Northam enters US PGM recycling sector

Pennsylvania assets cost $10.7m Greater exposure to palladium

Northam Platinum secured another cheap deal, snapping up the assets of a liquidated platinum group metal (PGM) recycling company in the US, giving the group greater exposure to palladium and reducing its exposure to SA.

The deal, which is due to close before the end of August, comes soon after Sibanye Gold bought US miner and recycler Stillwater Mining for $2.2bn, launching it into the premier league of PGM producers.

The assets Northam is buying in Pennsylvania are capable of generating more than 300,000oz a year of PGMs, mainly palladium, from recycled autocatalysts, which are used to tackle pollution from the exhaust gases of petrol and diesel engines.

A-1 Specialised Services went into liquidation after a dispute with Impala Platinum (Implats) was decided in the South African company’s favour by the London Court of International Arbitration, awarding it $201m in May 2016. Implats had not received that money, said a company spokeswoman.

When its assets were advertised for auction, Northam made a $10.7m cash offer for the lot, sneaking in ahead of this week’s auction of individual components, which would have broken up and destroyed the asset base, Northam CEO Paul Dunne said. “These types of assets only come up once in a lifetime. They are exceptionally good assets and will be strategically significant in the future. We have paid a very attractive price,” he said.

Northam will develop a working relationship with its German partner, Heraeus, which refines Northam’s PGMs and which has started its own

recycling business. “We’ll be co-operative with Heraeus rather than competitive,” he said.

The transaction was about gaining exposure to the North American autocatalyst recycling market and growing exposure to palladium, he said.

Two-thirds of Northam’s metal output is platinum, prices for which have been stagnant for years, leaving 65% of SA’s platinum mines unprofitable.

“This business has a different risk profile from mining. However, it’s not a South African risk mitigation factor at all.” Northam was likely to talk to Sibanye Gold about “common interests” in the recycling market.

The enormous footprint of what was one of the world’s biggest recycling businesses and its well-kept assets, described by Dunne as “ready to go”, marked another smart, low-cost transaction, said Nedbank analyst Leon Esterhuizen.

“Stillwater has shown how this recycling business can be grown and Northam is picking up the core assets needed to build such a business for next to nothing. Line up Paul’s deals and you have to applaud,” he said.

Dunne knew the recycling business well. “Paul was central to the establishment of the recycling business that, for many years, represented the backbone of earnings in Implats.”

Northam would grow the Pennsylvania business slowly, putting in place good commercial arrangements, Dunne said.

Northam bought the suspended Everest South mine and concentrator from Aquarius Platinum and the Eland Platinum mine and hundreds of pieces of equipment for practically nothing from Glencore. It has also done a deal to buy untouched mineral rights from Anglo American Platinum.

The plan is for the Pennsylvania plant to sell the powdered and PGM-laden catalytic material to Northam’s smelting complex at its Zondereinde mine north of the Pilanesberg nature reserve.

Northam will steadily build up a new client list for the plant in North America, the largest source of recycled autocatalyst and one that Johnson Matthey recently forecast would in the next seven years generate 2.4-million ounces a year of recycled PGMs, of which 1.7million ounces would be palladium, about 500,000oz platinum and the balance rhodium.