Anglo American Platinum: A glimpse into future markets

Consideration for the long-term future of South Africa’s platinum mining operations takes into account a lot more than existing demand and supply.

AngloForWeb01Indeed at Anglo American Platinum (Amplats) in recent years, there has been a paradigm shift in the approach to marketing which concentrates not just on existing market demand, but the possibilities for precious metals in the future.

Platinum mining remains at the forefront of this focus and the JSE-listed company presently produces around 2.3 or 2.4 million ounces per year in Southern Africa.

“There is an expectation to stay around that level for the foreseeable future although the uses for platinum will evolve,” states Andrew Hinkly, Executive Head: Commercial.

“This is a hugely exciting time for the industry; the outlook for growth in platinum demand is not generally well understood. The future demand will come from emerging new applications as well as growth from existing demand,” he adds.

The company reduced production levels as a result of restructuring which took place during 2013. The restructuring itself followed a review that took place in 2012.

Having implemented changes the company has enjoyed growth in recent months, as Hinkly explains: “The largest driver to improved year on year profit performance has been the significant devaluation of the South African Rand but another contributor has been the additional improvements in revenue due to our efforts in minor metals marketing and a more efficient approach to distribution.

“Our strategy has been to improve revenue across the basket of metals we mine; from major PGMs through to the minor metals and by aligning ourselves closer to the end customers rather than working through distributors.

“Since last year and moving into 2014, we have increasingly worked directly with end customers which has lead to increased revenue and improved market share of Iridium and Ruthenium,” he continues.

Those minor metals are increasingly playing a part in Amplats’ returns and are sold as a by-product of the mining and production process for platinum. Among the metals are Ruthenium, Rhodium, Palladium, Osmium and Iridium – and all of these metals possess attractive chemical properties that are under scrutiny for future uses.

Of particular interest to the scientific community, these metals are helping to develop future demand through energy storage, the hydrogen and fuel cell value chain, medical devices, electronics, water treatment and aerospace.

Of course much of the work around future uses for these metals is of direct interest to a mining company like Amplats and will help to safeguard future demand. To that end the company has become actively involved in research and development initiatives that will not only benefit and potentially influence future market demand, but could make a real difference to lives and the environment around the world.

“We are engaging with a much broader marketing base but this is not affecting our production levels,” Hinkly says. “We have made huge improvements in our customer relationships over the last couple of years and for example, we have expanded our presence in Asia Pacific with the opening of an office in Singapore 12 months ago. We will continue to grow into this market which offers lots of new demand potential, but will do so without neglecting our existing markets in Europe and North America.

“We are very much focused on expanding the market for metals which concentrates primarily on jewellery, industrial applications and the investment sector. Palladium and platinum are both used within the automotive market but platinum is also used to make jewellery and has proved a popular market in China and India more recently.”

Hinkly describes the technologies associated with hydrogen energy and fuel cell development as “important potential areas for platinum going forwards” while research and development is revealing new and important potential markets for minor metals also, as Kleantha Pillay, responsible for market Development at Anglo American Platinum, outlines:

“Iridium is particularly useful in the electronics segment and for energy storage devices in the future, while Ruthenium can be used in water treatment which is an increasingly important topic around the world.

“We continue to look at areas for potential collaboration in South Africa to help facilitate local beneficiation opportunities.

“In the past we undertook research through grant funding but going forward we are investing in early stage research as well as start up companies involved in commercialisation of new technology.

“The PGM Development Fund (PGMDF) is a venture capital fund established to invest in attractive, high-tech opportunities that contribute to developing markets for Platinum Group Metals (PGMs).

“It is an Anglo American Platinum Limited initiative managed by Douglas Investments and supported by Bryanston Resources. We are investing today to ensure the sustainability of PGMs for the future,” she adds.

To date the Platinum Group Development Fund investment has leapt from $10 million to $100 million (committed over the next 5 years) with a further $20 million provided by co-investors.

“We seek to invest in the parent company of our research partners, ring-fencing our investments for specific PGM projects. In this way we benefit not only from the success of the research project but also the success of the parent organisation,” states Pillay.

“We are seeking to attract a further $200 million of investment in the future,” adds Hinkly. “By adopting this approach our investment is far more effective and complimentary in helping to develop the PGMs market,” he continues.

At present the company reports that it has invested in 3 companies via its PGM Development Fund:

Altergy designs and manufactures proprietary proton exchange membrane (PEM) fuel cell power systems; Ballard is a leading provider of clean energy fuel cell products that optimise power systems for a range of applications and Primus Power is a leader in low-cost, grid-scale energy storage solutions with a scalable, distributed, multi-hour system that economically serves multiple storage applications. The fund is presently enjoying an internal rate of return in excess of 40 percent.

Within South Africa, the term “beneficiation” defines the efforts from Government and enterprises to add value to the country’s natural resources. It is a concept that Amplats fully embraces, as Pillay explains:

“One area that has been identified is a clear gap in skills in working with PGMs,” she says, “so we provide funding for research projects in PGM applications that improve the skill base.. With new demand we always look for local downstream opportunities and a good example will be the rural electrification fuel cells which will enter field trials in the next couple of months and if successful, could result in the creation of a new manufacturing business in South Africa. This is a very sustainable source of demand and will also add more skills and job opportunities.”

“We feel these applications are coming to market at exactly the right time,” adds Hinkly. “Our intention is to continue concentrating on the developing markets with a view to making our mining business more sustainable. The biggest risk is not to invest enough in new technologies which will create the future demand for our products. We are actively creating the future demand by wisely investing in the organizations and companies who are developing those new applications.”