Once a bright and rising star of the precious metals industry, platinum is down and out. And the three mining houses that ruled platinum-rich Rustenburg when the price peaked at more than $1,800 an ounce in 2011 look very different today.

A recent sign of this was the announcement from Impala Platinum last Thursday that it would have to lay off 13,000 workers as it shuts down five of its 11 Rustenburg mines over the next two years.

Distressed Lonmin has only just avoided closing its doors by selling off operations to Sibanye-Stillwater. Even so, it is cutting jobs and shutting old shafts in a restructuring aimed at shoring up the balance sheet to ensure that the acquisition goes through.

Anglo American Platinum (Amplats), on the other hand, stands out from its peers. In its 2018 interim results, the company announced a record performance from its Mogalakwena mine in Limpopo, which was up 19% in the first half of the year.

Amplats generated free cash flow of R1.3bn and announced an interim dividend — the first since 2011 — of R1bn. It also reported it would buy out Glencore’s 39% in its Mototolo platinum joint venture.

Since early 2014, the platinum price has moved from $1,210 an ounce to $820.

Over this period Lonmin’s share price has dropped 98%, from R533 a share to R7.45. The Impala share has lost 84% in value and decreased from R123 to R18.36.

Amplats’ share has moved down 10.6% — from R470 to R420.

Nedbank Corporate & Investment Banking analyst Leon Esterhuizen says Amplats has changed completely over the past four or five years. The company has moved down the cost curve, and its assets are cost competitive at the current metal price.

"Certainly Amplats is the platinum group metals [PGM] company that generates the most free cash flow in the world," Esterhuizen says.

Amplats took tough decisions before many others would, or could, do so.

"The company has been on this road for a while. It sold out of the legacy mines that were stuck in the old way of operating," he says, referring to reliance on manpower over mechanisation. Globally — and especially in SA — "mining that is labour intensive is just dying".

If a platinum ore body such as the western limb of the Bushveld complex, which includes Rustenburg — were discovered elsewhere in the world, it is unlikely it would have been economical to mine, because it is so hard to mechanise. Low labour costs in SA have made this possible, says Esterhuizen.

Now, with labour and related social costs rising, and electricity costs "going through the roof", the business case is weakening, he says.

In addition, the platinum price has remained persistently low. It dropped to under $850 an ounce in July and has yet to recover.

But investors needn’t be optimistic about the platinum price to be optimistic about Amplats. "[Amplats] will make money at current prices, but more money if the price goes up, " says Esterhuizen.

The company is in a strong position thanks to a strategy of selling loss-making assets and keeping just the high-quality ones.

Its key asset is Mogalakwena which, as an open-pit mine, can be mined mechanically and at low cost. Mogalakwena contributes 70% to Amplats’ profits. It also benefits from being a palladium-rich resource. Current and medium-term structural deficits in the palladium market have pushed the price up in recent months — it’s at $900 an ounce compared with $600 in mid-2016.

"I’m bullish over Amplats," says René Hochreiter, mining analyst at Noah Capital Markets. Mogalakwena is not just the best platinum asset around — it is one of the best mines in the world, he says. It is second only to Debswana’s Jwaneng diamond mine in Botswana, the mine with the highest margins globally.

Amplats’ acquisition of Glencore’s 39% stake in the Mototolo joint venture will also unlock significant synergies with its greenfield project, Der Brochen.

By combining the Mototolo area with Der Brochen, the life of the mine will be extended from five years to beyond 30, Amplats has said.

The deal marks Glencore’s complete exit from platinum.

Mototolo will now join Mogalakwena, Amandelbult in the Waterberg and Unki in Zimbabwe as mines Amplats own and manages itself.

"This is a very much stronger business today as a result of the actions we have taken in recent years, and I’m pleased to say we see even more value that we can unlock," Amplats CEO Chris Griffith said at the release of the interim results.

In contrast, companies such as Impala and Lonmin will be successful only at high metal prices, says Esterhuizen.

Hochreiter points out that, of late, rhodium has been the saving grace for many platinum mines, where it is produced as a byproduct. Thanks to demand outstripping supply, the rhodium price has risen from $1,000 an ounce in August last year to $2,335 now.

Still, it’s clear that miners such as Impala are barely hanging in. "Impala is a shadow of its former self," Hochreiter says. "I’m really worried about [these mines]."

But he says if one were really optimistic about PGMs, or if the rand weakened, there would be some hope for Impala. "Things just have to go a little bit better and Impala will shoot the lights out," he says.

The announced restructuring at Impala garnered the rebuke of mineral resources minister Gwede Mantashe last week.

He claimed the company’s move is a careless and mindless commitment to implement its predetermined outcome, "no matter how unworkable that might be".

For its part, Lonmin has been fortunate to have some of the most efficient shafts in the business, but even so the company is just breaking even at current prices.

However, "[Sibanye-Stillwater] has a huge incentive to make it work — it has huge debt," Hochreiter says.

A metal-streaming deal in the US, where it sold a percentage of its future gold and palladium production for cash up front, will bring the diversified miner’s debt down from R23bn to R16.5bn. It is no longer in danger of breaching debt covenants and the credit ratings agencies are satisfied.

Sibanye-Stillwater also has a good record of reducing cost structures to carve out sustainability for mines. In taking over Amplats’ old Rustenburg assets as well as the Aquarius platinum assets, Sibanye-Stillwater managed to take R1bn out of the cost structure.

However, for long-term survival, the platinum price must rise.

Many are struggling to see where the demand might come from.

The May 2018 "PGM Market Report" by Johnson Matthey — a global sustainable technologies company that invests heavily in research & development in this field — shows that SA will this year contribute 4.4 million of the total 6 million ounces in supply. Gross demand for four applications — autocatalyst, jewellery, industrial and investment — is 7.76 million ounces. About 2 million ounces will be supplied through recycling. Net demand will be 5.73 million ounces, the report states.

It’s unclear what will improve the supply-demand dynamic and, ultimately, the price. Fuel-cell vehicles are hoped to become a driver of demand.

Amplats, along with the Public Investment Corp, will invest $200m in a PGM venture capital fund that will, in part, seek new projects powered by these metals in sectors such as hydrogen infrastructure, fuel-cell electric mobility, energy storage platforms and water treatment solutions.

A considerable amount of research has already been done. "Johnson Matthey has been looking for new applications for years, and is at the forefront of discovery," Hochreiter says.