JOHANNESBURG (miningweekly.com) – Given the prominence of Russia as a platinum group metals (PGMs) producer, there are fears that it may potentially have an impact on global PGMs supply, Implats CEO Nico Muller said on Tuesday, when the JSE-listed company delivered robust earnings and free cash flow generation for its half-year ended December 31.

In the six months, Implats generated free cash flow of R15.1-billion, closing the period debt-free and with net cash of R18.5-billion.

Muller said it was important to note that Russia produces 2.7-million ounces of palladium a year, which accounts for 38% of global supply.

However, only 10% of global platinum and rhodium is produced by Russia, and even smaller percentages of iridium (8%) and ruthenium (4%).

“In addition to that, we have not seen sanctions imposed on the purchase of energy such as gas or raw materials, so no sanctions have been placed on PGMs,” Muller said during the presentation covered by Mining Weekly. (Also watch attached Creamer Media video.)

“To the extent that they may, it is important to note that China’s consumption exceeds the total volume of PGMs produced by Russia.

“We have seen an amplification of the PGM prices but from our perspective, it’s too early to conclude definitively that the world is facing a disruption in the PGMs supply,” he said.

From a basket price perspective, PGM prices peaked in the first half of the calendar year of 2021, followed by some softening in the second half of the year that overlaps with this reporting period.

“We have seen a recovery of the PGM prices at the beginning of 2022, even before the Ukraine situation unfolded, and we attribute that to a recovery in auto production, combined with guidance that had been issued by two of the peer companies in terms of potential supply constraints in the next year.

“In the long run, we believe that the fundamentals remain supportive of the PGMs pricing environment and that will be supported by the auto sector as well as the evolution of the hydrogen economy,” he added.

Earlier, Implats group executive refining and marketing Sifiso Sibiya reported that customers started building up inventory about three months ago, ahead of Russia’s invasion of Ukraine.

In response to HSBC mining equity analyst Leroy Mnguni on the impact of potential sanctions on Russian offtake agreements and logistics, Muller said that if Russia was forbidden to sell into existing offtake agreements it would have a rightful choice to sell to a new partner and that he was convinced that China would represent that potential avenue.

“I don’t believe that the logistics required to change distribution of metals is complicated and I think that can be done in a very short space of time. We mostly fly our products out. The only issue is if you’ve got restricted air space, but there are many ways to get high-value metals to the right consumers. I don’t think that is any issue at all,” said Muller.

CARBON TAX, RENEWABLES AND GREEN HYDROGEN

“We are well aware that electrification and hydrogen are two technology streams that are evolving, and we are learning as we are going along, just taking note that it may have an impact and we will adapt the strategies of the company to suit future world requirements,” said Muller.

In response to an analyst’s question on the impact of the change in carbon tax, Implats CFO Meroonisha Kerber said the increase in the carbon tax in the next few years would range from R20-million to R30-million.

“The issue is really around when they start removing the rebates, and also if Eskom is allowed to push through the carbon taxes to us. That should increase the carbon tax significantly that we’re going to pay,” said Kerber.

“As a group, we are looking at moving to renewables and you’ve seen what we’re doing in Zimbabwe. We’re busy looking at renewables for Marula, and we’re looking at different options for Rustenburg, and also our refineries.

“The way is for us to not only manage the cost but also on our journey towards carbon neutrality, we definitely are going to move towards more of our energy being derived from renewables,” said Kerber.

The next phase would be transitioning to gas in the form of green hydrogen.