

Further, Cowley states that the age and depth of many existing mines, poor productivity and complex labour relations are major challenges faced by the PGMs sector, but that new infrastructure development, combined with the implementation of methods to improve productivity, such as mechanisation and changes in shift patterns, might help to mitigate these challenges.
Meanwhile, she tells Mining Weekly that, despite the platinum production losses in 2014, the dollar price of a typical basket of South African PGMs fell last year, as the depreciating rand acted as a hedge for the local PGMs sector against the dropping dollar price. However, she asserts that any gains incurred from rand- denominated prices have been cancelled out by increased labour and other costs.

“PGM destocking by producers helped to mitigate the impact of the strike on PGM supplies to the market and we estimate that during the first half of 2014, producers shipped more than 500 000 oz of platinum and smaller amounts of other PGMs from in-process and refined inventories,” Cowley notes.

She points out that industrial demand for PGMs remained firm in 2014, owing to unusually high demand from the global chemicals industry.

Further, platinum sales to the automotive industry were positive, resulting from increased diesel car sales in Europe and the implementation of Euro VI legislation on light- and heavy-duty vehicles. The demand for platinum jewellery dipped slightly last year, compared with record levels achieved in 2013, however, the Chinese market remains robust.

Cowley states that, in 2014, there were temporary shortages of palladium sponge, which is used for autocatalyst production and other industrial applications. To meet demand from automotive and industrial customers, fabricators and refiners converted several hundred thousand ounces of palladium ingot into sponge in the same year.

She warns that the platinum market is likely to be in deficit again this year, regardless of improvements in primary supply. “Gross demand for platinum totalled 8.5-million ounces last year and we expect this figure to increase in 2015 as a reflection of gains in the autocatalyst sector, particularly in Europe, and as we expect further improvements in industrial purchasing.”

Cowley asserts that platinum miners will be hard pressed to make sufficient returns from mining output, owing to current platinum prices, which were at about $1 270/oz at the time of going to print.

Upcoming Projects
Cowley avers that, despite the difficulties facing the industry, several PGM mining projects are under development in South Africa. “In the short to medium term, the largest potential for expansion is on the western limb of the Bushveld Complex.”

Platinum projects currently under way on the western limb of the Bushveld Complex include midtier platinum miner Platinum Group Metals’ Western Bushveld Joint Venture (WBJV) mine, which it owns in conjunction with Amplats and management consultancy Africa Wide. The WBJV mine has a production target date of 2016.

Other upcoming projects include Chinese-backed emerging platinum producer Wesizwe Platinum’s Bakubung mine, in Rustenburg, which will start production in 2019, and the construction of the Styldrift mine by midtier platinum miner Royal Bafokeng Platinum, adjacent to its existing Bafokeng Rasimone operation, in Rustenburg.

Cowley notes that there are also plans to increase production at mines on the northern limb of the Bushveld Complex, including the expansion of Amplats’ Mogalakwena opencast mine, in Limpopo.