South Africa's upcoming general election could significantly impact the global platinum market, with potential implications for the country's dominance in platinum group metals (PGMs). The election outcome will be crucial for the crisis-torn country, where the mining industry faces challenges due to political and economic uncertainty. The result could influence the future of PGM mining, affecting major players like Sibanye Stillwater, Impala Platinum, and Anglo-American Platinum. The best-case scenario involves an ANC, DA, and MK coalition, potentially boosting the industry through pro-business measures. However, a decisive ANC victory could worsen social and economic strains, posing further challenges to the industry.
Author: Mihail Stoyanov
On May 29, 2024, South Africa will hold a General Election, the most significant since the end of apartheid. The election’s outcome will profoundly impact the crisis-torn country.
The economic and political uncertainty is negatively impacting the South African mining industry. This matters because South Africa is a central player in a few critical metals, holding 90% of the world's platinum group metals (“PMGs”) reserves, 36% of chromium ore reserves, and 37% of manganese ore reserves.
PGMs are crucial for energy transition with a few companies dominating the landscape: Sibanye Stillwater, Impala Platinum, and Anglo-American Platinum.
Elections Overview
The African National Congress (ANC) has been the ruling party since 1994. Recently, the business-oriented Democratic Alliance (DA) has gained popularity. The ANC's support has waned due to the country's profound economic and social crises, with recent polls indicating support dropping below 40%, a record low compared to its historical average of about 60%. Two ANC spin-offs, the MK and the Economic Freedom Fighters (EFF), have also attracted some of its supporters.
Meanwhile, a combined effort by the DA and MK could potentially split the current government, dominated by the ANC. If successful, the ANC could lose its ruling coalition role for the first time since its 1994 victory.
Related Articles:
PGM Market Overview
Bushveld Ingenious Complex (“BIC”) in Gauteng province holds the world`s largest reserves of PGMs. For every 100 ounces of platinum reserves, 90 are in South Africa, 6 in Russia, and 2 in Zimbabwe. The remaining two ounces are in North and Latin America.
Eight of the world's largest platinum mines are in South Africa, owned by three companies: Sibanye Stillwater, Impala Platinum, and Anglo American Platinum.
Sibanye Stillwater: Owns several mines in South Africa, including Marikana and Rustenburg, two of the largest globally. Marikana is the second-largest platinum mine, while Rustenburg ranks fifth.
Impala Platinum: Operates mines in South Africa, Zimbabwe, and Canada. The Impala Rustenburg Mine is the largest platinum mine in the world, with an annual production of 667,000 ounces of platinum (excluding other PGMs). The mine's life is estimated to continue until 2035 at the current production rate. Bafokeng-Rasimone, another significant asset, has a life of mine (“LOM”) until 2052.
Anglo American Platinum: Owns the largest platinum open-pit mine, Mogalakwena, in South Africa. Mogalakwena is the company's flagship asset with a 75-year LOM. The Amandelbult mine, the sixth-largest, has a LOM until 2040.
Two smaller PGM miners in South Africa, Sylvania Platinum and Northam Platinum Holdings, also play crucial roles. All these companies maintain strong balance sheets despite the weak PGM market and challenging business environment.
Challenges and Market Dynamics
Miners in South Africa face chronic issues such as power shedding and labor shortages. Weak PGM spot prices have exacerbated these problems. Load curtailments, labor shortages, and prices below all-in-sustain costs (“AISC”) have forced some mines to close, reducing supply. Meanwhile, demand is increasing, widening the existing deficit. The World Investment Platinum Council (“WIPC”) predicts the platinum deficit will grow in the coming years as above-ground inventories and production (mining and recycling) decline while demand rises.
Recycling temporarily mitigates platinum shortages, accounting for about 24% of the global supply. For every four ounces of platinum, one is obtained through recycling. However, recycling alone cannot compensate for the supply risk from South Africa's dominance in the PGM market.
Future Demand
The hype around battery electric vehicles (“BEVs”) is calming down, and internal combustion engines (“ICEs”) will persist longer than anticipated. Automakers like Mercedes, GM, and Toyota have announced plans to continue ICE production lines. As the automotive industry starts destocking its inventories, the demand for PGMs, particularly platinum used in catalytic converters, is expected to grow.
Elections and PGM mining
The outcome of the upcoming elections will significantly impact PGM mining in South Africa and the global market. The industry's major challenges—personnel shortages and power interruptions—must be addressed.
Best-Case Scenario: ANC, DA, and MK Coalition
The best plausible scenario is an ANC, DA, and MK coalition. The DA's pro-business policies could boost the labor market and address Eskom's power issues. This coalition would likely benefit the mining industry, gradually restoring production capacity. Although the PGM supply would improve, it would still fall short of meeting the looming deficit. Mining companies would see increased revenue from higher output and robust spot prices, making this the best scenario for PGM miners.
Worst-Case Scenario: ANC Decisive Victory
If the ANC wins decisively, social and economic strains could worsen, exacerbating mining industry challenges. Miners may continue to cut production, closing mines and reducing output from operating ones. The platinum supply would continue to diminish, widening the existing deficit. Lower outputs are a headwind for the company’s revenue. However, the increased deficit would drive higher PGM prices, potentially stabilizing miners' revenues in the long term despite declining output.
