Southern Palladium expects PGM market to remain undersupplied until 2028
This comes on the back of major producers cutting down on investment and production in the past few months as they sought to adjust for low revenue occasioned by then tanking PGM prices.
JSE-listed Southern Palladium believes the global platinum group metals (PGM) market will remain undersupplied over the next three years as companies in the industry, especially those in South Africa, restructure their operations.
Platinum prices clawed back this week, strengthening 9.14% in the past week, to about $1 088 (R19 814) per ounce as of yesterday afternoon.
Palladium prices also rose nearly 7% this week, to $1 049 per ounce, with the recovery in the precious metal attributable to firming demand from automotive and industrial sectors.
With the global platinum market set to remain in under supply, mining analysts believe that there will probably be support for PGM prices for the remainder of this year.
In a presentation at the London Platinum Week this week, Southern Palladium managing director Johan Odendaal said the “platinum market is to remain undersupplied” throughout 2025 to 2028.
This comes on the back of major producers cutting down on investment and production in the past few months as they sought to adjust for low revenue occasioned by then-tanking PGM prices.
“Concerns about the long-term sustainability of several operations (amid) restructuring of unprofitable supply which could lead to deeper deficits,” he said.
The World Platinum Investment Council (WPIC) said this week that South Africa’s platinum supply will fall by 2% this year.
The WPIC estimated that 25% of PGM operations were showing negative margins against the backdrop of “less economic incentive to substitute platinum for palladium” in new vehicles.
There has also been increasing confidence in hydrogen’s role in global decarbonisation efforts.
Southern Palladium is, nonetheless, pressing ahead with its Bengwenyama PGM project in South Africa, saying last month that it was well funded to complete pre-feasibility studies at the Bushveld Igneous Complex situated in Rustenburg, North West province.
The company is sitting on cash reserves from its cash position of $8.34 million as at the end of December 2023.
Southern Palladium believes that there is a well-established downstream smelting and refining process for PGM concentrates within South Africa.
And with most smelters processing the concentrate from the Eastern and Western Limbs of the Bushveld Complex, the company believes its PGM concentrates from the project would be suitable for these facilities and it is now able to initiate discussions with potential offtake parties.
Scoping studies at Bengwenyama have indicated a life of mine on the UG2 reef only at an estimated 36 years for an average annual production rate of 330 000 ounces PGM.
Cash costs for the project are expected at the low end of the global cost curve for PGM.
Southern Palladium is weighing up options for the development of a shallow underground mining operation targeting the approximately 2 million tons per year UG2 reef via decline systems, and employing a hybrid mining method used at neighbouring mines
In London, Odendaal said scoping studies at Bengwenyama had outlined “significant upside”.
Southern Palladium has appointed financial advisers “to evaluate funding options” for the project which appears to be “robust” and inexpensive.
In the second quarter of 2024, Southern Palladium will lodge its environmental Impact Assessment for the the application of mining rights as it looks forward to completion of its pre-feasibility study in the second half of 2024.
BUSINESS REPORT