Lower platinum group prices have ended Anglo American Platinum’s (Amplats's) seven-year reign as the biggest mining company in terms of market capitalisation on the JSE.
Gold Fields has taken top spot but a report this week highlights South Africa's limited gold reserves.
The PwC South Africa Mine 2023 report, which studied the performance of listed mining companies with operations in South Africa from July 2022to June 2023, said the JSE's listed market capitalisation slumped 21% to R1.087bn on lower market caps of companies in the coal and platinum group metals (PGM) sectors.
Amplats, a unit of globally diversified Anglo American, was unseated from the top spot for the first time since 2016 to number two, with gold producer Gold Fields taking the number one spot. This is because of lower PGM prices in 2023. Kumba Iron Ore is third in terms of market capitalisation, the study found.
The market capitalisation of PGM companies declined 12% with “Anglo American Platinum losing a massive 41% — or more than R154bn of its market capitalisation due to the continued decreases in commodity prices”, said the report.
The PGM basket price comprises platinum, palladium, rhodium, iridium, rhutheum and osmium.
While the price of platinum increased 13%, palladium and rhodium, have declined 7% and 19% respectively.
Andries Rossouw, PwC’s Africa energy, utilities and resource leader, said “a slower than expected recovery of the Chinese economy and the Covid restrictions across China, and the continued decline in automotive production, resulted in a decrease in both iron ore and platinum prices”.
“These lower prices resulted in a significant decrease in market capitalisation for the large PGM producers.”
In addition to falling prices, in South Africa load-shedding is expected to lead to a decline in PGM production of 5%-25%, with higher labour costs and ageing plants also adding pressure on output, the report said.
The headwinds resulted in Impala Platinum’s share price falling 41% in the year to date, while Amplats, Sibanye-Stillwater and Northam Platinum share prices fell 40%, 35% and 33% respectively.
In its 2023 integrated annual report released this week, Impala Platinum said “a continued decline in PGM basket prices would put most of operations’ free cash flow at breakeven or negative.”
Sibanye-Stillwater spokesperson James Wellsted said the decline in PGM prices has affected margins at the group’s operations.
“It is reflected in the share price decline, but our South African PGM operations remain profitable in general and we will have to manage this downturn the best we can,” said Wellsted.
The report said the market capitalisation of gold companies increased 14% as gold was regarded as a safe haven asset amid the US banking crisis. The average rand price of gold increased by 16.6% during the period.
Higher prices saw Gold Fields and Harmony Gold Mining Company increase their market capitalisation by 42% and 35% respectively.
Gold Fields' new joint venture with AngloGold Ashanti to create Africa's biggest mine in Ghana, further supported the growth of the gold sector.
But the report highlighted that as of the end of June 2023, South Africa had about 68-million ounces of gold reserves declared, translating into a reserve of about 27 years, though many mines' lifespans are shorter than 20 years.
The Free State has six years before its gold reserves are depleted. It has five gold operations, as well as one project which is in development with total gold reserves of 3.37-million ounces.
“At current depletion rates, this will result in six years left of mining. One upside is that the ratio of reserves to resources indicates that there is flexibility for operations to convert resources into reserves, which may extend the number of years left of mining if capital investment decisions make sense and can be executed timeously.”
Harmony spokesperson Jared Coetzer said the company's strategy has always been to extend life of mine and continue create long-term value for stakeholders citing the Unisel and Bambanani operations as case studies. He said the company completed recapitalising Target 1 and is conducting exploration drilling at the Joel operation for possible opportunities to extend.
"But to say there is a definitive 6 years and then things are closing is misleading given how Harmony has always operated and sustained communities by converting our substantial resources to reserves," he said.
The report said mining revenue in rand terms fell 5% with PGM revenue falling 33%, followed by a 22% drop in iron ore and a 12% decline in coal.
The report said mining is a major driver of the South African economy: for the first six months of 2023, exports of mined materials amounted to R575bn. However, above-inflationary cost pressures, fluctuations in commodity prices and exchange rates, and the cadastral system remain challenges for the sector.
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