Rand may add to plat­inum woes

The Star Early Edition - - COMPANIES - Di­neo Faku

THE plat­inum price is get­ting squeezed this year amid an over­sup­plied mar­ket but the in­dus­try will likely cut pro­duc­tion if the rand strength­ens to R11 to the dol­lar, ac­cord­ing to NOAH Cap­i­tal Mar­kets min­ing an­a­lyst René Hochre­iter.

The plat­inum price sank to $942 an ounce from about $1 117.73 an ounce last year and $1 017.44 an ounce in 2015.

Hochre­iter said yes­ter­day: “There is just too much sup­ply of plat­inum and there is no sign that South African pro­duc­ers are go­ing to re­duce pro­duc­tion.

“Only once the rand strength­ens to R11 to the dol­lar will we see pro­duc­ers cut­ting pro­duc­tion,” Hochre­iter added.

South Africa is home to 80 per­cent of the world’s known plat­inum re­serves and the in­dus­try is a ma­jor em­ployer in the min­ing in­dus­try with a work­force of 172 000.

The plat­inum price’s tum­ble has hurt South African pro­duc­ers with Cham­ber of Mines chief ex­ec­u­tive Roger Bax­ter say­ing last week that at cur­rent prices half of the plat­inum sec­tor were mar­ginal, which was a chal­lenge for South Africa.

Lo­cal pro­duc­ers are feel­ing the pinch of the strength­en­ing of the rand, with Lon­min, the world’s third-largest plat­inum pro­ducer, say­ing the ex­change rate had contributed to a $146 mil­lion (R1.88bn) im­pair­ment.

Last month, An­glo Amer­i­can Plat­inum chief ex­ec­u­tive Chris Grif­fith said the mar­ket was not largely op­ti­mistic about plat­inum group met­als.

Also, Sibanye Gold chief ex­ec­u­tive Neal Frone­man was re­ported to have said there was a “high de­gree of con­cern” for the eco­nomic vi­a­bil­ity of up to 300 000 ounces of Sibanye Gold’s plat­inum group me­tal (PGM) pro­duc­tion should the slump in the rand bas­ket price of the met­als con­tinue.

Mean­while, South Africa’s Im­pala Plat­inum last week an­nounced it planned to sell about $500m of un­se­cured bonds which would be con­vert­ible into shares with pro­ceeds ex­pected to be used to re­fi­nance its ex­ist­ing debt.

Im­pala, the world’s sec­ond-largest plat­inum pro­ducer, which mines in South Africa and Zim­babwe, said the 2 022 bonds would in­clude R3.25bn of rand-de­nom­i­nated con­vert­ibles and $250m of dol­lar-de­nom­i­nated con­vert­ibles.

PHOTO SUP­PLIED

Zon­dereinde Northam Plat­inum in Lim­popo. The strength­en­ing rand is a con­cern for plat­inum pro­duc­ers

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