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PGM players are changing

Because the Game's rules are evolving, the future of the PGM market in South Africa will preferred shallow deposits and low cost producers, with palladium enriched ores and safe extraction methods (mechanized mining).

 The major growth driver for the demand came from the autocatalyst sector until 2008 (93% growth since 2000). The economic downturn in 2008 has significantly impacted that industry and consequently reduced the demand for Platinum. The demand has recovered in 2009 but without reaching the 2007 level. Today, jewelry and chemical sectors are the most active for growth in demand.

Note that the jewelry sector has recorded a 45% increase in demand from 2008 to 2014 whereas the automotive sector recorded a 10% drop during the same period.

Today the offer is coming mainly from South Africa (65%) and is facing severe socio-environmental constraints and a significant drop in metal price. However the Rand weakness against the dollar accentuates PGM producer basket pricing providing some cost relief. Nevertheless, the wage agreements and safety measures have involved strategic reviews by major producers. Among reviews, mechanized mining over the best suited reefs would represent the best practices.

The platinum and palladium are the metals for our green technologies in transport. Their properties are still unique but R&D for PGM substitution are progressing.

Most common use of platinum is as a catalyst in chemical reactions. Platinum is mainly used in Autocatalyst (41%) and Jewelry (38%): Chemical (7%).

Diesel engines operate at lower temperatures than gasoline engines and, to date, platinum is better suited as a catalyst in converting CO, NOx and hydrocarbons to harmless emissions at the lower temperatures. Catalytic converter effectiveness exceeds 90% in eliminating harmful emissions. However such figures have been threatened by the VW scandal and its hacking software. The diesel engine for light cars are seriously reconsidered and some politicians have already expressed their willingness to eradicate their access into cities.

The recycling has made a significant improvement! From 2002 to 2012, the recycling rate has increased from 9% to 27% (against total supply for platinum). However recycling depends on infrastructures in place, which are much more developed in USA and Europe as compared to emerging countries. As such, the growth in recycling will not simultaneously follow the growth in demand.

It is always very ambitious to speculate about the price, but considering that 40% of demand for platinum is expressed in the areas of hydrogen fuel cells (Toyota) and catalysts for diesel cars; we might see no great change on a mid-term future.

The fuel cell is a market en devenir and the diesel cars are declining due to several reasons (Fine particles issues, NOx emissions thresholds lowered, price differential between diesel and petrol cars is justified less)

Platinum price variation would result from big moves in the jewelry sector and from investment sector.

Thus the big miners are struggling with some old and costly assets which penalize their portfolio and their overall results. New names have appeared in the Bushveld in South Africa. Sibanye, has acquired the Rustenburg operations from Anglo American Platinum for about $300M and  will probably complete the transaction to get Aquarius Platinum for about US$294 million (completion of the transaction by the end of April), which owns two platinum mines (Kroondal in South Africa and the Mimosa mine in Zimbabwe).

Sibanye spun off from Gold Fields in 2013.

Aberdeen International through African Thunder (private company) has acquired Platinum Australia assets (Smokey Hill). The management is motivated by taking opportunities in some strategic metals and It has also purchased for $5M the Diablillos lithium-potash project in Argentina from Rodinia Lithium Inc.

Platinum Group Metals (PTM) is starting the production at its Western Bushveld Joint Venture (WBJV) Project 1 with the first concentrate expected in early 2016. With 4.1Moz PGE4 of reserve including 2.6Moz Pt and 1.1Moz Pd, PTM intends to position itself as a low cost producer in one of the shallowest remaining deposit of the Western Bushveld.

PTM is also progressing with the Pre-feasibility study at the Waterberg JV (PTM 46%/JOGMEC 28%/BEE 26%). The type of mineralization opens up new potential for low cost, safe and mechanized PGM mining. Moreover the basket is enriched in Palladium (Pd) and gold (Au) (30% Pt, 61% Pd, 1% Rh, 8% Au).