EDITORIAL: Valterra’s market honeymoon

Valterra Platinum has had an auspicious start in the market, even if its first set of financial results as an independent company is a less than happy one.

Valterra, the former Anglo American Platinum, was unbundled from Anglo in late May, just as the platinum price was starting to take off. Since then, platinum group metals prices have soared, with spot prices now about 30% higher than Valterra achieved in the first half of its financial year to end-June.

Platinum prices have gained the fastest, up more than 50% since March. Concerns that electric vehicles (EV) would soon displace conventional internal-combustion engine (ICE) vehicles have been allayed, with the take-up of EVs slowing rapidly. That supports demand for the platinum that goes into autocatalysts for ICE vehicles. And with few miners investing to expand their PGM resources in recent years, a platinum supply “cliff” now looms. And some of the gold “safe haven” buying is going into platinum as the gold price soars ever higher.

All of that has helped to drive up metal and share prices for the sector. It’s been one of the big drivers of the JSE’s rally this year, with PGM shares now accounting for more than 6% of the JSE all share index. Valterra’s second-half earnings stand to benefit richly.

The first half has been a bit bleak, with earnings down 81% in part because of the costs of the demerger from Anglo, but also because of flooding at Amandelbult’s Tumela mine in Limpopo that cut output by more than a fifth. But the company, one of the world’s largest PGM miners, expects production to bounce back to deliver on its 2-million ounce objective in the second half.

The company expects to turn cash positive in the second half, after its departing parent extracted a chunky special dividend that pushed Valterra into a net debt position in the first half. With the precious metals price rally going strong, is Anglo sorry to have said goodbye?