Just one new frontier for SA’s PGM miners

There are four main territories for platinum group metals (PGM) production, and SA miners have tied up three of them.

It’s not just grandly ambitious designs on tightening control of the global PGM supply but also necessity because of the poor environment in Southern Africa, host to two of the territories.

In SA, which is home to about 80% of the world’s PGM, mines have become deeper as the easily accessible, low-cost material was extracted first. Now there are second- and third-generation shafts 2km deep at labourintensive operations.

SA’s mines have had to accommodate electricity tariff increases of 523% since 2006, and the government is hampering attempts to install large solar arrays on mines by their biggest customers, who also happen to be the best payers for electricity.

In Zimbabwe, an important source of mined PGM, the economy is in freefall. The three SA majors, Impala Platinum, Sibanye-Stillwater and Anglo American Platinum (Amplats), are wary about investing more in their projects there to expand production.

The third major source of PGM is North America, a developed economy in a stable, investor-friendly zone. SA companies have snapped up all there is — ranging from mines to recycling plants — to diversify out of Southern Africa.

Amplats, which has the opencast Mogalakwena mine — the world’s most profitable PGM mine — is not anxious to spread its wings and argues it makes good profit in SA where, until recently, it was the largest source of platinum.

The only other real contender is Russia, but that’s tied up by Norilsk Nickel, the single largest company producing PGM.

The one area that is a swing factor is recycling of PGM.

If SA companies truly want to dominate the sector, they will have to make inroads into recycling more than 5.5-million ounces of platinum and palladium a year.

DISCLOSURE STANDARDS

Almost every day, shareholders in JSE-listed companies are reminded of their second-class status when it comes to disclosure.

As they notice the almost daily Sens announcements from South32 and Anglo American about share repurchases in the previous 24 hours, they must surely wonder about companies with primary listings on the JSE.

JSE requirements on this score fall way behind those of leading international exchanges.

Many investors believe that share repurchases present an excellent opportunity for a company to manage its capital resources effectively. However, almost as many believe share repurchases create too many conflicts and are often an indication that management has run out of productive ideas.

Whether you approve or not, it is difficult to argue in support of the JSE’s disclosure requirements. As things stand, companies are only required to issue a Sens statement if a cumulative 3% of shares have been repurchased in terms of a general offer. Companies do have to make some disclosure in the annual report, but that could be as long as 12 months after the actual activity. A Sens announcement is only required if there is a specific repurchase.

JSE investors have no idea if they are buying shares at the same time as the company is selling. It might not make a difference to their decision, but they are entitled to know.