Palladium's Ongoing Surge: What it means for Africa’s mining industry

by Ina King (Potgieter) March 12, 2020

Several metals have seen their stocks soar recently.

Gold, with its age-old appeal of a safe haven investment, has surged over 25% in the last 12 months, adding over $330 to its current spot price, which sits at $1 654.38 at the time of writing.

And rhodium continues its tremendous, record-breaking surge, having increased its value six-fold in the past year to currently trade at $13 800/oz. at time of writing.

Yet there’s another platinum group metal whose soaring value has also been in the spotlight lately: palladium. The price of this shiny white metal skyrocketed to new records this month, reaching a new high of $2 877.90/oz., up from the previous record high of $2 224.90/oz. ($671 more than gold) in January 2020. Palladium is 80% more expensive than it was a year ago and has seen more than a 400% rise from its $450/oz. in 2016.

Southern Africa, which, through the Bushveld Complex in South Africa and the Great Dyke in Zimbabwe, accounts for approximately 55% of the world’s known palladium (together with 85% of its platinum) is exposed to these movements, and the soaring commodity prices are likely to have significant, far-reaching impacts on the region’s PGM mines.

What’s driving the demand?

The precious metal is a primary component used in catalytic converters (contained in vehicle exhaust systems), where it is used to help turn toxic pollutants into less harmful carbon dioxide and water vapour. (Between 80% and 90% of palladium worldwide is used for this purpose.)

And as governments around the world are tightening regulations on air pollution, many vehicle manufacturers are substantially increasing the amount of palladium in their motor vehicles. In China, for example, new emissions standards require 30% more palladium per vehicle, which has led to a substantial increase in demand.

Other applications that use the precious metal include jewellery, dentistry and electronics, while a new lithium battery technology requiring palladium is also in development.

Where is palladium found?

South Africa and Russia together contribute approximately 80% of palladium used worldwide, with a relatively even split of production between them. Demand for palladium has outstripped supply for almost a decade, and in November 2019 production of PGM fell by close to 14%.

The price rally has affected the profitability of mining groups in the sector, with Business Insider reporting in January 2020 that Implats had reported a five-fold increase in gross profit to almost R7-billion in the past year.

Projects in Africa

In addition to 31 operational mines in South Africa and Zimbabwe, there are a number of mining projects in various phases of development, including 2 Grassroots projects, 12 Pre-feasibility, 7 Feasibility, 2 Bankable, 9 Active and 6 Completed projects.

In addition to these operations that are centred on the Bushveld Igneous Complex and the Great Dyke in Zimbabwe, there are projects in Tanzania, Uganda, Mozambique, Madagascar, Gabon and Botswana.

The Big 4 of palladium miners

The Big 4 palladium miners in Africa are Anglo American Platinum, Sibanye Stillwater (having recently acquired Lonmin PLC), Impala Platinum and Northam.

Anglo American Platinum

Total mineral resources of 4E is 564.7 Moz. PGM production of 4.4 Moz. and refined PGM production of 4.6 Moz. Anglo American Platinum has 9 operational mines, as well as a project in Pre-Feasibility, Feasibility and Active stages.

Sibanye-Stillwater:

Over 70% of Sibanye-Stillwater’s total revenue is generated via its southern African mines. The company’s 4E PGM operations in southern Africa include approximately 30% palladium and 9% rhodium, with total mineral resources of 389 Moz. PGM. Following the acquisition of Lonmin PLC in mid-2019, Sibanye-Stillwater has 7 Operational mines, 2 Completed, 3 Pre-feasibility, 1 Feasibility and 1 Active mining projects.

Impala Platinum

Impala Platinum’s operation are centred on the western limb of the Bushveld Complex and the Great Dyke in Zimbabwe. The company had a gross refined production of 391 100 oz. of palladium in the last six months of 2019. Impala Platinum has 5 Operational PGM mines and 2 Active mining projects.

Northam

Northam has 4 Operational mines in the Bushveld Complex in South Africa: Zondereinde, Booysendal North, Booysendal South and Eland mines. Together, these mines have total mineral resources of over 240 Moz. 4E.

Conclusion

Market indicators reflect that price growth will continue as demand continues to outstrip supply, most of which is attributable to demand from motor vehicle manufacturers.

The entire value chain around PGM, from investors to original equipment manufacturers and suppliers, should take advantage of the rapidly expanding business opportunities within this industry.