Leading the next boom? competitive Eastern limb platinum supply

Abstract

Primary production of PGE globally is geographically restricted to South Africa—bushveld Complex (77%); Russia—Noril’sk and alluvial producers (13%); and collectively USA—Stillwater; Zimbabwe—Great Dyke; and Canada—Lac de Iles (10%). Seventy-seven per cent of the world’s PGEs are supplied from mining operations in South Africa’s Bushveld Complex (Johnson Matthey, 2010). The Bushveld Complex has geographically distinct western and eastern portions. Historically, the majority of supply has come from the western limb due to thefavourable platinum grade distribution, geographical proximity to existing water, power, and transport infrastructure and human resource availability from the nearby Gauteng Province. Through resource depletion and increased mining depth in the west, an alternative supply for these metals is now required. Producers must secure capital investment to develop these resources in order to continue to maintain historical production levels as well as market share, despite substantial preproduction lead times. Shareholders also require competitive returns on their investments. Meanwhile, competing for economic rents is the South African government whose key objective is to ensure that historically disadvantaged groups also benefit directly from the resources sector. While long-run global demand trends for PGEs remain positive, it is also anticipated that platinum supply will peak around 2014/2015 whereafter a supply gap could result in a shortfall by 2029 (Black, 2009, and Johnson Matthey, 2010). This gap would need to be satisfied through either primary production, or recycling. Extraction of PGEs is without doubt required for the foreseeable future; replacement resources and associated investment are thus required. A strategic choice is therefore available to South African PGE producing firms. The western and eastern limbs are geographically 300 km apart and exhibit distinct differences. As mining on the western limb gets deeper, and consequently more expensive, will operations on the eastern limb be able to provide South African PGEs more competitively?