AmPlats’ sale of its South Africa-based Rustenburg assets today sparked hopes there may be some respite for the beleaguered platinum industry after a torrid two years.
Shares in owner Anglo American (LON:AAL) jumped over 7%, seemingly in relief it had found someone willing to take the deep mines off its hands after it made it clear it wanted out in 2012.
The problems are not hard to spot. The platinum price has dropped 40% to US$988 this year, a fall reflected in the share prices of the miners.
Lonmin (LON:LMI) shares have tumbled 87%, while Anglo, the biggest platinum producer in the world, has fallen 50%.
The World Platinum Investment Council’s (WPIC) quarterly report today highlighted another key issue.
Global platinum supply is expected to grow 9% to 7.9mln ounces in 2015, while demand is set to rise by 4%.
Broker Investec, said: “What surprised us about the figures from the WPIC was that it appears the platinum industry has still not got the message that production has to reduce.”
In the second quarter of this year, the WPIC said platinum production was 17.5% higher than in 2014.
The WPIC added it expects the supply deficit to reduce to 445,000 ounces this year, from 785,000 ounces last year.
Granted it is higher than a previous forecast of 191,000 in May, but this was attributed higher investment demand earlier in the year.
Carole Ferguson at SP Angel said: “The supply is coming back from South Africa. Last year was a bad year and now, all the operations have been restarted.”
Ferguson doesn’t see a slowdown in supply unless the same problems reoccur.
The way its deal with Anglo American has been structured suggests gold miner Sibanye also has some reservations.
It will pay will pay R1.5bn (£70mln) upfront and will pay Anglo 35% of Rustenburg’s free cash flow for six years.
Ferguson at broker SP Angel, said: “I think it could be AmPlats saying this [the strikes] could happen again, and we are already seeing community issues resurfacing.
“To run these mines in South Africa, you need to have a buy-in from the highly unionised workforce and the community.”
Local gold miner Sibanye has bought the mine, and Ferguson reckons having a local company run the mine operation could mean better production coming through from Rustenburg, though given the way the price is moving, less platinum rather than more is what the market wants.