The past six months were even more difficult than anticipated some six months ago. Platinum prices continued downwards to five year lows and consensus price estimates indicate that 2014 price levels will only be reached in 2017. Thus a challenging two years lay ahead for producers.
The focus of the South African miners, who hold about 80 percent of the world’s platinum reserves and produce more than half of world's platinum supply currently, are on protection of the business for all stakeholders until the demand increases and prices recover. The strategies are all around efficiencies, cost containment and cash preservation. The focus around efficiencies is related to restructuring core operations and exiting of non-core operations. The focus around cost containments has been ongoing for a few years now and further reductions of head count are on the cards. The focuson cash preservation is linked to the prioritization of capital expenditure.
“The strategies are all around efficiencies, cost containment and cash preservation.”
An indication of the tough times in the Platinum industry is the decision by Glencore to distribute (in specie) their 23.9 percent interest in Lonmin to shareholders. Glencore indicated that a market disposal of the Lonmin stake would not be in the best interests of its shareholders and allowed shareholders to decide after distribution how they will deal with their interests in Lonmin and the Platinum industry.