International precious metals mining company Sibanye-Stillwater (Sibanye) has, through the recent acquisition of platinum group metals (PGMs) producer Lonmin, increased its role in and authority in the global PGMs sector.

Following the inroads that Sibanye made into the sector by acquiring PGM mining companies Aquarius Platinum and the Rustenburg operations of Anglo American Platinum in 2016, it followed this up by acquiring US-based PGMs company Stillwater Mining Company in 2017, and Lonmin in June 2019.

These strategic acquisitions have, in a short time period, made the company the largest primary producer of platinum and the second-largest producer of palladium globally.

Lonmin, which had been under financial pressure for a number of years, was not sustainable as a standalone company in the long term. Now, as part of a bigger group, Sibanye expects to realise synergies of about R1.5-billion by 2021, says Sibanye investor relations head James Wellsted.

He highlights that the Lonmin acquisition is the culmination of the company’s South African PGMs strategy – consisting in the acquisition, adjacent production assets, and now, processing and beneficiation operations, between which significant cost savings and other synergies can be realised.

“Previously, we have had to process our PGM concentrates at additional cost, through Anglo American Platinum, whereas Lonmin is one of the three producers in South Africa that actually has beneficiation all the way through to precious metals. Processing PGM concentrate from our Rustenburg operations at Lonmin instead, will enable us to realise cost savings of about R780-million yearly,” he says.

He underscores that Lonmin still has a significant role to play in the local PGMs sector, as the outlook for these commodities is positive for at least the next five to ten years.

“This consolidation is creating a more sustainable industry, particularly on the western limb of the Bushveld Complex where we operate,” he adds.

While there are several variables that may affect PGMs supply and demand, Sibanye could play a crucial role in the future supply and demand dynamics for the sector, says Wellsted.

By leveraging its position, the company hopes to improve its contribution to the PGMs sector and the local economy. Wellsted enthuses that, “this will bring benefits for all stakeholders, especially in relation to job sustainability and the development and upliftment of the communities in which we operate”.

Operations

The most prevalent PGMs at Sibanye’s operations are platinum, palladium, rhodium, iridium and ruthenium. Platinum accounts for about 60%, with palladium and rhodium constituting 30% and 10% respectively.

While the market price increase for rhodium and palladium in the past two years has had a significant impact on the basket price of the metals received by the local industry, Wellsted notes that the platinum price, which is the biggest part of the company’s basket, has been under pressure during that period.

“The substantial increase in the rhodium and palladium price in the past two years has pushed the basket price higher, along with the weaker rand. It has increased the profitability of the sector and certainly for our more marginal operations. However, it is still not high enough yet to incentivise significant investment from the industry – and that is what we need.”

As a result, to gain a better understanding of the future of the PGMs sector and the threats faced, particularly to ensure a better understanding of the ‘tech metals’ used in battery technology, Sibanye also acquired commodity consultancy SFA Oxford in February to scope out opportunities for growth in that area.

“We acquired it for its intellectual property, as the company does extensive research on drive trains and automotive vehicles while assessing technology and battery materials. I believe that is the logical next step – at the right time – for our already significant exposure to the automotive sector,” he comments.

The company expects continued demand for palladium in automotive catalysts, with global growth continuing at a moderate pace. With global emissions standards becoming even more stringent – particularly in China and Europe – Sibanye expects these factors to mitigate against the threat of greater battery electric vehicle penetration, with fuel cells, which are relatively platinum-intensive, becoming more prevalent as well, states Wellsted.

“We are going to witness higher PGM inputs in vehicles to try to reduce the unwanted gases released by exhausts. For platinum, specifically, we do think that the price preferential between palladium and platinum – about $700/oz – is going to incentivise some substitution of palladium in the petrol automotive catalysts – a partial substitution for platinum.”

It will be replaced partially by platinum and that will continue to drive demand for platinum in the next two to three years, which will be positive for the platinum price, he suggests.

Further, while Sibanye has a significant uranium resource at its South African gold operations, the uranium price is currently too low to justify processing, says Wellsted.

Nevertheless, the company aims to diversify into other commodities in the future where there are viable opportunities.

Sibanye’s vast experience in the South African gold mining sector, which has been under pressure and consolidating for survival for decades, will be beneficial as it forges ahead with the diversification of its portfolio, concludes Wellsted.