Platinum firms losses confirm metal doldrums

The drop in the share prices of Northam Platinum and Impala Platinum after they reported losses this week shows that recovery in the industry is still far from certain.

Northam Platinum's share price fell 5% on Friday after it posted its loss, although it had narrowed it from R273-million to R226-million in the six months to December.

World number two platinum producer Impala Platinum's share fell 4.6% on Thursday after it reported a loss of R328-million for the six months to December compared with a profit of R218-million a year earlier.

Paul Dunne, Northam Platinum CEO, said on Friday that the market still had not accepted South Africa's PGM production was declining.

The platinum industry has been in the doldrums for the past 10 years, with the platinum price in that period 16.86% lower. More recently, the price has increased, up 9.28% in the past year. But this is marginal compared with other industrial commodities.

Dunne said that if there were no redevelopment projects miners would eventually go out of business under the current market conditions.

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"For this price level, the rand basket price, the industry is not sustainable in its current form - that's a fact, it's not speculation," Dunne said.

Nedbank analyst Leon Esterhuizen said prices would rise. It was just a question of when and what was done in the meantime. If a company had a good balance sheet, it should use the opportunity to collect good assets, such as Northam buying Eland Platinum. But with the balance sheet not so solid, it should hang on and raise equity capital to try to stay alive.

"The longer this continues, the closer you get to the point of the price increasing. So that's why people are playing the survival game: just stay in the game long enough and the price will pick up at some point - the commodity cycle always has dips and peaks," Esterhuizen said.

Dunne said further tightening of output was needed. There would be no major change in the price until the surplus in stocks was reduced.

Northam was redeveloping some of its mines and had bought Eland Platinum for R175-million from Glencore. In another deal, Glencore will sell and market Northam's chrome minerals from its Zondereinde and Booysendal mines at market price. Glencore could also at a later stage market and sell chrome, which may be produced as a byproduct of the PGMs Northam is to extract from Eland Platinum.

Northam Platinum said it had a lot on its plate and only if market conditions improved would it operate Eland Platinum, which has been on care and maintenance since September 2015.

Implats reduced its production forecast from 700,000-710,000oz in its Rustenburg mines to a guidance of 650,000oz. The company also lowered its Marula production forecast from 90,000oz to 80,000oz in the year.

mtonganal@sundaytimes.co.za