Financial year 2001 has been a significant year for shareholders of Barplats, as it saw the re-commencement of mining at the Crocodile River mine
Open-cast mining operations started in December 2000, following the decision by the Barplats board to re-open the mine ten months before, in February 2000. The Crocodile River mine had been mothballed since 1991.
Commissioning difficulties with the concentrator, which has delivered lower than expected recoveries are being addressed. It is anticipated that as the open-cast reserves are replaced with underground ore, recoveries will improve.
Investigations to increase output and extend the life of the mine are continuing.
At the Kennedy’s Vale mine – another previously mothballed project -which is 100% owned by Barplats, a 3D seismic survey commenced in May 2001 and the interpretation of data from this survey should be complete by mid 2002. Thereafter, a feasibility study will commence.
The pgm market
Prices of Barplats’ major pgms - platinum, palladium and rhodium – were subject to great volatility during the year, with the average price of platinum exceeding US$600 per ounce and with palladium breaking through the US$1 000 mark
In spite of Russia delivering near-record quantities of platinum during calendar 2000, and a weakening in the Japanese jewellery market, the platinum market held up well. However, slowing world economies during 2001 should have an impact on demand, and a balanced to slightly oversupplied market is forecast for 2001.
Substitution, in automotive and electronic industries, given renewed impetus by the dramatic swings in the price of the metal and a significant downturn in the information technology sector, will see reduced palladium demand for the first time in ten years. Shrinking demand from these sectors, exacerbated by consumer de-stocking and high Russian deliveries during the first quarter of 2001, led to a near-halving of the price.
Consumption of platinum in jewellery was 1% lower at 2.84 million ounces, the first reversal since 1983. This was due to a sharp decline in the Japanese market, which outweighed strong growth in both China and in the United States.
A continuing sluggish economy, accompanied by a surging price, saw Japanese fabrication offtake falling by 20% although the number of pieces was only 4% down. With many manufacturers reducing metal stocks in deteriorating trading conditions, sales in the lower price brackets were worst effected, with many younger buyers switching to more affordable alternatives.
In spite of high and volatile prices, Chinese demand rose by 16% to a record 1.1 million ounces. At prices above US$600 many manufacturers halted production, resulting in a shortage of retail product. Tightening up on tax payments by the Chinese authorities also restricted fabrication.
In the US, demand climbed by 15% to 380 000 ounces on the back of strong first-half growth, which was tempered by weakening consumer confidence in the second six months as the economy began to slow. In Europe, demand remained firm with strong growth coming from the United Kingdom. The global expansion of the platinum jewellery market took another important step forward with the launch by the Platinum Guild International (PGI) of a jewellery campaign in India. India is the world’s largest gold market and has the potential to be a significant one for platinum.
Demand for platinum from the autocatalyst sector continued to benefit from tightening emission legislation, with automakers endeavouring to reduce their dependence on palladium by moving to platinum-based systems. Offtake was 2.5% higher at 1.93 million ounces. Despite a 2% decline in European car sales, platinum benefited from a rise in diesel vehicle sales and the introduction of tighter legislation, which requires higher platinum loadings for catalyst use with diesel engines.
n the US, platinum offtake edged upwards as automakers reverted back to platinum. In 2000, tighter emission legislation was adopted by several countries, including Japan, China, India, South Korea and several smaller south-east Asian countries.
Demand increased by almost 4% to a record 8.86 million ounces primarily as a result of higher automotive usage. Consumption by automakers rose by 11% to 5.38 million ounces. Palladium is the most effective metal for the control of hydrocarbon emissions, the main target of the most recent legislation. With the phase-in of these standards all but completed, automakers are looking at reducing their dependence on palladium. Although this metal will remain a key ingredient in future formulations, the auto industry expects to cut its usage by 30% over the next five years through thrifting programmes and by moving to platinum/rhodium systems.
The strong move away from palladium to nickel-based multi-layer ceramic capacitors in the electronics industry continued, with less than 50% of capacitors produced containing palladium. The substitution trend is forecast to continue. The market, though, will still require Russian sales from stock in order to satisfy demand for the next few years. Thereafter, the market should return to a natural supply/demand balance, to the benefit of both supplier and consumer.
The rhodium market was underpinned by strong demand from the automotive industry. Demand for rhodium for autocatalysts rose by 17% to 579 000 ounces. Increasingly stringent emission legislation and the desire by automakers to thrift palladium were the main drivers of growth. This trend will gain more impetus by new emission legislation, a feature of which is tighter limits for nitrous oxide, for which rhodium is the preferred metal.
Operations at the Crocodile River mine are expected to improve this year, with prospects for further growth under review. Further evaluation of the Kennedy’s Vale project may well see a feasibility study begin in mid-2002.
As anticipated the record high markets for our major metals are expected to return to more sustainable price ranges in the year ahead. Nonetheless, Barplats shareholders may expect an increase in earnings in the coming year.
KC Rumble