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South Africa’s platinum mining industry in trouble

Several experts and industry roleplayers in South Africa’s platinum mining industry have warned that the industry faces severe pressure, and job cuts have increased significantly over the past years.

The average platinum group metal (PGM) price fell by around 35% last year, leading to big profit declines for most South African PGM miners.

This is due to a global economic slowdown, which has decreased the demand for PGMs, particularly platinum, palladium, and rhodium. 

This lower demand has been prevalent in the automotive and industrial sectors and has, therefore, caused a noticeable decline in PGM prices. 

Most recently, Sibanye-Stillwater reported a massive R37.4 billion loss for the year ended December 2023.

Impala Platinum (Implats) also recently released its results for the six months through December 2023.

Profit plunged 88% as it followed peers by reporting much lower earnings because of the plummeting PGM price. Implats’ basic earnings dropped to R1.6 billion in the six-month period.

Anglo American Platinum (Amplats) saw a 71% year-on-year fall in headline earnings per share for the 12 months ended December 2023.

Sibanye-Stillwater CEO Neal Froneman said earlier this year that South Africa’s mining industry is in a precarious position and facing challenges that could “easily” push it into a loss.

“It’s going to be a year much like Christmas – as we call it, ‘silly season’ – with certain groupings trying to take advantage, disrupt,” he said.

“We are already in a precarious situation with low commodity prices, which could very easily push the industry into a loss.”

However, low commodity prices are not the only factor weighing on the PGM industry.

Sibanye-Stillwater CEO Neal Froneman

Challenges

Afriforesight’s head of PGMs and chief sustainability officer, Deborah Chikukwa, said last year that PGM miners currently face many challenges. 

Aside from low demand and subdued prices, production costs are also a significant hurdle for PGM miners, especially compared to other mining sectors. 

Chikukwa explained that most PGM operations occur underground, increasing their production expenses. 

In particular, rising energy costs, which account for a substantial portion of PGM operations, present a significant challenge. 

In addition, chemical input costs have surged compared to pre-Covid levels, further squeezing these miners’ profit margins.

Chikukwa said load-shedding adds another layer of complexity to the struggles of PGM miners.

She explained that the increased frequency and severity of load-shedding in 2023 exacerbated challenges for this mining sector.

While many players are exploring alternative energy solutions, such as solar and wind power, these are not immediate remedies and will likely only materialise in the next 24 months.

In trading updates this year, mining companies and their CEOs have been outspoken about the deteriorating operating environment which prevents them from investing in South Africa. 

Exxaro’s coal production decreased by 11% in 2022 “due to the poor rail performance from Transnet” and the “structural constraint of inadequate electricity supply”.

Sasol attributed its declining output to South Africa’s deteriorating infrastructure and the “structural constraint” of load-shedding.

“Persistent load-shedding, infrastructure constraints, in particular, the poor performance of the national provider of rail and port logistics services […] continue to significantly impact our business,” it said.

However, Chikukwa said the most significant cost for PGM operations is labour, which constitutes between 50% and 60% of costs.

Minerals Council of South Africa chief economist Hugo Pienaar explained at the 2024 Mining Indaba that platinum mining shafts in South Africa are among the world’s deepest, oldest and most expensive to run, exacerbating the impact of declining PGM prices. 

PGM miners have also been hit by high labour costs, which, when combined with electricity, make up most of their costs.

Many South African mining companies – including PGM miners – have also cut their production to reduce costs because they cannot export their commodities due to deteriorating rail infrastructure and port backlogs. 

Hugo Pienaar
Minerals Council of South Africa chief economist Hugo Pienaar

Job cuts

Therefore, in response to the lower price environment, PGM miners have had to implement cost-cutting measures, which have largely included significant job cuts. 

Sibanye announced in October last year that it would enter into Section 189 consultations to retrench over 4,000 workers amid the company’s restructuring.

The company said above-inflation increases in key cost components such as electricity, water, wages, and fuel, combined with the recent decline in PGM prices, have significantly impacted the global PGM industry’s profitability, including Sibanye-Stillwater’s South African operations. 

It said certain operating shafts are now loss-making and pose a risk to the sustainability of the remaining operations.

Amplats also recently proposed a restructuring of its business that may affect about 4,300 jobs across its South African operations.

The section 189A process involves a consultation period with trade unions and affected employees and will be facilitated by the Commission for Conciliation, Mediation and Arbitration.

In parallel, Amplats has initiated a contractor-vendor review process that could affect 620 service providers.

In November 2023, Implats started offering voluntary job cuts to miners at its South African mines, and CEO Nico Muller also recently warned that the miner may need to cut even more jobs.

Impala Platinum CEO Nico Muller

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