With the distinct exception of diamonds, no subsector in global resources has been more trashed up over the past 12 months than platinum, yet Northam, long known -incorrectly as increasingly shown - as the industry's highest cost producer, has more than survived, and has paid a dividend, to boot.
In southern Africa, which produces upwards of two-thirds of global platinum group metal (PGM) output, sectoral entities have generally been forced into rights issues and increasing debt, as seen earlier this year at Tier I producer Lonmin, which raised nearly US$450m, and Tier II producer Aquarius, which also separately raised debt. Industry leader Anglo Platinum on 27 July announced that its parent company, Anglo American, had increased its committed facility to Anglo Platinum by R7.1bn to R20.6bn.
Impala Platinum, No 2 in platinum, and Russia's Norilsk (where PGMs are byproducts to nickel), No 3 producer of platinum, are yet to publish financials for the first half of 2009. Impala, generally regarded as the most robust of the big producers, previously published relatively robust results for the half year to 31 December 2008, while Norilsk published a loss of US$555m for the year to 31 December 2008, after posting profits of US$5.3bn for the 2007 financial year. The wipeout in nickel prices was also an issue.
Severe price corrections in PGM prices, not least platinum which spiked above US$2,000 an ounce in March 2008, have been only one challenge faced by miners. After averaging around R550,000/kg, the co-called basket price for PGMs (which includes platinum palladium, rhodium, gold, and other metals), has ranged from between R200,000 and R281,000/kg from October 2008. The numbers look far better when expressed in dollar terms, attributable to a rand exchange rate that, for South Africa miners and exporters, has been unexpectedly troublesome.
METAL PRICES
Precious, US$/oz
Low*
High*
Current
From low
From high
Gold
682.41
1006.29
956.19
40.1%
-5.0%
Platinum
744.25
1539.00
1271.25
70.8%
-17.4%
Palladium
160.75
328.25
277.38
72.6%
-15.5%
Silver
8.46
16.24
15.10
78.5%
-7.0%
* 12-month
All told, it's been heavy weather for PGM miners, aggravated further by the stubborn refusal by any of the big producers to implement any meaningful production cuts, as seen across so many other mining subsectors. Such cuts were never an option for Northam, which runs a single mine, the deepest platinum mine in the world, and the only steady-state one with refrigeration. Despite the obstacles, including a complex geology, Northam has emerged as some kind of a champion in the PGM sector.
