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South African mine closures still a last resort in COVID-19 battle

Highlights

Government compelled to keep mining going

No current logistical bottlenecks

PGM price volatility to remain a feature in 2021

London — A shutdown of the mining industry in South Africa would be a last resort in the country's battle against COVID-19, analysts and industry players said, given the sector's economic importance.

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Johan Theron, the group executive for corporate relations at Impala Platinum, the world's third-largest platinum producer, said that "given the economic impact and importance to the economy, government is ... compelled to keep mining going as far and as best as possible."

Theron noted, though, that the situation continued to be fluid and mines could close should circumstances worsen. "You can never say never."

South Africa moved to a so-called Level 3 lockdown on Dec. 28, with President Cyril Ramaphosa saying on Jan. 11 it was being extended with new restrictions, including closing land borders until Feb. 15 for general entry and departure.

Sibanye-Stillwater senior vice president and head of investor relations, James Wellsted, said there was little likelihood of its operations being affected. The company is the world's largest primary producer of platinum and rhodium.

"Despite the talk of a move to lockdown level 4, the president announced we would stay at adjusted level 3, which mainly impacts on the entertainments and food and beverages sectors," Wellsted said.

"It does not really make sense to shut down the mining industry as the spread of the pandemic is through the communities, and we are providing a support service to the government by screening, testing and then, if needed, quarantining or isolating our employees. We also have well established and effective protocols in place to manage the risk in the work environment."

Analysts at Heraeus Precious Metals, one of the world's largest platinum group metals refiners, noted that when South Africa last year eased its lockdown to Level 3 -- it peaked at Level 5 -- underground mines returned to full operation with social distancing protocols implemented, "even though the number of coronavirus cases was increasing".

New cases

Analysts at UK brokerage SP Angel said on Jan. 12 there was talk of a surge in new cases in a major supplier of platinum, with prices increasing 2.4% day on day.

SP Angel also said delayed shipments were raising prices for ferrochrome and other industrial minerals. "Coronavirus protection measures are holding up containers coming out of South Africa," SP Angel said.

South African ferrochrome producer Merafe Resources CFO Ditabe Chocho told Platts the current lockdown "does not restrict cargo movement, although infection of operators may cause problems".

Sibanye-Stillwater's Wellsted said the company was not experiencing issues while Theron said Implats was seeing "no impact at this time".

Chrome and platinum group metals miner Tharisa's head of investor relations and communications, Ilja Graulich, told Platts the company was not facing any issues.

Price volatility

Heraeus said platinum group metals (PGMs) with the tightest markets may find strong support for already high prices in the short term.

"It will take some time for Anglo's [Anglo American Platinum] refined output to return to normal levels once the Anglo Converter Plant is fully operational," Heraeus said.

"However, the second wave of lockdowns [globally] will prove detrimental to economic activity, so PGM demand in 2021 may not rebound as strongly as anticipated."

Wellsted said price volatility will likely continue to be a feature in 2021.

"The outlook for demand appears to be robust. So, barring a significant worsening of the situation (say all vaccines prove ineffective or the like), we do not anticipate any significant surprises."

Theron said: "At the margin, demand and supply impacts are likely to be similar over time, so bar continued unprecedented volatility, demand/supply balances unlikely to be disrupted and hence one should expect metal prices to remain well supported, especially for metals in short supply (palladium and rhodium)."

The palladium spot price, as of 1035 GMT on Jan. 13, was around $2,398/oz.

Palladium base prices from refiners Johnson Matthey and Engelhard Materials Services (BASF) of Germany stood at $2,416/oz and $2,408/oz, respectively, while JM's and BASF's rhodium base price stood at record highs of $20,200/oz and $20,100/oz.

Heraeus Precious Metals saw its rhodium industrial price hit $20,350/oz, up 7.4% from Jan. 6.