Platinum miners to benefit from just energy transition

Platinum Group Metals (PGM) miners will benefit from the local and global just energy transition as it will significantly increase the demand for platinum.

Momentum Securities’ Faheema Adia told Moneyweb Now that, despite recent bad results, PGM miner Anglo American Platinum (Amplats) is set for strong long-term growth.

Amplats – the world’s largest primary producer of platinum – recently reported a 71% drop in its headline earnings for the first half of 2023.

The company’s profits decreased by 70% in the reporting period compared to the six months ended June 2022. Its profits for the year fell from R26.73 billion to R7.92 billion.

Amplats attributed this to Eskom’s load curtailment and smelter rebuild costs.

The company’s share price has fallen by over 30% over the past six months.

Amplats is one of many mining companies that have reported weak results over the past few months, as lower commodity prices, the country’s electricity crisis and Transnet logistics problems have cost these companies billions in lost sales.

However, Adia said Amplats and its holding company Anglo American hold long-term value and are set to perform far better in the second half of 2023.

In particular, she expects Amplats to see a long-term upside of at least 20%.

This is mainly due to the expected recovery of the PGM basket price, which has been down by 29%, driven primarily by lower radium and palladium pricing.

She said that, in particular, PGM prices are set to benefit from the just energy transition.

At the 2022 United Nations Climate Change Conference, President Cyril Ramaphosa presented South Africa’s Just Energy Transition Investment Plan (JET-IP), which revealed the country’s plans to create a hydrogen economy.

Mapungubwe Institute for Strategic Reflection researcher Dr Nqobile Xaba wrote in Mining Weekly that PGMs are essential parts of green hydrogen electrolysers and fuel cells.

She explained that PGMs are used in electrolysers to separate water into hydrogen and oxygen and in fuel cells to generate electricity from the hydrogen, “with both playing key decarbonisation roles”.

Therefore, as the just energy transition grows, so will the demand for PGMs.

Adia said, “Anglo American Platinum is very well-positioned to benefit from that, so this is one to have in the portfolio for the long term.”

In addition, she said Amplats is offering a lot of value at its current price, with a price-to-earnings ratio of below eight times.