With global demand for platinum and palladium increasing by the day, it seems that the profitability of South African platinum mining companies will continue well beyond the horizon.
South Africa's platinum industry is on the cusp of a boom to which many analysts can see no end. Even though South African platinum companies already control over 70% of world platinum supply and a substantial portion of the world market for the mining by-product, palladium, consumers are now demanding that an even greater proportion of their metal needs be sourced from South Africa.
While dependence on supply from one geographical area is a risky strategy, consumers have little choice. Bureaucracy in Russia is sending the price of palladium soaring for the third year running as delays in export shipments create an artificial shortage of the metal. Hopes of a sizeable platinum industry emerging in Zimbabwe are fading rapidly as the country's economy and political credibility deteriorate.
Furthermore, demand for platinum is growing at an annual rate of 3% and may rise faster as use of the metal in the jewellery and investment industries grows fast while stricter vehicle anti-pollution laws expands the market for both platinum and palladium in auto-catalysts.
Reserves to last 300 years
With palladium prices having soared some 150% since the beginning of 1996 and last years 20% decline in the value of the rand having boosted local profits, the outlook for South Africa's platinum companies, which hold the world's biggest reserves, is good.
Already Anglo American Platinum Corp, (Amplats) South Africa and the world's biggest producer, reported a 70% climb in profit to R705m for the six months to December, while the world's second biggest producer, Impala Platinum Holdings, boosted its profit 136% to R451m in the same period. While both are racing to boost their market share they are employing markedly different strategies to make the most of the boom.
Amplats, which controls reserves that could maintain its current annual production level of 1.9m oz of platinum for the next 300 years, is expanding its production rapidly at its existing operations and expects its output to rise to 2.3m oz by 2003.
The company has said it will announce further expansions and has entered negotiations with the Royal Bafokeng Nation with the intention of securing the mineral rights to land adjacent to its newest mine, Bafokeng Rasimone. Should it succeed it may double Bafokeng Rasimone's...