Platinum: from a “fake” metal to one of the most expensive metals

Throughout the history of mankind, the demand for certain types of mineral raw materials has been constantly changing. This has always been caused by the progress in science and technology, changes in the structure of the economy, and the discovery of new deposits. Today, it is obvious that the focus in mining and manufacture is shifting from the “traditional” types of raw materials (for example, iron, coal, chromium) to those resources that are in demand from new and advanced technologies. The talk is, in particular, about the platinum group metals (PGMs, platinoids).

Surprisingly, but platinum was not of much value for a long time. While gold panning in New Granada in the 16th century, the Spanish conquistadors noticed that some nuggets were mixed with an unknown white metal. This annoyed them, since it was extremely difficult to separate the white metal. The Spaniards called this metal “platina” (silver), a diminutive of the Spanish word “plata” (silver). At that time, “platina” cost half as much as silver, 5 times less than gold and was used exclusively to imitate gold jewellery, as it was believed at that time.

In the modern world, the prices of platinum and gold are competing. Since 1997, there has been a long period when platinum was more expensive than gold. In 2008, the peak price of platinum, $2,300 an ounce, was more than double the price of gold. After that, the situation changed several times. The price of gold rises in crises when investors, still considering it the most reliable asset for investment, increase the demand for it. This is clearly confirmed by the current situation, as the price of gold amid uncertainty is 2 times higher than that of platinum. 

From 2000 to 2020, the average price of platinum was about $1,057.5 per ounce, and the average price of gold per ounce was $902. So far, the average price ratio of gold and platinum is in favour of platinum.

The platinum group metals (PGMs) include six elements such as platinum, palladium, ruthenium, rhodium, osmium, and iridium. Platinum and palladium are considered the most demanded among them. Compared to other metals, the PGMs have exceptional properties, in particular, high electrical conductivity, plasticity, thermal conductivity, corrosion resistance, non-toxicity, as well as the ability to preserve all these properties in a wide range of temperatures, pressures and compositions of aggressive media. Due to these unique properties, the PGMs are increasingly used in various industries, including oil refining, automotive and chemical ones, medicine, as well as in radio and electrical engineering, electronics and instrument making industries, and others.

Discovery of the PGM deposits and their commercial development 

Until 1820, Colombia was the only source of platinum. When its production began to decline in this country, some deposits were discovered in the Urals (Russia), which became the main supplier of platinum for the next 100 years.

In Canada, platinum was discovered in 1888 in the copper-nickel ores in Ontario. Thus, from the end of the First World War until the 1950s, the northern neighbour of the United States was the main source of supply. In 1924, a farmer from the Transvaal province of South Africa found several platinum nuggets in a riverbed. After that, geologist Hans Merensky discovered two deposits about 100 kilometres long each. They became known as the Bushveld Igneous Complex (BIC). Nowadays, its mines account for three quarters of the world’s platinum production.

The PGM production has grown steadily since the Second World War. This was attributed to the emerging new technologies. In particular, platinum began to be used in the oil industry and in the growing plastics production.
In the 1960s-1980s, the demand for platinum grew due to its use in jewellery, which gradually conquered the markets, first in Japan, then in Germany, and later in Switzerland and Italy. By the 1990s, the platinum jewellery conquered the UK, USA and China, which are today the largest markets for platinum jewellery.

In 1974, the United States opened the era of autocatalysts, the technology using the platinum-group metals to convert toxic impurities in car exhaust gases into non-hazardous substances. The use of the autocatalysts has spread all over the world. Since their introduction, they have prevented more than 12 billion tonnes of pollutants from entering the Earth’s atmosphere.

The PGM market today

The PGMs’ distribution pattern across the countries of the world has not undergone significant changes for several decades. The PMG world reserves are estimated at about 69,000 metric tonnes. Almost all of them, over 90%, are located in South Africa. The South Africa’s share in the global production of platinum and palladium is over 71% and 35%, respectively. Russia, Zimbabwe, the USA and Canada also have a significant raw material base.

The PGM market is highly monopolized. In South Africa, about a dozen companies are mining these metals. However, the PGM supplies are actually controlled by three corporations such as Anglo Platinum Ltd., Impala Platinum Holdings Ltd. (Implats), and Lonmin plc.

