Analysts cheer PGM initiative
ANALYSTS yesterday cheered the move by the Public Investment Corporation (PIC) and Anglo American Platinum (Amplats) to invest $200 million (R2.64 billion) in funds managed by AP Ventures, in order to stimulate demand for platinum group metals (PGMs).
The experts said any intervention was good for an industry that was still reeling from the slowdown in China’s demand for raw materials.
AP Ventures will invest in sectors aligned with the PIC’s investment strategies for alpha generation, which include the hydrogen and fuel-cell value chain, energy storage and logistics, power generation and management, water, health care and food preservation.
Wayne McCurrie, a senior portfolio manager at Ashburton Investments, said PGMs had a future if fuel-cell technology took off. But he warned that this was highly dependent on the safe storage and distribution of hydrogen.
“Until then, any initiative to increase demand may help to stabilise prices. The continued take-up of electric vehicles will negatively affect demand for PGMs, but this is not really a problem for the next five years at least,” McCurrie said.
“Hopefully, this initiative will help to counteract this threat as well.”
Stimulation
PGM mines were particularly profitable when China’s economy was booming from 2002 to 2008. Since then, prices have declined nearly 60 percent, pummelled by weaker demand for the metal, which is used to curb pollution from vehicles, partly because of slower sales of diesel cars in Europe.
McCurrie said South Africa could still benefit from the stimulation of the industry.
“South Africa still has plentiful PGM reserves, but needs higher prices to make the industry great again,” he said.
Sibonginkosi Nyanga, an equity research analyst at Momentum Securities, said the PIC-Amplats initiative was good for the industry.
“If you look at the current scenario, there has been a low demand for platinum, and this has led to a decline in platinum prices. The initiative is aimed at creating a demand for platinum, which is good for the industry,” Nyanga said.
Victor von Reiche, a portfolio manager at Citadel, said the venture capital fund represented only about 3 percent of annual demand by value using current spot prices and would therefore not change the current dynamic, which was dire for most mines.
“As part of a multi-pronged solution, there could be value in the venture fund longer term should new markets be identified, such as fuel cells and the like. The platinum industry requires more immediate intervention focused on the supply side of the equation,” he said.