Implats warns on power cuts

• Country’s production of platinum group metals will probably fall this year as power cuts worsen, says precious metals producer

SA’s worst power blackouts threaten platinum and palladium supplies at Impala Platinum (Implats), now and in the years ahead. Implats spokesperson Johan Theron said: “If it gets worse, it will get to a point when you have certain days where we will stop sending people underground.”

Power blackouts threaten platinum and palladium supplies at Impala Platinum now and in the years ahead.

Outages in 2022 curbed output of the metals, and the power crisis that’s crimping the economy has worsened in recent months. The country’s production of platinum group metals is likely to fall this year, said Implats.

The electricity crunch is hitting SA industry and agriculture, and blackouts are expected for at least two more years, threatening output. This is another headache for major mining groups such as Anglo American Platinum, Sibanye Stillwater and Implats, which have found it increasingly hard and more expensive to run deep and ageing shafts.

“If things don’t get better soon then we are likely to have a worse period this year than last,” Implats spokesperson Johan Theron said in an interview. “If it gets worse it will get to a point when you have certain days where we will stop sending people underground.”

SA mines roughly 70% of the world’s platinum and about 40% of all palladium, according to Metals Focus consultancy.

Both metals are used mainly in autocatalysts that cut vehicle emissions.

Output curbs could widen a global platinum shortage that Metals Focus forecasts to be the biggest in two decades in 2023, and add to an expected palladium deficit. Over the longer term, the power crisis is another worry for investors already wary of backing new mines as the electric-vehicle boom clouds platinum metals demand prospects.

INFLATIONARY PRESSURE

State-owned utility Eskom cannot produce enough power from its old and poorly maintained plants. It imposed blackouts on more than 200 days last year and continuously this month.

Mining companies are scaling down some surface activities and then catching up when power supplies are less tight, sometimes during the night and weekends, said Theron.

SA platinum-group metals output last year was probably on average 6% below producers’ initial guidance and one of the worst in the past two decades, according to UBS Group analysts including Steve Friedman.

Platinum has rallied about 25% since the start of September, when power cuts intensified, while palladium has retreated.

Reduced output may help support prices, but lower volumes could weigh on producers’ margins, at a time when they’re also facing inflationary pressures, Friedman said.

Worsening blackouts could lead to the early closure of some marginal shafts, according to Sibanye spokesperson James Wellsted.

The power crunch also risks reducing appetite to invest in future production.

“How do you develop a mine in an environment where you are not sure whether you have got power? Nobody is investing in replacement ounces or growth in the industry,” said Wellsted.

IF THINGS DON’T GET BETTER SOON THEN WE ARE LIKELY TO HAVE A WORSE PERIOD THIS YEAR THAN LAST