LOWER interest rates would lead to a “material” improvement in platinum group metal prices, but they would not return to levels of two years ago, said Craig Miller, CEO of Anglo American Platinum (Amplats).
“We are seeing some tightness in the market in terms of our own customer engagement,” Miller said in an interview on October 3.
“An uptick in automotive sales as interest rates come down will see demand pick up quite materially and lead to higher prices. But they are not going back to $30,000 for rhodium or $3,000 for palladium,” he said, referencing record prices in 2021.
Prices would increase “a few hundred dollars,” he said, adding: “that is quite possible”. Rhodium was trading at $20,000/oz as recently as 2022 compared to $4,775/oz today, according to Johnson Matthey, a semi fabricator.
Palladium, which traded at more than $2,000/oz in 2022 was just above $1,000/oz now which Miller believed was $400/oz below the breakeven required for North American mines that have a prill split (component of production) weighted towards that metal.
If Miller is right that potentially spells bad news for Amplats’ rivals Impala Platinum and Sibanye-Stillwater which are hoping for a price recovery having already announced restructuring of their operations in the continent.
Said Miller: “We take a conservative view to make sure we are setting up the business for the long-term cycle. We do think that based on anticipated deficits in platinum industry we see an increase (in price), but palladium will be in balance so for a sustained material increase would need to see big increase in demand,” he said.
Amplats’ controlling shareholder Anglo American has announced plans to demerge its subsidiary. Miller said he expected share price volatility until the process was completed, probably during the course of 2025.
Anglo recently sold R7.2bn in new Amplats shares in an effort to broaden the shareholder base and reduce the impact of an anticipated flowback when it demerges its stake. Another ‘bookbuild’ of shares was possible, said Anglo CEO Duncan Wanblad.
“That signals their intention to get on with their strategy,” said Miller. “It will start to mitigate some of the flow back especially as some who took up shares are long term holders of Amplats as well as PGMs,” he said.
As a result of the possible overhang in shares, Amplats hasn’t recovered as significantly as rival PGM producers.”We just need to deal with,” he said.
“We are not getting worked up with the share price during the interim. We are more focused on delivering strategy.” A major part of this is an improvement in operating costs.
Miller said Amplats has stuck to its R16,500 to R17,500 per oz operating cost guidance for this year despite reporting above this level at the half-year. Some R3bn of a targeted R5bn in cost reductions had been delivered with the balance being addressed now.
Amplats was likely to post in the upper half of its cost guidance for the 12 months to end-December owing to a previously announced mill failure at its flagship Mokgalakwena mine which took 29 days to repair, said Miller. Amandelbult, Amplats’ mine in Limpopo province, was also shut for two weeks this year following a double fatality at the mine.
