PAUL DUNNE: Riding rhodium’s rally
The surge in the price of the metal is a benediction for SA miners, as the country holds most of the world’s supply. But the state needs to do its bit too
Forget palladium. Rhodium — considered the rarest and most valuable precious metal in the world — has pulled off a 78% rally in price this year alone. It’s now trading at $4,400 an ounce and some analysts have begun eyeing its former record high of $10,000.
This is important for SA and the country’s platinum group metals (PGM) miners, because most of the world’s rhodium emanates from our bushveld orebodies.
The name rhodium comes from the Greek word rhodon, meaning rose, because of the rose-red colour of the metal’s salts.
It’s the lesser-known part of the PGM group; its sister metals include platinum and palladium.
Rhodium has a very special application when it comes to human health. It is used extensively in the automotive sector to control the emissions of nitrous oxide (NOx) gases. NOx is one of the greenhouse gases responsible for climate change.
The latest round of environmental legislation in Europe, China and India is focused heavily on the NOx gases, and this is creating a significant demand pull, leading to higher prices.
Unsurprisingly, the recent price rise has had a positive impact on the basket price that miners receive, boosting profits.
While rhodium is some way off its previous highs, palladium scorched to a record $1,613.50 an ounce in March this year. That’s helped PGM miners out of an eight-year share price decline, though the platinum mining index, at 42.7, is still a considerable way off its 2011 peak of 87.7.
It has to be stressed, however, that our sector is not out of the woods just yet. The damage done to balance sheets will take some time to fix.
It is very important for conditions to be created that are supportive of doing business
It is also important to realise that local producers’ ability to mine more has been hurt by a lack of reinvestment over the past difficult decade.
At Northam Platinum, though rhodium contributes about 9% by volume of all precious metals produced, it now contributes as much as 25% to the basket price.
The company’s decision to resume mining the Kukama shaft at the Eland mine near Brits demonstrates our confidence in the metals, and this orebody has a rhodium content that is higher than average.
At full production, 2,800 new, permanent jobs will be created.
Importantly, mining is a primary industry that sits at the base, or foundation, of all economic activity. So our dependency ratio and economic multiplier effect are large.
Social issues in SA are becoming extreme, unfortunately, particularly in the areas where we operate. Small towns and rural areas are impoverished, often with failed local government structures. This results in severe underdelivery of services and a general lack of economic opportunity. The outcome of that is severe unemployment, especially of the youth.
On the eastern limb of the bushveld complex, youth unemployment is at more than 50%. When centres of economic activity are created, such as a mine in a rural area, community protests take place because people want jobs. At Northam’s Booysendal mine near the town of Mashishing, there are 300,000 people in our recognised communities. We have just built a mine that will employ an additional 2,100 people.
The need for economic opportunity is great. We are engaging with government at the moment, as there are some unrest issues in the area that are symptomatic of the problem.
We at Northam will play our part, but what we are demanding now is action from the government to play its part, in particular in respect of the rule of law.
It is very important for conditions to be created that are generally supportive of doing business, and mining is particularly vulnerable to social unrest.
Northam is pulling its weight as a company. We are creating thousands of new, sustainable jobs, and that is something our country desperately needs.
• Dunne is CEO of Northam Platinum