JOHANNESBURG (miningweekly.com) – There is no alternative but to substitute palladium with platinum, said platinum group metals (PGMs) mining company Royal Bafokeng Platinum (RBPlat) CEO Steve Phiri on Tuesday.
Speaking at RBPlat’s presentation of a 147.2% improvement in headline earnings to R123.1-million and a strengthened balance sheet that has put the company in a position to consider dividend payments of a minimum of 10% of free cash flow, Phiri said the substitution of palladium with platinum would be driven by supply security challenges. (Also watch attached Creamer Media video.)
While the price of platinum had remained subdued, the price of palladium had increased to more than $1 900/oz at year-end compared with $950/oz the year before.
Rhodium outperformed still further, increasing to $6 000/oz at year-end and had since doubled to beyond $12 000/oz.
Combined with a weaker rand, this increased RBPlat’s 2019 PGMs basket price by 37% to R28 743/oz.
Phiri anticipated that platinum would continue to be in surplus, while palladium and rhodium would be in deficit.
Increasingly stricter emission-control legislation had driven demand up to such levels that “supply is almost not there”.
“Substitution might not be happening in big quantities now but we do believe that there’s no alternative but to substitute palladium with platinum,” he told the presentation covered by Mining Weekly.
Jewellery demand for platinum, which decreased in 2019 owing to the slowdown in China, was set to be impacted further by the coronavirus.
“We’re told the factories are shut and even our Platinum Guild International office is shut,” he disclosed.
On the supply side, troubled State electricity utility Eskom remained a risk to supply, with 6 500 oz lost as a result of electricity load-shedding and safety disruptions, of which 5 900 oz were lost owing to Section 54 stoppages.
With Anglo American Platinum paid in full for the remaining 33% of BRPM, RBPlat’s strengthened balance sheet has put the company in a position to soon consider dividend payments of a minimum of 10% of free cash flow.
During 2019, RBPlat increased tonnes milled by 12.5% to 3 847 000 t, with 9.2% platinum, palladium, rhodium and gold (4E) metals in concentrate increasing by 9% to 401 000 oz and platinum metal in concentrate increasing 9.2% to 261 000 oz.
The company is transitioning BRPM from being a Merensky-biased operation to a Merensky and upper group two (UG2) operation. UG2 ore contains more palladium and rhodium.
RBPlat has signed a new five-year wage agreement with the National Union of Mineworkers and 96% of its discretionary procurement expenditure in 2019 was with historically disadvantaged South African companies.
“After a number of years of relatively subdued demand, the market began to improve in 2019 and early signs this year are indicative of a robust palladium and rhodium market during 2020, and likely beyond,” Phiri said.