South Africa’s platinum group metal (PGM) miners are piling into chrome. If all announced expansions come to pass, South Africa’s annual output of the metal will increase by 12%–15% (3.5Mt–4Mt) by the early 2030s.
That excludes expansions by Valterra Platinum, South Africa’s largest PGM miner, which is due to unveil its chrome strategy in February. Speaking on the sidelines of the FT Mining Summit in October, executive head of processing Agit Singh told the FM that Valterra was keen to preserve its industry-leading position.
“We have now got to the point where we can make a big step change [in chrome],” he said. While proposed tonnage increases are under wraps, Singh said: “I don’t like being second best."
But why are PGM miners focusing on chrome, a metal used in the manufacture of stainless steel? Three reasons stand out.
First, and most importantly, it’s unavoidable. The industry is digging more chrome-rich UG2, a type of ore that occurs beneath Merensky ore, which has been heavily mined. Chrome in Merensky ore is a hindrance for smelters, interfering with PGM extraction. That is why PGM miners have been modernising processing technology to more effectively extract chrome from more UG2.
Second, diversified revenue streams help offset costs. “Chrome has a big impact on all-in sustaining costs [AISC],” says Singh. “That’s why we need to go for it.” At Sibanye-Stillwater, first-quarter chrome output, annualised at roughly 1.7Mt, is equal to 5% of its AISC. Byproduct credits, led by chrome, cut Sibanye-Stillwater’s AISC for the first six months of its financial year, by R7,480/4Eoz ($456/oz) against total AISC of R26,252/4Eoz. (4Eoz stands for platinum, palladium, rhodium and gold, measured in ounces.)
Another benefit of maximising chrome production is that it helps to derisk projects, whether these are life extension plans or greenfield endeavours. PGM developer Southern Palladium increased the value of its Bengwenyama project by $1bn after deciding to recover 1Mt of chrome a year compared to the 350,000t a year in an earlier study. In much the same vein, chrome also has countercyclical characteristics.
Third, the near-synchronous improvement in commodity prices has made “pure-play” PGM miners that much more attractive to investors. Whereas PGM production used to mean platinum, palladium and some rhodium, market drivers are now more varied. Demand for ruthenium in data centres and for iridium in electrochemistry is broadening the total revenue basket. PGM miners with meaningful Merensky production are also keen to highlight their exposure to copper and nickel.
Overall, platinum as a proportion of PGM mine revenue has fallen from 62% in 2012 to about 34% this year, according to a study by market intelligence company SFA Oxford. Of course, the revenue pie shifts as commodity prices wax and wane, an increasingly changeable picture in volatile times. But for chrome specifically, expansion stacks up well economically. South African chrome ranks in the bottom two quartiles of global production, with byproduct chrome the cheapest. As a supplier of roughly 60% of all chrome, exporting ore in this way is a rare example of South Africa pressing home global advantage.
That is true unless the government’s plans, unveiled in June as part of its revised industrial development strategy, ruin the party. The proposal is for an export levy or worse on chrome, and another idea is to link export licence applications to new empowerment targets. The proposals are reviled in the industry and are possibly under revision. In the meantime, chrome expansions are operating on a sniff of good faith.
It’s worth giving some credit to JSE-listed Tharisa, which has tried for a long time to establish itself as a PGM and a chrome miner. As part of a new concentrate offtake agreement with Valterra — in terms of which Tharisa will supply 50% of its concentrate from its North West mine to Valterra — the parties will seek to produce commercial quantities of chrome using Vulcan X, a fine chrome extraction technology.
Tharisa developed it to extract more chrome from in-process PGM ore, but in Valterra’s hands it could be applied to its vast tailings. “Our collaboration on fine chrome recovery and beneficiation is an important part of advancing opportunities to unlock value and enhance cash flow margins at Valterra,” said Valterra CEO Craig Miller in a statement at the time.
Some PGM miners supply chrome for further processing into ferrochrome. That might now be a practice long past. In an interaction with Glencore’s head of ferrochrome, Japie Fullard, at the Junior Indaba in June, Tharisa CEO Phoevos Pouroulis said chrome has become “even more important” and that “previous colleagues” — referring to Fullard’s predecessors — “did a great job of convincing the PGM industry chrome was a worthless byproduct”.
“That was a masterstroke,” said Pouroulis. Fullard, sharing the stage with Pouroulis, simply smiled.
