THE scale of under-investment in new reserves would support the increase in the price of metals such as palladium which is more than $2,000 higher per ounce than five years ago, said Mike Jones, CEO of Platinum Group Metals (PTM).
“We need that margin in order to incentivise capital. We’re way behind the curve on that,” said Jones at the Junior Indaba, an online mining investment conference.” Palladiium was trading at about $500/oz in 2017 compared to $2,861/oz today.
Earlier in the conference, Clare Hanna, a senior analyst for metals research company, CRU Group, cast doubt on the sustainability of metals price increases. The company forecasts a 36.3% year-on-year increase in prices in 2021 for the basket of metals it tracks, but Hanna said mining inflation and the sheer overshoot on price would create volatility.
CRU Group said palladium would increase between 5% and 15% this year compared to a 15% or more price increase for copper, thermal coal, iron ore and platinum. It put a modest 0% to 5% price increase expectation on gold for this year.
Jones, whose company is developing the Waterberg Project in South Africa’s Limpopo province, said tracking inflation “… makes for an interesting graph”, but added: “Don’t forget, we’ve been in capital scorched earth [mode] for a decade. We’ve not been incentivised to put capital into the business”.
PTM is seeking investment for the Waterberg Project, a palladium dominant venture, which has been scoped to produce some 420,000 oz of PGMs following investment of $617m. He was confident the finance would be raised.
“If you’ve got a quality orebody it will find itself into the market. It could be M&A, it could be a takeover. I can’t tell you the intrigue, but it’s going to happen”.
Jones said market forecasts often ignored the changing face of value imputed to the technology that uses PGMs in electric vehicles and fuel cells. “The market is way behind understanding the value proposition.
“We are putting PGMs into a lithium battery and everyone says to me ‘That’s just ridiculous; they cost too much; palladum has gone way up.
“But what is the value of a battery that has a 40% to 100% performance increase? That’s the piece that gets missed,” he said. “The battery that is in an electric vehicle is not your grandfather’s flashlight battery. That’s a battery in most people’s minds. So you can see the value of battery storage in the market has changed completely.
“Therefore the value of commodities that go into that has changed completely, but no-one’s tracking that. They are thinking of commodities like their grandfathers thought of commodities,” he said.