As South African platinum group metals miners cut jobs and their Zimbabwe units scramble for capital to sustain productivity and expansion, weaker commodity prices and growing transition to electric vehicles (EVs) is casting doubt over sustained demand for the precious metal that is mainly used in internal combustion engine catalytic converters.
South Africa has the world’s largest reserves of platinum and is home to the biggest producers of the metal in Anglo American Platinum (Amplats), Sibanye-Stillwater and Impala Platinum (Implats).
Although Sibanye-Stillwater has made a good case to transition its investments into battery metals such as lithium, South African platinum group metal (PGM) companies are big employers in the country and in neighbouring Zimbabwe, where they also have large mining operations.
“South Africa holds about four-fifths of the world’s known platinum reserves and is one of the biggest producers of palladium used in the internal combustion engine’s catalytic converters. In the electronic vehicle (EV) era, such parts are no longer needed, casting a shadow over future demand for the metal and the thousands of jobs and families that rely on extracting it,” according to Bloomberg, which released a report in June, “BloombergNEF’s 2023 Electric Vehicle Outlook”.
Forecasts by BloombergNEF indicate that on a cumulative basis, EV vehicle sales will top $8.8 trillion (R167trl) by 2030 and $57trl by 2050 across the world. Many auto manufacturers are rushing to embrace EV production, giving a boost to lithium producers such as Zimbabwe.
This is leaving the future of the platinum mining industry uncertain, added Bloomberg.
Sustained weakness in platinum and palladium prices have recently prompted Sibanye-Stillwater and Implats to shed jobs in South Africa.
Sibanye-Stillwater could cut some 4095 jobs as it restructures its South African PGM operations while Implats has kick-started voluntary retrenchments at its Rustenburg operations and at the head office. With the South African operations cost-cutting through retrenchments and delayed salary increases, the Zimbabwean operations have started to feel the squeeze too.
Zimbabwean operations
The traditionally low cost Zimbabwe operations of the South African PGM producers are now faced with capital inadequacies that could impact on production ramp up and expansion programs. In light of the fall in PGM prices, the South African producers would need to have higher production, but this is increasingly becoming doubtful.
In Zimbabwe, Zimplats, run by Implats, Amplats-owned Unki and Mimosa (jointly owned by Implats and Sibanye-Stillwater) require about $730 million in capital for the 2024 calendar year, said the Chamber of Mines of Zimbabwe this week. Accessing this capital is proving to be problematic, said mining industry executives.
“That was the projection and with latest developments, we don’t see this kind of spending happening. We are bracing for cost saving and hope that this will not blow into job cuts here in Zimbabwe after South Africa,” one manager with a Zimbabwe platinum miner said.
All in all, a total of $2bn is required in capital funding across Zimbabwe’s mining industry in 2024. It’s a particularly hard-sell for the Zimbabwe PGM sector, with Implats already announcing spending holdbacks, including at the Zimbabwe operation as it scrambles for means to save cash amid the commodity downturn.
“Analysis of capital requirements by mining companies show that the industry requires around US$2 billion in the next 12 months to ramp up and sustain their operations. Survey findings show that prospects for access to capital are subdued in 2024 compared to 2023 with 60% respondent executives excepting worsening access to capital,” the Chamber of Mines of Zimbabwe said in a survey report released this week.
The survey, which painted a bleaker outlook of profitability in the Zimbabwe mining industry, found mining executives “generally pessimistic about prospects of their business” in 2024.
It identifies notable variables weighing down on the confidence of mining executives in Zimbabwe – including those from Zimplats, Unki and Mimosa – including “a depressed commodity price outlook, gloomy investment environment, inadequate foreign exchange and infrastructure” bottlenecks.
Moreover, most mining executives in Zimbabwe expect profitability in their mining operations to decline, weighed down by subdued commodity prices and high-cost structures. Where they expect to raise production to compensate for revenue losses due to low prices, the increase in production was more likely to be offset “a disproportionate decline” in prices.
The Zimbabwean PGM miners are expecting an unstable fiscal regime in 2024, citing recent royalty increases for PGMs and platinum as a precedence for fiscal policy inconsistencies.
Executives in the PGMs and lithium sectors are quoted in the Chamber of Mines of Zimbabwe survey saying that the new royalty was “high and unaffordable and worsened their viability” challenges.
“Executives in the Zimbabwe PGMs sector indicated that they experienced a 5% average increase in overall production cost as a result of the 180% royalty increase from 2.5% to 7% royalty while those in the lithium sector reported a 4% increase in the overall cost of production on the back of the 150% royalty increase from 2% to 5%,” notes the survey report.
Source: IOL
