World wants platinum, says Northam’s Dunne of R7bn plan – by David McKay (MiningMx – August 24, 2016)

DOUBLING production at a cost of R7bn in the platinum sector may seem a demonstration of extreme optimism, but Northam Platinum CEO, Paul Dunne, believes there are plenty of reasons to be cheerful about the future.

In an interview with Mining in July, he told how the country’s platinum sector nearly hit the wall at the end of 2015. Prices for the basket of platinum group metals – platinum, palladium, rhodium and nickel – fell so low that only mine gate fixed costs were covered. In layman’s terms, miners were faced with the decision of whether to stay open, or close.

“We very, very nearly got there towards the end of last calendar year, but we’ve just managed to avoid it by some balance sheet management,” he said. Prices have also helped with a 15% recovery in the rand basket at the time of writing. “We were on the verge of severe structural change,” he added.

Dunne’s contention, however, is that Northam is building new production because it’s low cost and because even at a compound average growth rate of 1.5%, which is less than world economic gross domestic product growth, the platinum market will demand 9 million ounces of platinum by 2025.

Compare this to the current available production where reserve development has already been paid for; in Dunne’s terms – the capitalised resource base of South African platinum. Dunne believes there’s been a natural depletion to below four million ounces today from 5.5 million oz in 2005. And it’s going lower because the price of platinum is not currently demanding more investment.

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