Platinum miners face challenges

Low prices and uncertainty over policies and operating frameworks are inhibiting investment in sector

PLATINUM miners and resource fund managers say low prices remain the largest risk to growing supply, in addition to policies and operating frameworks deemed unconducive to support investment into broadening output, which, according to the World Platinum Investment Council (WPIC), will be lower this year.

The WPIC said in an industry report for the fourth quarter of 2016, released yesterday, that platinum supply from South Africa was expected to marginally decline this year.

The council said Impala Platinum (Implats), Anglo Platinum and Sibanye Gold’s units in Zimbabwe would also take a 7 percent knock in output to 445 000 ounces.

South Africa is the biggest producer of the precious metal, followed by Zimbabwe.

Fund managers said the capacity to grow supply was limited by low metal prices.

“Supportive platinum prices will attract further investment into production and this will see producers explore programmes to boost supply.

“Rising production costs and labour market challenges will force investors to switch strategy from growth to survival,” said an expert with a resource sector fund management company.

Implats spokesman Johan Theron told Business Report that “longer term PGM fundamentals remain positive” but cautioned that stakeholders such as government and labour “must resolve and agree how best to support the industry during the difficult period”.

In 2016, mine supply from Zimbabwe climbed 19 percent year on year to 480 000 ounces.

Zimplats, a unit of Implats, has just given the nod for a new replacement mine while its collapsed Bimha mine is also expected to return to full production by next year.

The Mimosa mine joint venture operation between Implats and Sibanye Gold is also undertaking an on-reef expansion project expected to stabilise production once completed.

“Regulatory uncertainty in Zimbabwe is negatively affecting the ability of companies to plan production and deploy capital,” resource analyst Sibonginkosi Nyanga has previously observed.

South Africa platinum mine supply, however, was down by 5 percent to 4.2 million ounces “owing to a higher number of safety-related stoppages, price-induced restructuring on the Western Limb and more general operational challenges”.

These had resulted in “lower underground ore volumes being hoisted” from the western hub of the Bushveld Complex.

Labour disruptions to production have been a common feature in South Africa’s platinum mining industry but operators say unions now understand the conditions under which the industry is operating such as low prices.

“Labour disruptions will always remain a business risk, but equally labour understand full well the conditions under which we operate, which should ameliorate associated business interruption risks,” Theron said.