Palladium catches up with platinum
. . . Zimplats maintains platinum will recover
PALLADIUM has been growing in significance over the past decade, and latest figures provided by local platinum giant, Zimbabwe Platinum Holdings (Zimplats), point to this fact. The numbers show that palladium currently contributes 35 percent of Zimplats’ revenue, compared to platinum’s 38 percent.
In 2009, palladium contributed 11 percent of Zimplats’ revenue, against platinum’s 68 percent at that time.
The trend has been incremental
By 2012, palladium was contributing 19 percent to Zimplats’ bottomline, while platinum had declined to 55 percent.
And by 2015, palladium had grown to account for 27 percent of the platinum producer’s revenues, while platinum had further decreased to 49 percent.
Palladium is an important component in electronics, and it is used in many new technologies, such as fuel cells, and is particularly attractive to investors because it is not easily replaced by other metals.
Global metals experts — Money Metals Exchange — give a brief outline of the recent shifts in palladium:
“The metal began moving out of relative obscurity in the 1990s as automakers found it to be a great alternative to more expensive platinum. Prices accelerated upwards and peaked at over $1 000 early in the year 2000. The run upward in price was followed by a precipitous fall and the metal spent most of the next decade trading under $400 per ounce.
“Its fortunes changed in 2008 as interest in precious metals as a safe-haven began to surge. The precious metals complex put in a bottom in December 2015 and to date, palladium has been far and away the best performer in terms of price.
“The price per ounce eclipsed that of platinum for the first time ever in 2017. The metal rode a wave of increased investment demand, coupled with a recovery in the automotive manufacturing sector worldwide.”
Palladium is believed to be 30 times more rare than gold. It could therefore be the new quintessential “precious” metal, but it still has great industrial use, mainly in catalytic converters because the metal serves as a great catalyst that speeds up chemical reactions.
But Zimbabwe’s largest platinum producer isn’t concerned.
Zimplats is in the business of producing platinum and associated metals, the so-called platinum group metals (PGMs), which include palladium.
But for how long will palladium be considered an “associated metal”?
The ascendancy of palladium, at the expense of platinum, would entail a significant shift at the very core of how platinum producers operate.
However, Zimplats CEO Alex Mhembere thinks the rise of palladium is temporary and that platinum will regain its greater contribution to the company’s bottomline.
“We are not in a position to take that strong stance (to re-focus on palladium production) because it requires us to shift what we call the mining charter agreement. At this stage, we still think it is temporary and that platinum will overcome palladium,” said Mr Mhembere.
“We have seen the trend yes, but if that becomes a permanent position, there are two things that we have to do, first is to widen our mining charter or shift the mining plant to palladium. Palladium ore tends to occur below the platinum ore.”
Income tax rate change hits Zimplats
Meanwhile, in terms of financial performance, Zimplats’ profit for the year to June 30, 2018 slid 94 percent to $2,6 million from $45,5 million in the prior palladium, nickel, rhodium and copper; comparable period. which resulted in a 17 percent increase in
During the period under review, the gross revenue per platinum ounce from platinum giant’s deferred tax charge was $1 868 to $2 184. significantly higher than the prior year Operating cost was down 5 percent to because of the change of the operating $1 290 per platinum ounce. subsidiary’s status from being a special Profit before tax rose 64 percent to mining lease (SML) holder to a mining $166 million, but the group incurred a lease (ML) holder. once-off tax expense of $163,3 million,
The group said a deferred tax charge of which knocked down profitability for approximately $95,4 million was recognised the period. The income tax expense in FY2018 arising from the change increased from $55,8 million in FY2017 in an income tax rate of 15,45 percent to $163,3 million driven mainly by a $98,1 under the SML tax regime to 25,75 percent million deferred tax charge. under the ML tax regime (inclusive Cash generated for the period of AIDS levy). amounted to $195 million.
As a result, profitability during the With regards to production, ore milled year was significantly depressed. reached 6 570 000 tonnes, which is above
Revenue for the year increased by 14 the company’s nameplate capacity of percent from $512,5 million in FY2017 to 6 200 000 tonnes. $582,5 million despite a 2 percent decrease Total platinum ounces produced and in 4E sales volumes from 555 892 ounces sold in FY2018 decreased from 281 069 to 542 085 ounces. ounces and 274 364 ounces in FY2017
Management attributed this to an to 270 717 ounces and 266 720 ounces increase in the average prices received for respectively.