Only these companies have their own facilities for the production of the commercial products, the refined PGMs. Moreover, the factories of Anglo Platinum Ltd. and Implats have the sufficient capacities to process more raw materials than they mine themselves. The rest smaller companies do not have sufficient resources to create full-cycle production facilities and are limited, at best, to the construction of ore-processing plants at their fields. The PGM concentrates produced by such enterprises are purchased by Anglo Platinum Ltd. for further processing. Moreover, Implats owns large stakes in two PGM mines in Zimbabwe.

The situation in the global PGM market is largely determined by the general state of the global economy. During the periods of its growth, as well as the development of high-tech industries using significant amounts of PGMs and the rise in the standard of living of the population, the demand for platinoids also shows a steady growth. And vice versa. For example, the PGM production in South Africa, the world’s leading supplier, decreased in 2020 by 11% compared to 2019. In addition to internal problems (increased labour and electricity costs, unreliable power supply), the decline was caused by the global trends such as the restrictions due to COVID-19 and disruptions in the supply chains.

The PGMs in Russia

In Russia, the PGM market is almost completely monopolized by one company, Norilsk Nickel. The concerns, however, are caused by the fact that the company (and the natural resources of Russia) is increasingly getting under the international management. Thus, out of 13 members of the Board of Directors, four are foreigners: three are the representatives of Great Britain and one is from Ukraine.

The most interesting is the personality of Gareth Penny, a British citizen, who has been the independent chairman of the Norilsk Nickel’s Board of Directors since March 2013. For 22 years, he worked for De Beers and Anglo American plc, and he was the De Beers Group’s CEO for the last five years of this period.

In this regard, the terms, or rather the guarantees, on which Penny carries out his activities at Norilsk Nickel are also interesting. According to information from the sources publicly available in 2016, if “he is not elected to the Board of Directors at the next annual meeting and does not become its chairman, or if his powers as the chairman end before the 2016 annual meeting, he would receive $3 million minus the sum he has received for the work done”. The additional quarterly remuneration in equal tranches until June 10, 2019 was also provided. This is actually an extremely rare practice of concluding contracts on such terms.

Russian-South African Platinum Cartel: Fiction or Reality?

The geopolitical situation pushes Russia to close cooperation with the “non-European” countries. The 30-year commitment of the Russian foreign policy to Eurocentrism fell short of the expectations as the West and the United States keep on imposing new sanctions against Russia and do not think about lifting the previous ones. Having China and Vietnam as our allies is a good option, but it is worth paying attention to southern Africa as well. In particular, Russia and South Africa have objective prerequisites for the development of mutually beneficial partnership.

South Africa is the largest (71%) world producer of platinum. The share of Russia is 13%. Russia ranks first in the world in the palladium production (43%). South Africa accounts for 35%. That is, the share of South Africa and Russia in the global production of platinum and palladium is over 84% and 78%, respectively. In this regard, it would be advisable, in my opinion, to think about combining the efforts of the two countries to create an organization similar to OPEC.

This idea, as they say, is obvious. It is not unusual for the countries with a monopoly on the production of certain minerals to agree about the cooperation to increase their influence on the global markets by regulating world prices for resources.

Meanwhile, there have been attempts to create such a cartel. Back in 1996, during the visit of one of the South Africa’s leaders to Russia, the then Prime Minister of the Russian Federation E. M. Primakov was proposed to consider the interaction between the two countries on the PGM market. As they say, Primakov “politely declined” to discuss the matter. It’s a pity…

Now, the need to return to this issue may arise in anticipation of the Russia-Africa summit scheduled to be held in November this year. In addition to the memorandum of understanding, real moves are needed in the development of bilateral relations.

Russia and South Africa have a huge potential for mutually beneficial cooperation. However, the Russian business will have to enter into rivalry with the global giant Western monopolies, as well as with the Indian and Chinese companies. It should also be borne in mind that the success of the Russian investors will largely depend on their knowledge of all the nuances of doing business in South Africa, including the knowledge of the BEE legislation and the correct choice of the BEE partners.
The restoration of the economic ties with the African states by the Russian Federation in the use of natural resource and the possible coordination of their raw material policy will significantly strengthen the Russia’s position on the African continent.

Margarita Obraztsova, Rough&Polished