HomeNewsAnother casualty for South Africa’s platinum sector

Another casualty for South Africa’s platinum sector

The worldwide over supply of platinum and the sustained drop in pricing has continued to hit the beleaguered South African platinum industry.

Platfields Limited, the Mpumalanga-based junior platinum explorer remains suspended on South Africa’s JSE as the company is still unable to publish its interim results that were due in August 2014. Cash flow constraints have been cited as the major issue as the company had been unsuccessful in trying to secure funding for the group.

Platfield’s location

Platfields started operation in 2002 when it held prospecting rights for its two near-surface platinum group metals (PGM) projects on the Eastern Limb of the Bushveld Complex and one near-surface gold exploration project in the Transvaal Drakensberg Goldfields of Mpumalanga province.

The company has also struggled with the labour issues that have dominated the South African mining industry this year and coupled with the cash flow problem, this has also impacted the company’s acquisition ability.

In addition, several of Platfield’s prospecting rights have expired and petitions for renewal have been made the Minister of Mines and Mineral resources.

Demand for platinum will increase over time

South Africa produces some 70% of all platinum and the longer-term prospects for the industry look encouraging. Over one third of platinum is used in the auto catalyst industry, specifically for diesel cars and trucks. With the recession of 2008/9 came a reduction in European diesel manufacturing and although the decline has moderated, Johnson Matthey still estimates that autocat demand still slipped 2% in 2013 to 3.13 million ounces.

Nevertheless, demand in Europe for diesel cars has increased and there has been consecutive monthly sales increase over the last year and demand for platinum looks good as the new pollution regulations (Euro 6 and Euro 7) come into place.

In the North American diesel market, demand is also surging as the economy continues to grow. Moreover, truck sales worldwide are expected to grow 4% over the course of 2014 with 2.87 million vehicles being produced.

Potential sale of mining assets to generate cash

With this backdrop, Platfields have announced that it has been approached by a third party and has commenced negotiations for the acquisition of substantial, Platfield mining assets. If successful, this may result in a reverse listing, a change in control and in the board as well as cash flow being injected into the group.