Comment
Zimbabwe is
no rose garden
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W
ith Zimbabwe on the
investor map again, there
is plenty of talk about the
great platinum opportunities on the
Great Dyke. One wonders, though,
about the feasibility of greenfield
platinum projects. The steady build-up
of supply has driven the platinum price
down to record lows, which has plunged
the South African platinum sector in
crisis after crisis over the past few years.
Although several shafts have closed,
and more are expected to be mothballed
soon, an increase in production at other
shafts, together with the imminent
commissioning of two or three new
mines in South Africa, is anticipated to
create a further oversupply in an already
saturated platinum market. Many
licenses on the Dyke are up for grabs
and as I understand it, there is a great
deal of interest from South African
entrepreneurs. Ignoring all the noise
and hype and the excitement, one has to
ask the hard questions.
The platinum market is forecast to
move further into surplus in 2018.
Johnson Matthey’s PGM Market Report
for May predicts that there will be a
slight increase in industrial purchasing;
however, this will be outweighed by
higher secondary supplies and lower
demand from the autocatalyst, jewellery,
and investment sectors. The report
further states that less platinum will be
used in diesel after-treatment systems
in Europe as automakers cut diesel car
output and more vehicles are certified
to Euro 6d-TEMP standards. Jewellery
fabrication will also contract, although
the rate of decrease should moderate as
the Chinese market shows some signs
of stabilising. Johnson Matthey predicts
that the market surplus could widen to
as much as 300 000 ounces, which is
bad news for the platinum price.
Although one cannot deny the
massive opportunities that exists in
Zimbabwe, it will be prudent to consult
the experts first before heading into
unknown territory. Coal is another
commodity that seems to be high on
the buying list, and there are good
deposits in Zimbabwe. The main
challenge, though, is that Zimbabwe is
landlocked, and the rail infrastructure
is limiting. Despite the rosy picture and
seemingly new political direction, there
is a pocketful of factors that could make
a new project fail. Many scoundrels out
there are able to make any deposit look
good, so extreme caution is required.
With the platinum price hovering
at its current levels, it is highly
unlikely that a new project, even if it
is a high-grade shallow deposit, will
justify the initial capital outlay of a
greenfields mine. It is also improbable
that the profit margins on an average
coal deposit will be high enough,
considering the exorbitant costs of
getting the product to the market.
Leon
Editor
JULY 2018 MINING MIRROR
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