A defining half-year to December 2024 is beckoning for South African platinum group metals (PGM) miners, who now have to tap into stockpiles to boost sales volumes, to survive the downturn in prices of the precious metal, although Northam and Amplats look better positioned.
SA PGM miners include Sibanye-Stillwater, Anglo American Platinum (Amplats), Northam Platinum and Impala Platinum, among others.
They are having to drastically restructure their operations and capital allocation in addition to cutting costs by laying off workers, closing non-profitable shafts and cutting capital expenditure.
Bruce Williamson, mining analyst at Integral Asset Management, told Business Report yesterday that SA PGM miners had to take similar drastic measures to survive.
“Severe cutbacks in production and labour are necessary to keep going” for the troubled SA PGM miners. Over the past 50 years PGM miners have been through similar, big downturns,” Williamson said in an interview.
“The next six months are going to be very tense for PGM miners and their customers. Amplats and Northam in my mind will be best positioned through this down turn.”
While the impact of subdued PGM prices has been felt over the past months, the current 2024 second half year period presents a defining moment for the PGM miners.
Amplats has been itching to lower its costs, and said this week that it was well on course with its restructuring process, as it eyes completion of the demerger process from Anglo American and a potential secondary listing in London by next year.
In the half year to June, Amplats raised PGM production by 5% to 1.78 million ounces while sales volumes for the period strengthened by 9% due to draw downs from its inventory.
“They (Anglo Platinum) are doing a great job under very difficult market and on-mine conditions. However, note that they have started to release a lot of PGM inventories/stocks, a R9.4 billion swing in inventories,” added Williamson.
Nonetheless, with other executives of PGM companies warning that the basket price was in very low territory, there was likely to be further turbulence for the sector as supply will come under increasing pressure if prices do not tick up in the next few months.
Nonetheless, selling of additional stocks and revenue from the other metals can make a big difference as in the case of Amplats.
Only six months ago, PGM companies were not really factoring in a large boost to revenues from metals outside the core three PGM metals of platinum, palladium and rhodium.
Northam said earlier this month, that the long-term contribution of its “counter cyclical investments made over the past decade in pursuit of establishing a very competitive production base which is able to withstand potential medium to long-term cyclical downturns”, would help it survive through the current downturn.
It expects the current weak price environment for PGM to “endure for some time” with “higher inflation also projected to remain a major source of concern” for the company.
BUSINESS REPORT