Company Announcement - Leading advisory firm Eunomix has conducted an in-depth analysis of the world’s main Platinum Group Metals producers since 2001.

According to Ryan Blumenow, Economist and Strategist at Eunomix: “The market has become more risk-averse and investors are concerned about the cost base of PGM producers. Producers should consider using longer-term contracting not only to smooth volatility in the face of currency swing, but to also optimise preemptively prior to the effects of the financial crisis being felt. The longer-term course of prices should be considered and recognised.”

The study unpacks the relationships between market forces, internal operational factors, and the performance of PGM producers both prior to and after the global financial crisis, through comprehensive and rigorous statistical analysis. It provides a critical view on the sector’s outlook in times of declining commodity prices. It offers a refreshing perspective on strategy for corporate management and the providers of capital.

The study confirms that companies enacting strategy on the basis of robust empirical foundations may align more easily to longer-term market forces, allowing them to maximize gains in a boom market but minimize loss preemptively in bust markets. The study examines the forces that drive performance, including the critical nexus between production volumes, prices and financial performance. Some of the findings present an opportunity for revisiting some of the key assumptions that have driven the sector.

Building on this, the study finds that prices empirically explain much of the performance of producers. This notwithstanding, companies in the same segment have vastly different fortunes, partly because of the existence of important regional and company-specific effects. Innovative strategy-setting clearly allow improved internal efficiencies to provide resilience. For example, currency fluctuations can fundamentally alter existing relationships between market forces and performance.

When external forces have a large impact over the affluence of PGM producers, optimization of internal factors becomes ever more important. Production decisions also have implications for the prevailing commodity market price. This means that producers have an opportunity to be market-movers instead of price-takers, through savvy use of production strategy based around robust empirical analytics.

Eunomix intends for the research to inform individual strategy formulation and the debate around how the current commodity cycle may be ameliorated. Greater engagement between producers, analysts, financiers, government, and other stakeholders must become a requirement for turning the sector around.

Eunomix will be presenting some of its key findings at the 2016 Mining Indaba, and will be engaging with corporate strategists and financiers there on the implications of the analysis. The firm will also be hosting a pre-conference workshop in Cape Town titled “A strategy primer: taking control of rising shareholder demands and lower prices”, where some findings from the PGM Report will be discussed. The workshop will be held on Sunday February 7th 2016, from 13h00-16h30 and will be facilitated by
Managing Director Claude Baissac. Eunomix will also be presenting at the Canada Interactive Breakfast Forum on Tuesday 9 February at The Westin Hotel in Cape Town.