Our products and markets

OUR PRODUCTS – THE VALUE OF PGMS

PGMs comprise a rare suite of durable and precious metals, including platinum, palladium, rhodium, ruthenium, iridium and osmium. PGMs share a set of unusual chemical properties which have made them indispensable to many critical sectors of the global economy. These properties include electrical stability and conductivity, ductility, durability, resistance to corrosion, resistance to oxidation and high melting points, which allow them to remain stable and strong even under extreme heat.

OUR MARKETS

The business of mining and processing PGMs in a complex South African operating environment has been aggravated by the protracted global economic downturn, which has had a sustained adverse impact on the markets for PGMs. For Northam, in many ways, our reputation as a mid-tier, niche, independent, reliable, producer has contributed to sustained offtake of our product into our established markets worldwide, even since the global downturn in 2008.

Over the year market movements for the company’s products were generally moribund. The platinum price at the beginning of the financial year was $1 437/oz, ticking up over the first half of the year, averaging $1 640/oz in January 2013, before dropping to an average of $1 440/oz in June 2013, and further to $1 312 at the end of June. The platinum price reflects the uninspiring demand for platinum from the autocatalyst and industrial sectors. Nevertheless, the prices typically continued to benefit from growth in the jewellery (notably in China and India) and investment sectors.

Palladium demand has been a lot more resilient than that for platinum; and, given the price differential, was the preferred PGM to benefit from the growth in gasoline vehicle production, and the on-going substitution of palladium for platinum. Prices over the financial year ranged from $581/oz in July 2012 to spike in April at $777/oz, before retreating to $648/oz at the end of the financial year. Since the end of the financial year the prices have recovered to ~$700/oz.

Rhodium’s fortunes were lacklustre. Although there was some robust industrial demand, it was limited and autocat demand remained weak. Overall demand for the metal remains thwarted by the weak and inconsistent demand from the vehicle sector.

It is of real concern to us that demand for platinum and rhodium is likely to remain subdued, particularly in the short to medium term, as the European vehicle industry struggles with the continued economic uncertainties in the region.

There is some optimism for palladium, where the outlook is more encouraging – the metal appears to be supported by strong demand from the autocatalyst and investment sectors. On the supply side, increasing quantities of recycled metal continue to find their way to market, although the price-dampening effect of these additional volumes will be offset by the possible cutbacks in primary mine production, and the on-going likelihood of further supply shortages occasioned by work stoppages and disruptions.

These disruptions and the spectre of labour unrest could result in further deepening of market deficits for platinum and palladium. Whether these will have a commensurate effect on prices will depend on the level of liquidity currently provided by above ground stocks of these metals. The lacklustre conditions currently prevailing in the rhodium market are likely to persist for yet another year.

AUTOCATALYSTS

Autocatalysts are small devices installed in the exhaust systems of motor vehicles, designed to chemically control the environmentally harmful emissions that are part of exhaust fumes. Autocatalysts, coated with platinum or palladium, convert over 90% of hydrocarbons, carbon monoxide and oxides of nitrogen into less harmful carbon dioxide, nitrogen and water vapour.

As emissions control legislation continues to tighten in the fight against climate change, the importance of PGMs in the global automotive sector can only rise. The demand for platinum and palladium is therefore strongly tied to this pivotal industry, which was and continues to be affected by the global financial crisis.

JEWELLERY

In addition to its high resistance to tarnishing and its attractive lustre, platinum is also one of the densest metals in nature, giving it a strength ideal for jewellery. It can be heated and cooled again and again without losing its ductility, and even the most delicate pieces retain their shape, giving designers more creative freedom than they would have using other metals. Some rings made of platinum for example, are so strong that no fitting is required to secure the gemstones; they are held in place by the sheer tensile strength of the platinum alone.

Platinum jewellery is particularly sought after in the markets of the Far East, which account for more than half of global demand.

INVESTMENT

Like gold, platinum is considered a long-term store of value and global investment markets offer a range of platinum-backed exchange traded funds (ETFs). While supply and demand were quite finely balanced in 2010, there remains a conviction among global investors that the ever increasing demand for platinum will soon outweigh its supply, limited by its natural scarcity.

This dynamic seems to be primarily responsible for the growing increase in platinum investment.

CHEMICAL AND MANUFACTURING APPLICATIONS

PGM-based catalysts are used in many other areas of industry and manufacturing for their chemical resistance to corrosion and high heat thresholds. Manufacturers of glass, nitric acid, silicones, petroleum and plastics all use PGMs, either to achieve the right properties in the products themselves, or to enhance the efficiency or longevity of the equipment used in the manufacturing process.

ELECTRONICS

Because of their conductivity, durability, high temperature stability and oxidation resistance, platinum and palladium are used to build and coat many of the tiny electronic circuit components used in all types of digital devices from computers and mobile phones to specialist industrial equipment.

The growing need for computers to store large amounts of information has also created a role for platinum, along with ruthenium, to improve their data storage capacity. As the world surges forward into the digital age, this is becoming an increasingly important area of PGM application.

FUEL CELLS

Fuel cells are electrochemical cells that convert chemical energy into electrical energy, in a similar way to batteries. Unlike batteries, however, fuel cells do not need to be recharged; the flow of electricity is continuous as long as the supply of fuel is maintained. Their only emission, apart from the electricity they generate, is water, making them one of the most promising developments of green technology.

Research is currently focused on the development of fuel cell technology for use in vehicles, as fuel cell vehicles have virtually zero emissions, but the possibilities extend much further than the road. Fuel cells will also be used as power sources in homes, offices and industry as an uninterrupted supplement to electricity supplied by national grids. They can be used on a smaller scale too, in handheld electronic devices. As the research into fuel cells accelerates, the potential applications continue to multiply.

The most common source of fuel for fuel cells is a combination of hydrogen and oxygen, reacted in the presence of a catalyst, which is usually platinum. Platinum, sometimes enhanced with small amounts of ruthenium, is the best available material to speed up the oxidation and reduction reactions involved in the chemical process. Its durability also means that it consistently outlasts other possible catalyst candidates, making it certain that platinum will remain a permanent feature of fuel cells as they are further developed and commercialised.