CFO Craig Miller unpacks the good and bad of increased PGM prices and demand


The PGM markets have seen a massive uptick in demand due to Covid-19 and the Russia-Ukraine conflict.

In 2021, the mining industry enjoyed record PGM prices on the back of a recovery in demand following the Covid-19 lockdowns during the prior year, albeit PGM customers were impacted by ongoing supply chain disruptions. As a result, Anglo American Platinum (Amplats) has delivered record results for their 2021 financial year, generating R108 billion in Ebitda.

During the year, Amplats’ PGM sales volumes were up 82 percent. Combined with the 22 percent increase in PGM prices, this resulted in unprecedented profits for the company. The company ended the year with R50 billion cash and cleared a record dividend to shareholders of R300/share.

While the PGM prices remain high as a result of continued recovery in the automotive sector, and the uncertainty created in supply of PGMs from Russia following its invasion of the Ukraine, CFO Craig Miller explains that Amplats won’t see the same sales volume again soon. “We saw such record volumes in 2021 because we were able to refine and sell the inventory we had built up in 2020 when we were unable to operate due to our own operational challenges and Covid-19 lockdowns.”

Impact of Russia-Ukraine conflict
Russia produces around 40 percent of the world’s palladium, and while platinum group metals haven’t been sanctioned by the Western countries yet, customers have started looking for alternative sources to buy platinum and palladium.

“We have seen a very significant uptick in palladium prices on the back of potential supply chain disruptions coming out of Russia. And at the same time we have seen oil and energy price increases coming out of the conflict,” Craig says. “So it’s another crisis we have to manage, but we’re quite used to it because of Covid-19.”

He explains that, when the country went into Covid-19 lockdown, the supply chain teams became a lot more connected with their suppliers and were much more innovative in terms of getting supplies into the country. “When we saw Russian forces building up in Belarus and surrounding Ukraine, we already understood what could happen and started preparing our supply chain responses.”

Customers who are reluctant to take Russian PGM supplies have turned to Amplats to supply into their markets, but Craig says it’s quite difficult to ramp up PGM supply that quickly. “Unfortunately, we can’t just decide to mine more palladium today because the demand is high. It takes a huge amount of time and effort”

He explains that it takes approximately eight to ten years to bring a mine up to speed from a green field, and then you still have to process and refine the metals. And at the same time, there’s not a great deal of metal processing capacity in the market. “So it takes a lot of capital to bring additional supply into the market.”

Investing in future growth
Amplats has used the profits of the record results to invest in growth options around its operations in order to meet rising demands in the markets. “We’re quite focused around making productivity improvements in the business.”

At the end of 2021, Amplats announced a ~R4 billion investment into extending the life of one of its operations for another 30 years. It is also looking at options to expand its Mogalakwena operation, which is the largest open pit PGM mine in the country and produces about 1.2 million PGM ounces per year, by either expanding the pit, or possibly going underground.

“What is equally important is how we’re embedding ESG into the business and how we’re making improvements by deploying capital to environmental projects that will either improve energy efficiency or reduce our carbon emissions and really help us to achieve a 30 percent reduction in carbon emissions by 2030 and carbon neutrality by 2040,” Craig says.

He adds that, in a country where there is loadshedding and increasing electricity prices, how the company brings renewable energy into the business and reduces its spend on coal fired electricity is a very important part of this ESG journey.

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