Asset manager Coronation has increased its stake in Northam Platinum to a strategic 15%, marking a stunning turnaround by the Cape Town-based money manager on platinum group metals (PGMs).
Northam on Friday said Coronation, on behalf of its clients, now owns 15.05% of the group’s securities, up from 10.01%.
The latest move by Coronation means the company and the Public Investment Corporation (PIC) own about 35% of Northam.
The PIC, which has backed the prospects of the PGM sector in July 2024 increased its stake in Northam to 20%.
Coronation’s love for PGM stocks reignited in October when it bought 5.07% of Northam. A year earlier it announced it was disinvested from the sector, saying the sector represented a value trap for investors despite the potential for some short-term gains.
Coronation followed up that investment a month later, increasing its holdings in Northam to 10.01%.
The prevailing low PGM price environment is constraining earnings across the entire sector. Moreover, its ability to respond to lower prices by suspending some operations or reducing costs is limited as the majority of mining costs are fixed. This is consequently constraining cash generation across the sector requiring ever more prudent management of liquidity.
Northam earlier this month said its growth programme remains on track despite temporary pauses to “specific project modules” which do not have a detrimental impact on the overall objectives and that these pauses represent appropriate management interventions to preserve liquidity while low PGM prices persist.
“Our strategy of countercyclical growth and operational resilience pursued over the past decade has established a competitive and sustainable production base which is able to withstand medium to long term cyclical downturns, including current market conditions. This strategic approach remains a differentiating factor for Northam,” it said.
“The current outlook for global PGM demand and supply remains uncertain which in turn results in an uncertain outlook for PGM prices. A raft of global geopolitical and macroeconomic issues have the potential to cause further disruption to the PGM markets and metal prices, while the possibility of Eskom load curtailment events could lead to additional operational disruption and challenges,” the company said.
“We continue to monitor the market and are confident that our recently commissioned additional on-demand self-generation capacity units at all our operations will significantly contribute towards mitigating risks associated with load curtailment events.”
A report earlier by Metals Focus this year said US President Donald Trump’s potentially inflationary policies, including blanket tariffs on Brics countries, could exert downward pressure on PGM prices by forcing the Federal Reserve to keep interest rates high and weakening global economic growth.
PGM prices are expected to benefit from the rollback of US electrification targets, with Trump pledging to “end the electric vehicle (EV) mandate from day one” during his campaign last year. In an effort to stimulate his country’s automotive industry, Trump has promised to reduce corporate taxes and offer new tax credits for auto loan payments, while repealing the $7,500 tax credit afforded to owners of plug-in EVs and fuel-cell electric vehicles.
According to the Metals Focus report every 1-million vehicles replaced by battery electric vehicles (BEVs) reduces PGM consumption by more than 150,000oz and EV adoption is forecast to drop 15%-20% by 2030.
A driver of the long-term outlook for PGMs, hydrogen-linked demand for platinum is expected to increase tenfold by 2030 contributing 10% of overall demand for the metal. The move is thus likely to reduce future platinum demand while eroding investor confidence in the metal.
SA accounts for more than 50% of the world’s platinum production and houses its largest reserves, primarily in the Bushveld Complex. The PGM sector is also the largest employer in SA’s mining sector. Six metals that are chemically, physically and anatomically similar comprise the PGMs: platinum, palladium, rhodium, ruthenium, osmium and iridium.
The PGM market has endured a tough two years with prices coming under pressure as demand for the metals, used mostly for internal-combustion engines, has come under pressure due to the rise in popularity of BEVs. SA PGM miners have responded by cutting costs with about 10,000 jobs lost in the industry over the past year. /With Jacob Webster
Would you like to comment on this article?
Sign up (it's quick and free) or sign in now.
Please read our Comment Policy before commenting.