South Africa

BUSINESS MAVERICK: PGM party: RBPlat surges back into profit, South Africa has positive terms of trade shock

PGM producers have benefited from palladium’s climb to record highs in February of more than $2,600 an ounce, while rhodium, which is much rarer, was more than $13,000 an ounce at one point in March. (Photo supplied)

Royal Bafokeng Platinum (RBPlat), a mid-tier and black-owned mining company, is the latest PGM (platinum group metals) producer to report stellar results in large part because of sky-high palladium and rhodium prices. These have also helped give South Africa a welcome shock on the terms of trade front.

RBPlat’s earnings per share surged 577% to 338 SA cents for the six months to the end of June from a loss of 70.8 SA cents in the same period in 2019. This was achieved in the face of the loss of 45 days of production time to the lockdown, which cost the group 54,000 ounces in output. 

But PGM producers have benefited from palladium’s climb to record highs in February of more than $2,600 an ounce, while rhodium, which is much rarer, was more than $13,000 an ounce at one point in March. The two metals are key catalysts for gasoline engines, which are grabbing market share from diesel engines because of environmental concerns and regulatory policies. The price for both metals remains at historically elevated levels. 

Stephen Phiri, CEO of Royal Bafokeng Platinum. (Photo: Halden Krog / Bloomberg via Getty Images)

This has hugely cushioned PGM producers — big and small — from the unfolding impact of the Covid-19 pandemic and lockdown, and enabled such companies to allocate funds for pandemic measures. RBPlat converted a change house into a 200-bed treatment facility, at a cost of R10-million, to provide initial Covid-19 medical treatment to its employees and the community. 

Robust PGM prices — as well as gold prices, which have hit record highs this week — also have wider implications for South Africa’s otherwise flailing and collapsing economy, underscoring the continuing importance of the domestic mining industry, which still suffers from underinvestment and policy uncertainty. 

“South Africa has enjoyed favourable terms of trade shock in the recent quarter, with a strong increase in the costs of exports accompanied by a notable decrease in import costs. The latest unit value indices (UVI) data shows that the index for exported commodities rose by 10.6% y-o-y in May. The main contributors to the annual increase were metal products, machinery & equipment (+19.3% y-o-y) and ores & minerals (+9.9% y-o-y),” NKC African Economics said in a research note. 

Among other things, this can help shore up the rand at a time when it does not have a whole lot going for it. South Africa’s mining industry has a sordid and brutal history of racially based exploitation. Yet at this juncture in the 21st century, it is no bad thing to sit on the world’s largest PGM deposits. DM/BM

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