Platinum, coal outshining gold as nation’s main mine earners : South Africa

Platinum, coal outshining gold as nation’s main mine earners : South Africa

While gold is still an important contributor to South Africa’s exports and its overall economy, platinum and coal are continuing to consolidate their positions as the country’s two major commodities.

Figures from the Chamber of Mines show that sales of platinum group metals were worth around R38 billion (US$ 5.4 billion) last year, slightly ahead of coal’s R36 billion contribution – both comfortably ahead of gold’s sales worth around R27 billion.

PGMs ”“ which include platinum, rhodium and palladium – overtook gold for the first time in 2001, and have held that lead for most of the time since then due to ongoing increases in PGM production and high metal prices. South Africa produces around 70% of the world’s new platinum and rhodium mine supply and about 40% of global palladium.

Though much of South Africa’s coal is consumed locally, mainly by power stations and coal-to-liquids producer Sasol, it is also a large exporter with the Richards Bay Coal Terminal shipping out more than 60 million tons of steam coal a year to various markets.

According to the chamber’s chief economist, Roger Baxter, PGMs account for around 2% of South Africa’s gross domestic product and about 11% of the country’s total merchandise exports. ”Add in the multiplier effects and I estimate that platinum is just under 5% of total GDP if the direct and indirect effects of platinum are included,” says Baxter.

Testimony to Baxter’s estimates on platinum’s importance is the town of Rustenburg, the world’s undisputed platinum capital. Property development and prices have surged and per capital GDP has soared.

Amongst the biggest beneficiaries of Rustenburg’s success are the Royal Bafokeng, the tribal grouping that owns the land on which Anglo Platinum and Impala Platinum, the world’s two biggest platinum producers, produce most of their metal. Their stadium, called the Royal Bafokeng Sports Palace, will host the rugby union international between South Africa and New Zealand taking place on Saturday, September 2.

Significantly, while South African gold production has slipped back to levels last seen in the 1930s, platinum output increases every year as smaller producers bring production on stream to complement that churned out by the big three ”“ Anglo Platinum, Impala and Lonmin. Smaller producers include Aquarius and Northam while those who hope to be producing in the future include newcomers Wesizwe and Eland.

In an interview on Moneyweb, Baxter said South Africa’s producers received an average price of R150,000 per kilogram for a PGM basket in 2005 ”“ in the first half of 2006, the average price rose to around R223,000/kg, underlining the lucrative nature of the business.

However, Baxter highlighted a number of constraints affecting even greater growth in the local PGM industry. These include: infrastructural constraints, regulatory red tape around prospecting, water licenses, and mining rights.

”These are factors which I think are holding back investment in the sector,” said Baxter.


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