Could platinum price rise boost Zim and SA?

Source: Could platinum price rise boost Zim and SA?

As Anglo American looks to sell its platinum fields, an expert says this may be the time to buy.

It is among the scarcest of metals and Zimbabwe has 15% of the world’s known deposits, but the price has languished in recent years. That could be about to change according to a leading expert.

Platinum is vital to modern car engines and an element in the growing use of solar power — it’s used in the batteries — and places you wouldn’t think of like cancer drugs and even some lipsticks.

There was a time when the word was shorthand for “more valuable than gold,” and so came the “platinum album” when a musician sold more than a million copies, and jewelry from a metal was only for the rich.

Early in 2008, the price per ounce peaked at close to $2300, and two years later it had crashed to just $834. There were rallies but never quite as high and always followed by fall, though never quite as low. Investors shied away and it took courage to play the market.

Dr Mbuso Moyo is from Zimbabwe and currently based at Wits University in Johannesburg where he is busy with post-doctoral studies. His academic work has largely been around the platinum industry and he believes the metal may be about to jump in price.

“Look at the big producers and it’s hard not to be optimistic,” he told The Zimbabwean. “South Africa has more than two-thirds of all the world’s deposits, or at least the ones we know of. Russia is second and behind that comes Zimbabwe with 15%. Russia is under sanctions, Zimbabwe platinum is not, and there’s potential to lift production.”

In terms of companies, the London-based Anglo American is the top supplier, with the largest field in South Africa through its subsidiary AmPlats, and mines in Zimbabwe. In the early days of development along the Great Dyke, Australia’s BHP was among the first investors.

“In April it almost came full circle,” Dr Moyo said. “BHP made an offer to buy the whole of Anglo American for $49bn, but the deal was rejected. That would have given the Australians a commanding share of the Zimbabwe platinum market if only briefly.”

BHP made known that, if successful, it would sell de Beers diamonds and Anglo’s platinum interests. The latter was one of the reasons the Anglo board allegedly decided not to sell. They have since announced a plan to dispose of both de Beers and AmPlats.

Problems at Anglo and platinum fields

“It’s hard to know what to make of the decisions at Anglo American,” Dr Moyo said. “They have been losing money of late but remain one of the great names in mining. If not BHP, then how soon before someone like the Brazilian giant Vale or another buyer makes a bid?”

He said the platinum fields in South Africa had ongoing problems with the workforce. “This applies to all the companies, not just Anglo. Platinum is found on land traditionally owned by the Tswana people but the workers come from across South Africa and neighbouring states, including Zimbabwe. There is local resentment and no one is sure how to deal with that.”

The global finance company, JP Morgan, this month lifted its rating of South Africa after a coalition deal between the African National Congress and the Democratic Alliance. This came after no party achieved a majority at the 29 May election.

Other rating agencies are expected to follow suit and the rand firmed with the inauguration on 19 June of President Cyril Ramaphosa for a second and final term.

But analysts say it could be some time before the long-term outlook improves, depending on how the new cabinet approaches the need for fresh investment in the country.

“We are seeing small rises in the price of platinum,” Dr Moyo said, “and I suspect this may be a good time to invest. We probably won’t get back above $2,000 anytime soon, but in a world of supply and demand, the metal is scarce and demand is going up. That’s good news for South Africa and Zimbabwe.”