PGM prices may hit producers in pocket

UNLESS platinum group metal (PGM) prices recover within a couple of years, miners would be forced to make major capital raisings, Macquarie First South said in a report last month.

If current prices persist, the industry would need R24bn in additional funding by the end of next year to “secure stable production in the longer term”.

“The current pricing environment in the PGM mining sector is creating significant financial stress in the industry, which in turn could affect the long-run sustainable production capabilities in SA,” it said.

“If metal prices do not increase from current levels in the near term, the survival of the larger platinum companies will depend on the appetite of debt and equity markets.”

The platinum price has fallen 20% since January to $971/oz, its lowest level this year.

Impala Platinum and Lonmin, the second- and thirdlargest platinum producers, have declined 42% and 70% respectively in the year to date.

Anglo American Platinum, the largest, has come down 24% and if it does not manage to sell its Rustenburg and Union mines as well as exit its Bokoni and Pandora joint ventures by the end of next year, Macquarie reckons it will have to use all its credit facilities.

Sibanye Gold, one of the few parties to publicly express its interest in the mines, said yesterday it would decide by the end of this month whether to buy the mines.

Reuters has reported a group of investors calling themselves Union Resources that has bid R2bn for the Union mine.

Amplats in June postponed a decision whether to sell or list the mines. A listing would only be completed towards the end of next year, CEO Chris Griffith said recently, declining to give insight into the disposal process in a difficult platinum market.

Implats might have to raise capital early next year to complete its new mines, which were replacing five old shafts it was phasing out, and to start replacement mines, Macquarie said.

Lonmin has told the market it is considering options to refinance its debt facilities falling due next year.

It said it would shut five shafts and increase job cuts to 6,000 from 3,500, removing 100,000oz of platinum output next year and in 2017.