The squeeze is on

OF the barriers to new platinum group metals production in South Africa, one of the most important is building processing facilities. Smelters and refineries are technically challenging, expensive to build and run, and in the current energy deficit, risky.

In previous years, it’s been possible for a new PGM miner to toll-treat concentrate with an existing company, such as Implats or Anglo American Platinum. These days, however, capacity is running tight. In March last year, Implats announced capital spend of $521m aimed at boosting its processing in Zimbabwe and South Africa. Some of it was to account for the changing nature of orebodies, which requires more base metals processing capability. Implats is reticent to sign away any new capacity, says Muller.

“Access to processing capacity is becoming a major barrier”” says Muller of new PGM production coming online in South Africa. “We see it with Waterberg, with IvanPlats. The investment required in beneficiating the concentrate to final metal is a big issue.”

Implats has a 15% stake in the Waterberg Project, a proposed 420,000oz/year venture controlled by Toronto’s Platinum Group Metals (PTM). Implats previously turned down an option to buy control of the project, preferring instead to invest in Canada. IvanPlats, the South African company controlled by another Canadian firm, Ivanhoe Mining, is building the $490m Platreef project, with first production due to come on stream in the first quarter of next year.

Both companies have failed (so far) to conclude concentrate offtake deals with Implats. IvanPlats is consequently building its own processing while PTM is considering the same. Says Muller: “I caution that the economics of developing your own processing capacity is pretty significant. I do think it’s healthy that the companies are looking at different ways, it’s useful for the industry, but I see tough economic hurdles.”

As for the Waterberg Project as a whole, Muller doubts Implats will follow its rights if PTM presses the button right now, partly because it’s palladium dominant, a metal in the PGM suite of metals under price pressure. “The area in which the mine is located, the metal mix of the orebody, the escalating power crisis in South Africa, the availability of water ... there’s a wide range of strategic considerations which right now represents a pretty significant level for that project to get an overwhelming vote of support from us,” he says.

Ask Frank Hallam, CEO of PTM what he’s thinking and he has a completely different outlook. He said in June the company was “pounding on doors” looking for a concentrate deal and thinks when decision time comes, there’s “no reason why Implats wouldn’t” invest in the project, despite its $620m capital price tag, especially given its investment so far.

MARKET analysts believe that after several years of soaring prices the PGM industry is now in the mixer.

“We really think this will be a watershed year for PGMs,” says Suki Cooper, a precious metals analyst for Standard Chartered Bank. Hydrogen technology could drive 450,000 to 850,000oz in new annual PGM demand by 2030. But the variance in this outlook underpins the level of market uncertainty.

“The first thing we need to do is get an updated feasibility study first, then we can get an agreement on concentrate,” says Hallam. The company is working on a streaming deal for gold that’s produced as a metal by-product which will help finance Waterberg. Hallam takes a highly strategic view: Waterberg is a bulk miner, which implies a low operating cost, in a metal that structurally is in production decline. There’s also a lot to be said for the long-term support of PTM’s Japanese shareholders Hanwa Company and JOGMEC, which hold 9.76% and 12.19% in Waterberg respectively. “Bulk mining, it always wins in the end,” says Hallam.

“A decade of deciders,” says SFA Oxford’s De Hoop of the future market. Metal prices have normalised but inflation is on the rise, supply-side risks abound in both South Africa and Russia, demand is uncertain because no-one truly knows the extent of electric battery vehicle adoption. Certainly, the automotive market is pushing EV consumerism, as evidenced by the increasing number of new models (see graph). Dunne, however, thinks constraints to EV takeover-related to metals availability and infrastructure limitations means the internal combustion engine, which requires PGMs in autocatalysts, will remain stronger than some market analysts assume.

It’s owing to uncertainty over the future direction of the PGM market that Muller continues to harbour an interest in transforming Implats into a diversified miner. Having frequently alluded to this ambition in Implats presentations over the past two years, he says now “we are looking at it as a two-year horizon” in terms of rolling out its plans. In the shorter term, the focus is on embedding R50bn in investment projects, which includes R9.82bn ($521m) in downstream processing expansions (see box) as well as the RBPlat transaction.

In fact, the RBPlat deal could be Implats’ last major investment in South Africa’s PGM sector. “Our platinum PGM journey would then be settled,” he says, alluding to the fact that PGMs also yield base metals, such as nickel and copper, as by-products. In the background to the RBPlat deal, Muller says that intellectual property has been developed in other metals. “Then the question would be what is the next step and you will probably find a great amount of energy and effort will go to assess the feasibility of other commodities.”

For Northam, Dunne says the company remains aspirational. “That’s a joke, but you can write it,” he says. RMB Morgan Stanley also thinks other corporate action could be in the offing. Intriguingly, Northam has an option in RBPlat. In terms of its November 2021 purchase of shares from Royal Bafokeng Holding, it has options on shares which would push its stake in RBPlat to about 38%. This comes with a major caveat, however. If exercised, Northam would then trigger a mandatory takeover of RBPlat – and the prospect of that seems distant at present. Says Dunne, stone-faced as usual: “We will maintain our optionality and we will consider each option as and when it arises.”

What is certain is that there’s no prospect of Northam moving into other metals, nor – in fact – into other jurisdictions. “We are a South African company, all our mining assets are South African, and we see ourselves as a South African PGM miner,” says Dunne.

Sometimes CEOs resign after failing to achieve potentially company-changing corporate transactions such as Northam contemplated in its bid for RBPlat. But there’s no sign Dunne is considering that. Asked about his future, he says simply, the company has achieved a lot during his 10 years in charge. “We’re now a lot more resilient and a lot more diversified,” he says. As he said above: “We’ve got a foothold.”