Amplats seeks new markets
Platinum miner teams up with PIC to give PGM research a boost
The world’s biggest platinum miner is teaming up with Africa’s largest fund manager to find alternative uses for platinum group metals and stave off any demand-side threat to the metals and diversify away from its heavy reliance on the automotive industry.
The world’s biggest platinum miner is teaming up with Africa’s largest fund manager to find alternative uses for platinum group metals (PGMs) and stave off any demand-side threat to the metals and diversify away from the heavy reliance on the automotive industry.
Anglo American Platinum (Amplats) and SA’s government fund manager, the Public Investment Corporation (PIC), are injecting a total of $200m into two offshore ventures to invest in research, development and new technologies that would use PGMs. SA is the world’s largest source of these metals.
The threats to platinum, palladium and rhodium, which are mainly used in industrial application and predominantly to make catalytic devices for motor exhausts, come from the strong push for electric vehicles and disenchantment with diesel passenger vehicles in Europe — the biggest single user of platinum — after Volkswagen cooked the results on emissions, which began in 2015.
It is in Amplats’s interests as the source of about one-fifth of the world’s mined platinum to find alternative uses for the metal and others that it mines in SA and Zimbabwe.
With the company’s strong balance sheet, restructured assets, and dividend payments as well as the highest return on capital employed of all SA’s platinum firms, Amplats was trading at an equity premium, JPMorgan Cazenove said.
“But we believe this premium is at risk due to expected structural decline of diesel combustion engines. We also expect platinum prices will disappoint in 2018-19 due to a lack of supply reform among SA’s highcost producers. We believe Amplats’s earnings and share price are likely to incur collateral damage from its peers’ inertia.”
Platinum prices have remained largely stagnant for a decade, while palladium prices have overtaken those of its sister metal — a rare occurrence — and are causing autocatalyst makers to look for ways to use less of the metal in petrol engine exhaust systems or substitute it with platinum.
Underlying the demand side of the market are questions about the longer-term supply from SA of both metals. SA is the largest source of mined platinum and a close second to Russia for palladium.
About 60% of SA’s platinum mines are marginal or unprofitable, leading to restructuring and consolidation.
The $100m from Amplats, which is 78% owned by Anglo American, will be matched with $100m from the PIC. Amplats is injecting its portfolio of companies it has set up or invested in since 2009 into AP Ventures and these assets include Altergy Systems, Food Freshness Technology Holdings, Greyrock Energy, HyET Holdings, Hydrogenius Technologies, Primus Power and United Hydrogen Group.
AP Ventures, an independent fund management business headed by Amplats stalwart Andrew Hinkley, will manage two UK-based venture capital funds that will hold the Amplats assets as well as the capital and hunt for new investments.
“Developing the market for PGMs is a strategic priority for Anglo American Platinum and this investment with AP Ventures is a key initiative,” said Amplats CEO Chris Griffith.
The PIC was investing in AP Ventures to ensure the South African platinum sector had a “sustainable future”, said the fund’s CEO, Dan Matjila.
“The potential for localisation of these technologies in SA contributes to sustaining jobs in the PGM mining sector and planning for creation of jobs in the manufacturing sectors,” he said.
DEVELOPING THE MARKET FOR PGMS IS A STRATEGIC PRIORITY FOR ANGLO AMERICAN PLATINUM