Gwede Mantashe
Photo by: Wynand van der Merwe
JOHANNESBURG (miningweekly.com) – Mineral Resources Minister Gwede Mantashe on Tuesday described the mining industry as one that is in self-doubt, believing that it is about to die, with suspicion and mistrust at a high level.
“I fail to understand why platinum is in a crisis,” he said, adding that mining stakeholders need to develop trust and create an industry that is growing and inclusive.
Speaking at the Breakfast Indaba and Platinum Group Metals discussion, Mantashe stated that the platinum sector was experiencing a relationship crisis that was resulting in financial suffering for the sector.
He conceded that policy uncertainty has been hampering investment in the mining industry, but assured stakeholders that Mining Charter 3 should be finalised by end-May and should restore policy certainty and provide guidelines with regard to transformation that benefits everybody.
Mantashe rather perceived platinum as a growing sector that is working towards being a competitive and prosperous industry. “The [platinum] price is not as good as it was [during the boom in 1999], but it is not as bad to constitute a crisis.”
Advisory firm Cadiz Corporate Solutions mining director Peter Major, meanwhile, said platinum has been overproduced, despite a lower commodity price.
“The mining industry has been able to handle 40 years of a flat gold price, using for example mechanisation as a coping mechanism. Mining houses had more control over their environment. Now, mines have no control over legislation, power supply or labour,” he pointed out.
Major added that an improved working relationship with government could restore the mining environment.
Meanwhile, metals miner Northam Platinum CEO Paul Dunne confirmed that there is a great deal of difficulty currently in the platinum and palladium industry. “Our business plans now revolve around the current price environment – which is 15% off from peak pricing.”
He highlighted that Northam is maximising revenue and producing at the lowest costs possible; however, the next options the company, and others, would have to consider are consolidation, rationalisation and care-and-maintenance closure.
“It is difficult raising equity to restore the balance sheet. We are considering what volume of production to continue with, while favouring lower-cost production and mechanised assets,” added metals miner Impala Platinum (Implats) CEO Nico Muller.
He assured that Implats would first exhaust options with the least negative social impact, but warned that work suspensions are a reality for companies with economically unviable assets.
Moreover, despite the low platinum price affecting the mining industry in South Africa, another factor that was taken into account during the event is where demand will come from in 10 to 20 years’ time.
Consulting, analyst and engineering firm SFA Oxford chairperson and director Stephen Forrest expects demand for platinum to be 600 000 oz/y less by 2040 in Western Europe, owing to a decrease in autocatalyst demand from automotive manufacturers, because they are moving towards manufacturing electric vehicles (EVs).
However, that decrease will be offset by growth in platinum autocatalyst demand in other regions – "new frontiers" such as China, Russia, India and South America – which will see platinum demand go up to about 1.1-million ounces a year by 2040.
Forrest added that the growth in these regions are driven by those countries adopting strict tailpipe emission standards on heavy-duty and light-duty diesel vehicles.
"Platinum demand in the automotive sector is going sideways; it is not collapsing, but growing very slowly, despite diesel being a dirty word in Europe. Those countries will be putting catalysts onto big trucks and that is where demand will come from, which will more than offset the reduction of diesel vehicles in Europe."
Anglo American Platinum executive head of marketing Andrew Hinkly averred that there is demand for platinum in the future. “A bad day in mining is better than the best day in automotive,” meaning that mining still has the power to influence the powertrain market in the next 20 years.
Implats refining and marketing group executive Paul Finney said EVs remain a small percentage in the global market, while fuel cell vehicles are also becoming more prominent and shaping the market.
Forrest said that to counter the potential future automotive market demand deficit, the platinum industry could shift its focus more towards marketing product for the jewellery industry. “Jewellery is a key lever for the success of the [platinum] industry, but government must play a role to aid in this process.”
Hinkly added that platinum producers should target marketing towards growing markets such as China and India, and not necessarily an established market such as the US, which might only redistribute market share.