Platinum prices, up 21 percent from their low last August, will extend gains as production cuts squeeze supply and consumption climbs, according to producer Wesizwe Platinum.
“You’ve got challenging supply issues and a market that’s recovering in terms of demand,” chief operating officer Paul Smith said. “The platinum sector as a whole is going to come off quite a low base quite aggressively.”
Strikes that began in August in South Africa led to mine halts that drove up prices from a low of $1 383.75 (R12 387 at current rates) an ounce. Prices have since fluctuated, rising this month on a plan by Anglo American Platinum (Amplats) to cut 400 000 ounces a year. The metal was fixed at $1 678 an ounce on Friday in London.
Amplats’ plan, which would remove about 7 percent of global output and may result in as many as 14 000 job losses, was criticised as “less than helpful” by Finance Minister Pravin Gordhan.
“Recent events haven’t done South Africa any good in terms of its labour issues,” Smith said last week. Smith, previously the director of new business at Aquarius Platinum, became Wesizwe’s chief operating officer earlier this month.
Wesizwe, 45 percent-held by China’s Jinchuan Group and the China-Africa Development Fund, said last week that it had secured a $650 million loan from China Development Bank to develop its Bakubung mine in North West.
The mine will produce about 350 000 ounces of platinum group metals a year for about 35 years, according to the company’s website.
“It’s a large, long-term production phase, close to five years of development, but also has a long mine life,” Smith said. “We will start ramping up production from 2018. The market is quite aware this is a long-term project.”
The loan gave Wesizwe the medium and longer-term funding it needed to develop Bakubung, he said. “The terms are very competitive… and we’re very comfortable.”
Wesizwe closed unchanged at 57c on Friday. – Bloomberg