Platinum stocks rally on JSE in past seven days

The JSE in Sandton, Johannesburg. Picture: Itumeleng English Independent Newspapers

The JSE in Sandton, Johannesburg. Picture: Itumeleng English Independent Newspapers

Published Mar 12, 2024


Platinum mining stocks are among the top performers on the JSE in the past seven days, with Impala Platinum (Implats) and Sibanye-Stillwater surging by 7% despite a jobs bloodbath characterising the industry on the back of subdued platinum group metals (PGM) prices and curtailed productivity.

PGM companies have responded to depressed prices of the precious and auto industry metal by closing non-profitable shafts and postponing projects. This comes as the global PGM industry, in which South Africa is a significant player, is set to tip into a deficit against global economic volatility.

Implats CEO Nico Muller said recently that “from 2025 to 2027 we are looking at a reduction of 14% of aspired production both at existing as well as planned increases” in production.

But on the JSE, it has been a different story, where shares in PGM producers Sibanye-Stillwater, Implats and Anglo American Platinum (Amplats) have been trading firmer.

“Over the last week: Implats up 16.64%, Sibanye up 10.20%. So what’s going on? Thirty percent of the palladium market was short, this concentration can lead to a short squeeze when they are forced to cover their positions. This can create sharp price moves,” wrote equities analyst Alex Frey on X yesterday.

However, in yesterday’s trade session on the JSE, Sibanye-Stillwater, Implats and Amplats slumped by 1.55%, 1.1% and 1.22%, respectively, in intra-day trade against their closing prices on Friday.

In the seven day comparative, Sibanye-Stillwater is up 7.15% at R20.96 while Implats is 7.12% firmer at R68.63. Amplats is 2.5% stronger compared to its close seven days ago.

Since the jump in palladium price, South African platinum shares have finally breathed a brief sigh of relief. Top performer is Implats (up 10.2% over the past three days); followed by Sibanye (6% higher) and Northam (5.3% increase).

“Amplats up only 3.6% (not as much pain on the down),” another market analyst, Martin Rogers, said last week.

In the past week, Neal Froneman, the CEO for Sibanye-Stillwater, exercised a put option as part of an off-market collar hedge on Sibanye-Stillwater shares, with some estimates putting his earnings from this at up to R96 million.

“Normally a CEO would unwind this hedge if he feels the price is now at an area where it could start to run back up again.. always good to take note of this,” said an analyst.

However, according to CapitalOnePartners, it is “difficult to conclude if the trade represented his view on the share price of his company (overvalued at the time) or the price of precious” metals.

“If it’s the latter, he should be blamed for not entering into a similar hedge to protect shareholders.”

Although the South African PGM miners have been roiled by weaker PGM prices, some analysts are hoping for a better outlook, especially on palladium. Sibanye-Stillwater said last month that its palladium project in Montana, US, had accounted for 82% of its $2.5 billion (R47bn) impairments for 2023.

Should the low commodity prices, which have also affected its nickel operations, persist, then “there may be further restructuring” required.

“Palladium continues to form what’s known as an inverse head and shoulders pattern. This pattern looks a bit like a person’s head and shoulders, but upside down (and) often indicates that prices might start going up after a downward trend. Eventually the PGM miners will slow down supply,” said one analyst.