Soaring rhodium price will contribute half of total SA PGM company revenues in 2021

RHODIUM¬†will account for about half of all revenue generated by South Africa’s four largest platinum group metal (PGM) producers this year at the metal’s current dollar price.

JP Morgan Cazenove said in a report last month that at a then spot price of $24,900 per ounce, rhodium would contribute 53% of total revenue generated by Northam Platinum and 52% of Impala Platinum’s (Implats’) revenue in the 2021 calendar year.

On a resource ounce basis, Tharisa, a Johannesburg-listed chrome and PGM producer, has the highest exposure to rhodium of 12% of resource ounces.

Rhodium is currently trading at $25,500/oz.

Rhodium was also a significant driver of Sibanye-Stillwater’s total revenue. Although Sibanye-Stillwater expected to produce 950,000 ounces of gold, rhodium revenue would equal 41% of total revenue, JP Morgan Cazenove said.

The revenue estimations were made on February 25 and are indicative as other constituents in the PGM basket have also changed in price, especially palladium which is about $100/oz stronger than in February owing to production disruptions at Norilsk, the Russian nickel producer.

The rand is R14,76 to the dollar compared to around R15 a month ago.

Rhodium would contribute about 48% of total revenue generated by Anglo American Platinum on a mark-to-market basis.

On a production basis, rhodium comprised between 5% and 7% of total PGM output by the four major producers.

“The market is always correct and efficient,” said Johan Theron, spokesman or Implats when asked if rhodium’s elevated price introduced an element of jeopardy into forecasting the basket price of PGMs.

“What is unusual in an already tight market is some of the black swan events recently – ACP (Anglo Converter Plant) and Norilsk – it has clearly elevated volatility and price risk both up and down,” he said.

Amplats lost about 600,000 oz of refined metal in its 2020 financial year owing to the breakdown of its ACP. It would take about two years to clear the consequent inventory in the pipeline.