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Bleak outlook for platinum miners

The brief but profound fever of “Ramaphoria” resulted in a stronger rand and breathed some live back into investor sentiment in South Africa. However, these good tidings did reach South Africa’s platinum mines where there is hardly any reason for an optimistic outlook.

Platinum producers in the country produce roughly 70% of mined platinum globally, are  shutting down shafts and slashing jobs as a strengthened rand combined with torpid prices are significantly reducing profit margins.

This will pressure President Ramaphosa as he looks to remedy an economy that is projected to grow by just 1.5% this year while addressing a 27% unemployment rate.

The industry’s most immediate problems are linked directly to the rand, which has strengthened by roughly 15% against the dollar in the past six months.

The rand rose 1.1% following Moody’s Investors Service left the country’s credit rating at investment grade and lifted its outlook to stable.

While the news may seem rosy it is bad news for miners, who get paid in dollars, but pay most of their costs in rand. In rand terms, platinum is down more than 15% since mid-November 2017.

President Ramaphosa needs to urgently implement a plan to create jobs for the industry.

While the rand has made things worse for the mining industry, it faces more challenges. Platinum prices are about 60% below record highs set a decade ago.