JOHANNESBURG (miningweekly.com) – The current low price of platinum gives the metal a clear investment case, says Northam Platinum CEO Paul Dunne.
“Platinum is currently very, very cheap on a relative basis to its sister metals, and gold,” Dunne, who was speaking at a media meet attended by Mining Weekly Online, says.
The ‘sister’ platinum group metals (PGMs) referred to include palladium and rhodium, which are at record price levels, while platinum remains at lower price levels, while it continues to play an important and effective catalyst role.
World Platinum Investment Council (WPIC) research director Trevor Raymond last week reported 1.2-million ounces of platinum investment demand in 2019, with mining supply in 2020 expected to be 2% lower than in 2019.
Dunne reaffirmed Northam’s full support for the WPIC: “We all assume that everybody knows everything about platinum, right across the world. It’s not the case. The WPIC are fulfilling an important role in terms of disseminating information surrounding the investment case, and I think they do it rather well,” he says.
Exchange traded fund (ETF) purchasing has accounted for about one-million ounces of platinum demand, with ETF buying, according to Raymond, resulting from institutional investors recognising platinum’s demand growth potential, supported by the platinum price moving from $800/oz to $900/oz.
The 12% increase in total third-quarter demand was driven by ETF buying, which offset expected demand decreases in the automotive (-5%), jewellery (-6%) and industrial (-1%) segments and total supply growth of 2% for the quarter.
Northam is targeting the doubling of its 500 000-oz-plus current output to the million-ounce level by 2024 and hopes to do that into a rising PGMs market.
The JSE-listed company continues to believe that the market rise will be led by palladium, followed by rhodium, with platinum lagging.
“But platinum, as an investment proposition, relative to the price of gold, palladium and rhodium, looks as cheap as chips to me. So, I think platinum will have its day, but not just yet,” he comments.
Platinum’s re-adoption in gasoline vehicles could change all that, but currently it is palladium and rhodium that dominate the gasoline market, at a mix of about nine palladium to one rhodium.
“We would like platinum to re-emerge in that gasoline application, but it’s technically challenging because the modern gasoline car runs quite hot and the catalyst these days is either bolted on the engine, or positioned very close to the engine, so it experiences temperatures of about 1 300 °C. At that temperature, palladium and rhodium perform better than platinum,” Dunne tells Mining Weekly Online.
The technical solution of accommodating platinum as a substitute metal in gasoline vehicles continues to be researched and developed. In the meantime, platinum continues as the metal of choice for diesel’s cooler run engines. However, the diesel share of Europe’s vehicle market has fallen from more than 40% to 30%.
The platinum price is currently at $900/oz, palladium is at $1 700/oz and rhodium at $6 000/oz.
The big price difference between platinum and palladium is motivating research and development to allow platinum to be reverse substituted into gasoline vehicles.
The market for palladium of ten-million ounces a year is larger than the platinum market, which is an eight-million-ounce-a-year market. Rhodium is a million-ounce-a-year market.
Demand for rhodium is very strong owing to new nitrogen oxide (NOx) emissions legislation. Rhodium is able to convert NOx into harmless water and hydrogen.
Ninety per cent of rhodium arises from South Africa’s upper group two (UG2) reef. There is no rhodium in the Merensky reef and in the reef in Zimbabwe.
Northam’s growth is all in UG2 reef. It is growing its rhodium-heavy UG2 base at Booysendal North and Booysendal South, which is 90% UG2, all of Eland is UG2 and half of Zondereinde is UG2.
A $1 000/oz rise in the price of rhodium is worth more than R500 000 free cash flow to Northam.
The first production from Northam’s new mechanised Booysendal South mine, in Mpumalanga, where 2 000 additional employees are in the process of being recruited, is on schedule for this financial year.
Output of 50 000 oz of platinum (60%), palladium (26%), rhodium (10%) and gold a year from Booysendal South is forecast.
“We believe in platinum group metals. These metals are very special. They are ‘greening’ metals to speed up reactions in many industrial applications across the world.
“Primarily, the most important application is automotive catalysis, the cleaning of exhaust gas. These metals do that very well,” says Dunne, who has confidently overseen the company’s on-schedule and on-budget growth strategy over the last six years.