Palladium boom gives short-term relief to SA miners

A surge in palladium prices has thrown struggling SA mining companies a lifeline. But it may not be enough.

Nornickel said in November it would spend $10.5bn to $11.5bn in the coming years to boost its metals output. It plans to raise production of platinum group metals from its Arctic mines by 25% from 2017 levels by 2025 – an increase of about 860,000oz. Platinum, meanwhile, sank to a 10-year low of $751/oz in August, a far cry from a peak of $2,290/oz in 2008. Platinum prices are now about $850/oz, partly supported by bets from some investors who believe the price has sunk too low.

Overall, the basket price of PGMs in SA has risen about 30% over the past year thanks to palladium, but miners are not generating enough returns given the composition of their ore to boost production significantly. Sibanye has fared better than its rivals partly thanks to its higher exposure to palladium after its acquisition of US mining company Stillwater in 2017. The addition of Stillwater means it now produces an even split of platinum and palladium.

Anglo American Platinum , the top SA palladium producer, resumed dividends in 2017 for the first time since 2011 and raised its dividend payout-ratio this year, but it too is shying away from major spending.

Till the Unions start their crap.

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