Mugabe ouster good for PGM metals

Published: 23 November 2017

THE end of President Robert Mugabe's lengthy rule, through a calculated military intervention, could prove a boon for the country's platinum-group metals, mining experts have said.

Zimbabwe, the world's number three platinum producer and fourth largest palladium producer, according to data from Johnson Matthey, heavily depends on exports of natural resources to generate foreign earnings.

The price of platinum is up about US$4 per ounce as of last week and is currently trading at US$935,27 per ounce whereas palladium which has seen a meteoric 38 percent improvement since the beginning of the year close trading at US$992,39 on Monday.

American financial market company CME Group executive director Erik Norland said a regime change in the impoverished southern African country may boost platinum and palladium production.

"Zimbabwe has not been particularly stable under Mr Robert Mugabe, and not particularly well-run, especially having suffered its Weimar-like inflation. Having the military take-over may actually bring greater stability and increase mining in the long-term," he said.

Mugabe's 37-year grip on power was broken last week when the military took over, angered by his wife Grace's emergence as the leading candidate to succeed the 93-year-old president, citing a deterioration of socio-economic conditions.

Mugabe - the world's oldest head of state - in 1980 inherited a well-diversified economy with potential to become one of sub-Saharan Africa's best performers.

However, Zimbabwe is now a basket case, with real per capita incomes down 15 percent for the past 37 years, largely due to mismanagement and corruption.

The country is presently faced with an enervating foreign currency shortage that has fuelled a thriving black market, while inflation is threatening to runway - with renowned economist Steve Hanke forecasting October inflation at 332,62 percent against the official 2,24 percent.

Goldman Sachs, an American-based investment firm, said there could be an impact on the rhodium - one element of the PGM metals group - market as a result of the Zimbabwe crisis because it was a relatively small market, but it agreed that there were few risks to the platinum sector.

"While Zimbabwe is a material player in the platinum, palladium market, we highlight that any disruption to production would likely have to be protracted to materially impact prices," it said in a report released last week.

Zimbabwe has a five percent share of the rhodium market.

From an equities perspective, the impact was consequently expected to be minimal, although Goldman Sachs said South Africa's Impala Platinum might be the most exposed because it had the largest operations of its peers Sibanye-Stillwater and Anglo American Platinum in Zimbabwe.

"While any disruptions would be negative for the shares of the companies, it is important to note that all three have bigger production bases elsewhere. Therefore, any production losses in Zimbabwe would likely lead to an increase in PGM prices offsetting the losses for these companies," the American multinational finance company that engages in global investment banking, investment management and securities said.

Implats, which owns 87 percent of Australia-listed Zimplats, the largest platinum miner in Zimbabwe that provides work for nearly 6 000 people, said its mines are not affected by the latest military intervention.

"While there are reports of military presence in the country's capital, to date, there has been no sign of unrest or military presence at any of our operations," Implats spokesperson Johan Theron said.

Zimplats mines, located about 150 kilometres southwest of Harare, reported sales of 274 400 ounces of platinum in the 2017 financial year to end-June, 227 900 ounces of palladium and 24 600 ounces of rhodium, making them the second-largest source of platinum group metals for Implats.
- fingaz