(Bloomberg) — Southern Africa is home to the world’s richest platinum deposits, but when Impala Platinum Holdings Ltd. pondered how to invest its windfall profits it chose North America instead.
The acquisition of North American Palladium Ltd. is partly a bet on platinum’s sister metal palladium continuing to rally, while Implats Chief Executive Officer Nico Muller has also stressed the appeal of a relatively quick payback from low-cost, mechanized assets. However, the deal is also a geopolitical play as the Johannesburg-based miner seeks to balance exposure to its more volatile home region.
“The diversification into North America provides a hedge against some of the socio-economic, political and structural risks the company faces in South Africa and Zimbabwe,” said Christopher Nicholson, an analyst at RMB Morgan Stanley.
The transaction comes three years after Sibanye Gold Ltd. bought Montana-based Stillwater Mining Co., but Implats’s first deal outside southern Africa also echoes trends in the country’s gold industry. AngloGold Ashanti Ltd. is selling its last remaining South African assets as it turns its back on deep-level mines in favor of more profitable deposits in West Africa, Australia and South America.
While South Africa’s platinum operations are far more robust than the nation’s gold mines, and Implats returned to profit this year on the back of record palladium prices and a weaker rand, its decision highlights some of the wider industry challenges.
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