IN A decade‚ Impala Platinum (Implats)‚ the world’s second-largest producer of the metal‚ forfeited just 0.29% of the value of the platinum group metals it sold‚ or $85-million (R900-million) out of revenue of $29-billion (R300-billion)‚ marketing executive Derek Engelbrecht has said.
Responding to allegations by the Alternative Information and Development Centre that Implats had undersold its metal by $2.28-billion (R24-billion)‚ Engelbrecht said this was wrong according to his data‚ based on the morning and afternoon price fixes in London and lagged by a month to account for contracts‚ and a weekly New York trader price for rhodium.
The centre has accused the three major producers‚ Implats‚ Anglo American Platinum and Lonmin‚ of “systematically underselling their metals”‚ with the data it used showing they forfeited revenue of R15-billion. It said without the discount they could have paid their workers the R12500 a month the Association of Mineworkers and Construction Union (Amcu) is demanding.
Extrapolating his data from the sources Implats used in the same way as the centre had done‚ Engelbrecht said Implats had given a discount of just 0.29% to market prices in 10 years. Some analysts think a discount of 1% to 2.5% to the market is reasonable.
“In 2007 and 2008 we gave $400-million (R4.2-billion) away on rhodium‚ when the price for that metal was going to the moon. All of the discounts we gave away essentially accrued in two years in rhodium‚ which were very volatile years‚” Engelbrecht said.
“We don’t give a lot of discounts … and I’ll never sell spot metal unless I can get more than the previous month’s average.”
The metal Implats sold in May‚ for example‚ was based on the April price‚ he said‚ and the centre may not have included the one-month lag in its calculations.
He said the pricing of rhodium may have been a problem.
The centre’s rhodium price was far higher than that used by Implats to determine its contract prices‚ which meant the centre showed a large discount when comparing the centre’s average rhodium price to the achieved prices in the company’s annual reports. He suggested the centre may not have used the New York dealer price‚ which is only available to those who pay for the expensive service‚ which entails canvassing eight or nine dealers and drawing up a mean price‚ and highest and lowest estimates.
Implats uses the average mean price over a month to determine its contracted prices. It sells 95% of its metal in contracts and the rest on the spot market‚ with the company striving to sell at a premium to the London daily prices in its spot sales‚ Engelbrecht said.
Amcu called a strike on January23‚ which shows little sign of ending.
The three companies’ mines near Rustenburg have lost R21-billion in revenue and workers have forfeited R9.5-billion in wages.
About one million ounces of platinum production have been lost‚ Engelbrecht said. He estimated there were above-ground stocks of four million ounces‚ including 2.5 million ounces in platinum-backed exchange-traded funds‚ generally held by long-term investors.
These stocks and the depletion of company stockpiles by the three big producers early in the strike are why the platinum price has not increased.
Macquarie said on Friday it expected the market to show a deficit of one million ounces of platinum next year.
It expected the platinum price to rise to $1495/oz (R15836/oz) this year and $1719 (18223/oz) next year.
“A supply shortfall of this magnitude should go a long way toward strengthening prices. Despite the cost to workers and the companies‚ the strike is the best thing to have ever happened to the market because it is restoring the long-term health of the industry.
It is taking that surplus metal off the market‚” Engelbrecht said. — BDlive
Implats denies under-selling claim
Responding to allegations by the Alternative Information and Development Centre that Implats had undersold its metal by $2.28-billion (R24-billion)‚ Engelbrecht said this was wrong according to his data‚ based on the morning and afternoon price fixes in London and lagged by a month to account for contracts‚ and a weekly New York trader price for rhodium.
The centre has accused the three major producers‚ Implats‚ Anglo American Platinum and Lonmin‚ of “systematically underselling their metals”‚ with the data it used showing they forfeited revenue of R15-billion. It said without the discount they could have paid their workers the R12500 a month the Association of Mineworkers and Construction Union (Amcu) is demanding.
Extrapolating his data from the sources Implats used in the same way as the centre had done‚ Engelbrecht said Implats had given a discount of just 0.29% to market prices in 10 years. Some analysts think a discount of 1% to 2.5% to the market is reasonable.
“In 2007 and 2008 we gave $400-million (R4.2-billion) away on rhodium‚ when the price for that metal was going to the moon. All of the discounts we gave away essentially accrued in two years in rhodium‚ which were very volatile years‚” Engelbrecht said.
“We don’t give a lot of discounts … and I’ll never sell spot metal unless I can get more than the previous month’s average.”
The metal Implats sold in May‚ for example‚ was based on the April price‚ he said‚ and the centre may not have included the one-month lag in its calculations.
He said the pricing of rhodium may have been a problem.
The centre’s rhodium price was far higher than that used by Implats to determine its contract prices‚ which meant the centre showed a large discount when comparing the centre’s average rhodium price to the achieved prices in the company’s annual reports. He suggested the centre may not have used the New York dealer price‚ which is only available to those who pay for the expensive service‚ which entails canvassing eight or nine dealers and drawing up a mean price‚ and highest and lowest estimates.
Implats uses the average mean price over a month to determine its contracted prices. It sells 95% of its metal in contracts and the rest on the spot market‚ with the company striving to sell at a premium to the London daily prices in its spot sales‚ Engelbrecht said.
Amcu called a strike on January23‚ which shows little sign of ending.
The three companies’ mines near Rustenburg have lost R21-billion in revenue and workers have forfeited R9.5-billion in wages.
About one million ounces of platinum production have been lost‚ Engelbrecht said. He estimated there were above-ground stocks of four million ounces‚ including 2.5 million ounces in platinum-backed exchange-traded funds‚ generally held by long-term investors.
These stocks and the depletion of company stockpiles by the three big producers early in the strike are why the platinum price has not increased.
Macquarie said on Friday it expected the market to show a deficit of one million ounces of platinum next year.
It expected the platinum price to rise to $1495/oz (R15836/oz) this year and $1719 (18223/oz) next year.
“A supply shortfall of this magnitude should go a long way toward strengthening prices. Despite the cost to workers and the companies‚ the strike is the best thing to have ever happened to the market because it is restoring the long-term health of the industry.
It is taking that surplus metal off the market‚” Engelbrecht said. — BDlive
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