Modern Mining June 2024

COMMODITIES OUTLOOK

Precious Metals resilient but still facing challenges By Afriforesight’s Kirthi Ramdhanee – Head: PGMs and Nathan Musson – Chief Economist

Demand for precious metals is expected to be strong overall through 2024/early-2025 driven by interest in gold, which should remain supported by safe-haven demand (i.e. risk hedging) due to the severe compounding geopolitical rifts, as well as persisting financial market concerns as global interest rate trends shift.

Afriforesight’s Chief Economist, Nathan Musson.

Demand for precious metals is expected to be strong overall through 2024/early-2025 driven by interest in gold.

T he PGM outlook is more nuanced, with near-term challenges still expected amid underwhelming global manufacturing growth (particularly from the auto-sector, the main driver of PGM demand) and as above-average inflation continues to drag down miners’ profitabil ity. Activity in the key PGM-using industries should however improve from later in 2024 as interest rates become generally more accommodative, which should encourage recovery in vehicle demand growth going forward. South Africa’s mineral revenues are driven, to a significant extent, by activity in the PGM and gold sectors, which respectively accounted for 24% (R187bn) and 16% (R125bn) of mineral sales, reported by StatsSA for the twelve months to February 2024. Mining activity trends in these sectors are expected to diverge both in the short-term – when SA gold output should improve moderately, while PGM volumes are curbed by ongoing cost/demand pres sures – and in the longer-term, where gold activity should decline as viable reserves deplete, while structurally higher costs discourage potential devel opments, while PGM activity is expected to improve with recovery in global growth. Longer-term PGM activity will, however, depend on the realised pace of transition to particular greener technologies.

SA Gold Outlook South Africa’s gold sector has faced

structural decline throughout the past decade and, while some near-term recovery/growth in activity is expected, the outlook for longer-term volumes remains distinctly negative unless plans change for the major producers. In 2023, domestic volumes improved firmly on the back of Sibanye-Stillwater’s recovery from its early-2022 labour disruptions alongside gains from Harmony Gold’s higher-grade underground operations and stronger activity from mid-tier producers. However, the 96.6 tonnes of gold produced was 39% lower than 2013’s level and, outside of the volatility following the Covid crisis, declines have been consistent. Even the rapid increases in gold prices realised in recent years have been unable to arrest this trend. Zooming into the past five years, the overall decline in activity remains obvious despite rand-based sales prices doubling over the period. This decline is being driven by longstanding depletion of viable reserves (due to the sector’s maturity) and structurally higher costs borne by local miners compared to the global average (graph below). Afriforesight’s assessment of commercial gold operations reveals that within the last five years costs for most SA producers have typically been

Afriforesight’s Head: PGMs, Kirthi Ramdhanee.

10  MODERN MINING  June 2024