Impala Platinum (Implats) CEO Nico Muller has ruled out the development of new platinum group metals (PGM) in SA, saying the long-term outlook for demand in electric vehicles has curtailed the desire to develop new assets in the sector.
“I think it is highly improbable that you’re going to see material investment in new PGM assets in SA — in particular if you don’t have beneficiation capacity. So there are two things; one is the current price environment and the other one is the long-term state of electrification [electric vehicles],” Muller told journalists on Thursday after the release of the group’s results.
“I don’t think our industry has ever had this long-term risk. For you to build a new mine you’re talking about 10 to 20 years. This is exactly the period where there is a long-term concern about electric vehicles.
“I am not convinced that any shareholder or company is going to see a clear and attractive shareholder return for development in new assets.
“If you have processing capacity, that helps. Or if you’re doing it as an add-on to an existing operation where you’re looking at purely marginal increase in cost, that is possible. But new fresh projects in my view are highly improbable.”
Estimates are that platinum supply will outstrip demand on the back of a rise in demand for green metals in response to the emergence of battery electrical vehicles, which have been receiving huge government subsidies around the world.
Earlier this year, Johnson Matthey, the world’s largest secondary PGM refiner, said that the sector is set for its largest supply shortfall in 10 years. But automotive companies are increasingly building electric motors — resulting in fewer petrol cars being built, which is the major market for PGMs.
SA, the world’s biggest platinum producer, is bearing the brunt of a plunge in PGM prices over the past year. Producers have responded by increasingly focusing on cost-saving measures and cutting capital budgets as margins become tighter.
Implats’ earnings report showed it suffered an annual loss after taking R20bn in writedown charges.
It swung into a basic loss of R17.3bn, or 1,929c per share, for the year to end-June, from basic earnings of R4.9bn and 577c per share in the prior year. No dividend was declared.
Revenue of R86.4bn decreased 19%, while cost of sales of R80.9bn declined 4%.
Group production increased 13% to 3.65-million ounces and refined and saleable production increased 14% to 3.38-million ounces. Dollar revenue per ounce decreased 34% to $1,350 on materially lower rhodium and palladium pricing, while rand revenue declined 30% to R25,257/oz.
Weaker dollar sales revenue offset the benefit of strong operational delivery. Average palladium and rhodium pricing dropped sharply, negating higher sales volumes and compressing operating margins and free cash flow, it said.
All three major PGM markets were likely to remain in fundamental deficits in 2024, though market shortfalls were expected to ease from those witnessed in 2023, Implats said. Automotive production growth was expected to moderate, industrial demand was expected to be marginally lower as capacity expansions eased, and supply was expected to stage a modest recovery on improved auto catalyst scrap collections, it said.
Group 6E (six elements: ruthenium, rhodium, palladium, osmium, iridium and platinum) refined and saleable production is expected to be between 3.45-million and 3.65-million ounces, while unit costs are forecast to rise by up to 5% to between R21,000/oz and R22,000/oz on a stock-adjusted basis. Group capital expenditure is forecast at R8bn-R9bn, inclusive of growth capital of R0.9bn-R1.1bn.
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