Every Friday morning, SAfm’s AMLive’s radio anchor Sakina Kamwendo speaks to Martin Creamer, publishing editor of Engineering News and Mining Weekly. Reported here is this Friday’s At the Coalface transcript:
Kamwendo: Platinum has been badly hit by anti-diesel sentiment in the wake of the Volkswagen car emission scandal in the United States.
Creamer: Our beloved platinum, how can they do that to us? Just shows you we mine it here, something happens in the US and we get hit. There was a scandal that the emissions were greater than Volkswagen was saying and this gave a bad name to diesel. Platinum is wedded to diesel, it goes into that autocat in the diesel.
There was a big fear that there would be a massive decline. Fortunately, off-road vehicles and other markets made it a milder fall, but there is a resistance to this now and an International Platinum Association is being formed, which some of our platinum mining people have joined, like Steve Phiri of Royal Bafokeng Platinum, who is part of this international body that is going around to local authorities abroad and around the world to say platinum is not to blame, the engines are not to blame.
In fact when you look at the engine for Euro 6 complaint engine, it gets rid of the nitrogen oxide (NOx) as well as the CO2. What needs to be done is a greater confidence in this diesel, because the emission scandal has been over hyped and people have started going to petrol engines.
Petrol engines use palladium and not platinum. It is an associated metal, but a lower cost metal. You notice that the price of palladium has been rocketing because of the affect on the price of this demand. The price of platinum not good at all, as you just announced earlier, still stagnant.
At the same time, the costs of the platinum miners is going up and something needs to be focused around marketing and getting this right. We cannot say this anti-diesel sentiment is not going to continue to hurt, who knows. There is an effort now to market it and make sure that diesel is wedded again to platinum.
Probably the palladium price will rise to a point where even the petrol engines will go back to platinum because it is a cheaper bet. But, until then we find that there is three times a palladium use to one platinum. There is an unbalancing act there that we need to sort out. One of the things really emphasised with Royal Bafokeng Platinum this week when they presented their results is that you need a lot of marketing of this platinum.
They were very pleased with some of the acceptance of the fuel cell, because that is the next step that has to be taken. It is great that the Japanese are going to have fuel cell electricity generation at the Tokyo Olympics, besides having buses driven by fuel cells and cars, you also have the actual electricity generation.
It also happened in Durban at COP17a few years back. They used the fuel cells to generate the electricity that was needed at COP17, of course, that is clean electricity that is what it is all about, clean, noiseless not a lot of maintenance. So, it is the answer to the maiden’s prayer, but in the meantime there is a set back and they have to try and straighten out this anti-diesel sentiment that is hurting platinum.
Kamwendo: South Africa’s Sibanye Gold went on a charm offensive in the United States this week to woo shareholder backing its big American acquisition.
Creamer: It is interesting to look at Sibanye Gold. It has got a South African name, all South African mining, mines gold here, a little bit of platinum across the border in Zimbabwe.
But, 36% of its shareholding is American. The biggest single block of shareholders sit in America. It was little wonder that they went to Miami this week to the big BMO conference and they went on a charm offensive on how wonderful their company is, what low-costs they've got, because they are now in the process of taking over the biggest platinum and palladium producer in the United States, Stillwater.
In fact, in North America outside of Africa this is the biggest platinum and palladium operation. They are taking a step closer just about every week. The Reserve Bank has given them permission, every box is being ticked. This was an extra effort to make sure that the American shareholders like this deal. A lot of the market sentiment in South Africa was a little bit cautious on this, but I think it is a great deal for us, because we need to get a big arm around this whole platinum mining industry, worldwide. We dominate down here but let’s also get the North American footprint. Sibanye Gold is very keen to go from mine to market. They are not at that stage yet, so they need to get to that refining stage.
It is still quite a long way off. There is a lot of processing done in America so they can see how that's done. Also, that recycling aspect, because platinum cannot be consumed. You have got to find market for it all the time. When it comes back in the recycled form, it competes against the mines.
When you open up auto catalysts and it has got four ounces of platinum in there, you just cut it open and take the platinum out, that is easy, but to mine it is a different story. You have got to mine about a ton of material, it takes you ages to get that four ounces out. It will give us good insight if we get hold of this North American asset in platinum and that is what Sibanye Gold is taking one step after the other to do.
Kamwendo: The mining industry’s downfall was caused by spending too much capital at the wrong time, says Glencore.
Creamer: Yes, from 2006 to 2012 they did the analysis saying that the capital allocation was way out of kilter, particularly because it hit the 2008 global crisis. So, this over capitalisation then resulted in too much supply. Because miners are price takers, they are not price makers, when you over supply you shoot yourself in the foot and you shoot all your shareholders as well.
They were saying let’s be judicious about this, let’s make sure that we try and balance out these markets for the good of all our shareholders for the good of the economies that you are operating in, particularly the South African economy, which is still in a heavily reliant mining and development of this nature.
Don’t over supply, because you are going to hurt yourself. Because Glencore is such a big company, they are not only in mining they are also in marketing, they can see these markets all the time. That is very good position to be in when you see Sibanye Gold wanting to go from mine to market.
People want to get closer to the markets, these miners, not so remote as they have been. Then you just have to take the price that can be very hurtful. At the same time in South Africa a lot of the mining companies are going ashen faced because the rand is strengthening. You spoke about a dollar strength, so hopefully it will give us a weaker rand, because that rand weakness does help things to tick over in the local mining economy.
All in all we are saying, be judicious, you have got a new start now, because things are coming right. You can see that things are settling themselves. Anglo reported good results, BHP Billiton showed that they had bounced back. Glencore produced excellent results. So, you see the bounce back is there.
They are saying, what are you going to do from now on? Are you going to be delinquents again and then send us into another tizzy as soon as we have a bit of a setback. Keep your eye very closely on that market, make sure that you are not only a miner but you are interested in the trading side of it. We see even coming out with the fact that there is not only platinum mining but from those reefs they also get chrome.
We had a situation where the platinum miners in mining UG2, the upper group two reef, a different reef to Merensky, they got a lot of chrome. They started selling that chrome and they were hurting our own chrome miners here. There has got to be a bit of an insight into how all this works. We noticed a lot of the trading companies are now going along to those mining companies, including Glencore and platinum miners saying, look, give us your chrome, let us market your chrome.
Chrome has been a very big asset in South Africa, it is one of our unique metals that goes into stainless steel. But, it was also hurt by over supply. We see now the price is right, things are going well, if we can keep that going it is very important for our local mining industry.
Kamwendo: Thanks very much. Martin Creamer is publishing editor of Engineering News and Mining Weekly.