South Africa’s platinum producers fail to capitalize on boom times

Miningmx reports on the fortunes of the South African platinum sector, the dominant global supplier where production peaked at about 5.3 million ounces in 2006, up from just over 4 million ounces in 2001, but has fallen ever since.

Regulatory and legislative uncertainty, the threat of nationalisation and the strength of the rand are preventing the mining industry from participating fully in the latest chapter of the super cycle, and if the basket price of platinum group metals does not improve, further capital expansion plans could be halted.

via Miningmx editor David McKay quotes Leon Esterhuizen in a report for RBC Capital Markets :

“Such a move would just reconfirm our view that any growth from this sector should be questioned, but it would also likely lead to further, significantly bigger problems longer term as the mines all fall behind on developing new reserves,” said Leon Esterhuizen in a report for RBC Capital Markets.

Balance sheets of most platinum producers remain under pressure even after significant capital raisings. “Almost unbelievably, against this background every single company in the space continues to talk expansion,” says Esterhuizen. “The majors in particular continue to stick to their guns that 2011 will see good volume expansion.”

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