PGM Future, Softening Prices, Resource Depletion, and Industrialization Highlighted at PGM Indaba
The afternoon session of the Chamber of Mines of Zimbabwe’s Annual General Meeting (AGM) 2024 witnessed a robust discussion on the future of the platinum group metals (PGM) industry.
Leading the plenary on “Update of PGMs Operations and Opportunities” were Alex Mhembere, CEO of Zimplats, Collin Chibafa, Chief Financial Officer of Unki Mines and Stephen Ndiyamba, General Manager of Mimosa Mining Company.
By Rudairo Mapuranga
The session commenced with a provocative question from the Deputy Minister of Finance and Investment Promotion, Hon. Kuda Mnangagwa, setting the stage for a comprehensive discourse on resource sustainability, market dynamics, and industrialization opportunities in the PGM sector.
Zimbabwe’s PGM Resource Longevity
Kuda Mnangagwa raised a critical concern regarding the longevity of Zimbabwe’s PGM resources
“I wanted us to put it more in a Zimbabwean context, and it will help the policymakers, especially on the fiscal side. When we talk of the estimated resource or the proven resource in the PGMs industry, I’ve been informed, or maybe misinformed, that if 40 years from now I am sitting in Senate, we might be debating a budget that excludes PGMs because the resources are limited. The resources will be exhausted. In a Zimbabwean context, what is the PGM industry looking like in terms of how long we are going to be mining platinum? It’s a key anchor in the economy in terms of forex reserves, in terms of earnings as well. That will inform, I guess, on policy, on whether you go to a friendly Commissioner General and Minister of Finance, or if they will be frowning a bit. I thank you.”
RJ Coetzee of SFA Oxford responded, emphasizing the underexploited nature of the Great Dyke’s PGM resources.
“Yes, thank you for the question. I think I’m the wrong person to answer it because I’m sitting with the most important people in your industry at the table, and they’ll have a much more intimate view. The short answer is yes, there will still be PGMs on the Great Dyke in 40 years from now. It is mostly underexploited as it stands now. I think I’ll leave it at that. With any new mining decision, you need a life of mine of at least 20 to 25 years anyway to make the decision.”
Alex Mhembere added, “I think the issue is not whether we would have a mine. It’s whether we would have conditions that promote mining in 40 years’ time. That is very critical. We may have mineral resources underground, but certainly, the issue is for us to develop and establish the capacity or the environment that allows us to mine, whether a foreign investor or not. That is very critical in my view. In terms of resources, we do have them. As simple as we are, we still have one more area to exploit before we exhaust. But even in the mines that we have developed, we will still be able to mine for at least the next 20 to 30 years. Our production will be coming down, but it will still be there in the next 20 to 30 years. And I think it’s the same for the other operators. And I do know some of our friends are starting their green projects now, GDI, Bravura, and others. So they certainly have lots of resources for the country to be producing PGMs.”
Stephen Ndiyamba concurred, stating, “So I think, as he rightly says, it seems like it’s not a question of the resource. It’s a question of how do we appropriately exploit that resource so that we get optimal value from it.”
Market Dynamics and Future Demand
Collin Chibafa addressed the crucial issue of future demand for PGMs, highlighting a significant risk related to the market’s shift towards electric vehicles.
“I think it’s important to add, will there be demand for PGMs 20 to 30 years from now? And that is one of the key risks we’re seeing, that two-thirds of our production goes into internal combustion engines in terms of limiting the production. So if you’re dealing with the emissions from your internal combustion engine, the market is moving towards battery electric vehicles. And the key question is, will we have uses for what we are producing? If there’s no demand for what we are producing, then yes, we might have the resource underground but we might not be able to exploit it or find someone to sell it to who would want to actually use it. So really, I think in this intervening period, we need to be able to mine, exploit, and then sell what we can while there’s demand for it, and to do so profitably.”
Abel Makura, President of the Association of Mine Managers of Zimbabwe (AMMZ), posed two pertinent questions to the PGM producers.
“I just have two short questions for the PGM producers. The first question that I have for them is, do they have any work that they are doing in terms of market research and intelligence, so that they are able to forecast the prices of our PGMs, like five years in advance, so that they already have strategies in advance on how to manage around the low prices, if they ever come, so that at the end of the day, it has minimum impact, especially on the workforce. Then the second quick question is, are they also engaging the government? Because if you look at Zimbabwe and South Africa, they are in the top three of the largest PGM producers in the world. So are they also engaging governments for assistance in terms of… So, for example, if they are having regulations that support the use of PGM-related products, like for example, the hydrogen fuel cell vehicles instead of the battery electric, like if they can… taxes that are higher or that are lower.”
Industrialization and Value Chains
Heresy Herry from Nedbank highlighted the finite nature of mining and stressed the importance of developing value chains and sub-industries to sustain future generations.
“I think what’s crystal clear based on the presentation by the PGM is that mining is a finite resource. The only thing that’s going to sustain our great-grandchildren are the value chains and the sub-industries that will create their farm. But I’ve been coming here for the last six to ten years, and I’ve never seen the Minister of Industry as part of this symposium. And the Minister, as we talked about creating a $12 billion industry, there must be a complementary document that gets us from the $12 billion that Isabella was talking about to the $7.3 trillion. Let’s take a cue on what’s happening in India, what’s right. They’ve got no diamonds to talk about, but they’ve been able to create an industry.”
Hon. Supa Mandiwadzira further elaborated on the need for industrialization and the importance of local value addition.
“I think it’s very interesting to see what we now understand and know about the platinum PGMs industry. But I think context is always important. It would have been better if they told us in the last five years how much did the three players make in terms of profits so we can understand whether the problems they are pointing out are because the market is deep or because of a lack of planning. And I think it’s related to the question the colleague has just asked here, where he’s saying, you know, we’re going to have to do this. You know, where is your projections, where is your forecasting in terms of pricing? The second point I need to make is RJ spoke about the fact that the industry is beginning to use much more greener PGM replacements, like recycling. And obviously, the concern is that we’re getting more and more EV vehicles, which means it’s a dying industry. And the concern the industry is raising is, you know, government is taking a lot of money. Shouldn’t the government be taking so much money from a dying industry anyway when the prices are still high enough for it to take that money?
“I also want to talk about the industrialization that the gentleman from Nedbank has just been talking about. The industry has made a lot of money, and we know these statistics that have been given here. What value chain industries have they created? I know they supported a lot of local people to be supplying into the platinum industry, but they import from South Africa, they import from China. Have they deliberately supported local manufacturing to replace these imports of the raw materials where they could now leverage some of the production that’s being made locally?
“And finally, I think somebody else spoke about talking to contractors to reduce their costs by 10%. I like this concept. I hope it also works the flip side. When the prices are high and they’re making money, they give incentives to the contractors for more money. Because it does appear, only when they’re in a crisis, does the industry come and cry and say, you know, you are sub-buying us, reduce your price. You know, the government, reduce your tax. When they are making more money, there’s no point where they say, you need to earn more money from us. We’re making more money. Increase your tax. It has to be fair at some point.”
Market Research and Planning
RJ Coetzee provided insight into the market research and planning efforts undertaken by the PGM industry. “Let’s get going. So the gist is, do producers have forecasts and where’s the market development? Yes, there are forecasts. Each mining company will develop their own forecasts and we would, for instance, develop an independent forecast on what the pricing is. I think to address a bit more of it, we saw an unprecedented revenue contribution from metals such as rhodium, which was not as significant in the basket 10 years ago.”