How platinum group metals and diamonds lost their sparkle for Anglo

Anglo American’s announcement on Tuesday that it planned to spin off Anglo American Platinum (Amplats) and do the same or sell off De Beers underscores how far both commodities have fallen.

Pointedly, BHP, which has had two all-share proposals to acquire Anglo spurned by the target’s board, wanted Amplats off the menu and signalled it would subject De Beers to a strategic review, which can often lead to an asset disposal. 

So neither company is much interested in platinum group metals (PGMs) or diamonds. 

Anglo’s plans, which CEO Duncan Wanblad acknowledged have been accelerated, are widely seen as a bid to thwart BHP’s unwanted advances.

But it does come after an extensive asset review undertaken by the  company, and PGMs and diamonds were clearly found to be wanting. 

Anglo has long been committed to PGMs, and its first big sale a few years ago of such assets to Sibanye-Stillwater was rooted in Amplats’ pivot to mechanisation. It was mostly its labour-intensive, conventional operations that it ditched.

But PGMs seemed central to its strategy. Two years ago Anglo unveiled its monstrous hydrogen-powered mine haul truck at its Mogalakwena mine in Limpopo to great fanfare, with President Cyril Ramaphosa among the guests. 

Hydrogen holds one of the keys to the future of platinum amid expectations that the internal combustion engine is in for a long-term decline as electric vehicles rise. The main use for PGMs is still mainly for emissions-capping catalytic converters in diesel and petrol engines. 

When that monster truck was churning up dust on that sunny autumn day in Limpopo, Amplats was also coining it. South Africa’s PGM producers were reaping record profits from record prices and the future looked bright. 

It doesn’t look so bright now. PGM prices have collapsed, undermined by a range of trends beyond the EV threat cited above. A still relatively brittle global economy, high interest rates and the initially undetected switch by Chinese makers of fibreglass to more platinum and less rhodium – which three years ago was the fetching almost $30,000 an ounce – combined to bring prices crashing back to Earth. 

Meanwhile, costs have continued to climb – a perfect squeeze on margins. 

Amplats’ 2023 earnings plunged more than 70% and the company signalled plans to cut up to 3,700 jobs.

Other PGM producers have been smarting too. Sibanye-Stillwater said in a quarterly update last week that earnings before interest, taxes, depreciation and amortisation (Ebitda) fell 72% and that it was “proactively engaging our lenders on temporarily raising our lending covenants”. 

The commodity cycle can, of course, turn and chemists can apply their minds in different ways to find new uses for PGMs to plug into the green energy transition. 

But Anglo clearly decided the time was ripe to cut its exposure to PGMs, and BHP didn’t want to touch the sector. 

It must be said that some of the past risk linked to PGMs in South Africa, such as labour unrest, has largely subsided in recent years. But the metals are no longer regarded as so precious. 

Diamonds in the dust