Northam: digging through the platinum dip

CEO Paul Dunne might joke that “there’s no luck in mining”, but fortune has certainly favoured Northam, the platinum group metals (PGM) miner he heads, in the past few months.

For starters, resource investment company BlackRock upped its stake in the company to 5% last week, following similar investments into Sibanye-Stillwater and Impala Platinum earlier this year.

“It shows there are some big investors on the market that share our positive view on the outlook for the [PGM] market,” Arnold Van Graan, head of markets research at Nedbank Corporate and Investment Banking, tells Currency.

Northam, like its peers, has also been swept up in a platinum price rebound. While this year’s stonking rally has cooled – the platinum price of $1,650 now is far off its January 26 peak of $2,878 – the metal still appears to have broken out of a multiyear depression.

“It’s been very volatile over the past couple of decades,” Dunne acknowledges, “but it’s much better now than it was 18 months ago, so we are pleased with the response of the market.”

This is largely due to the fact that there isn’t enough PGM supply to balance the market; according to the World Platinum Investment Council, 2026 will see a fourth straight year of market deficits.

Not enough metal

“The evidence suggests that there won’t be enough supply going into the latter end of this decade, and this is because some old mines might need to close,” explains Mergence Investment Managers analyst Malose Mamashela. This is especially true for Implats and Sibanye-Stillwater’s mines on the Rustenburg complex “unless significant capex were to be put in”.

“If you don’t have supply, the price has to respond to that, especially if the expectation is that on the demand side the consumer is still confident that the oil price and inflation is ebbing down, so they might want to buy newer vehicles,” Mamashela says, explaining how a rise in vehicle purchases would help lift the PGM market, which supplies key metals needed both for internal combustion engines, and electric vehicles.

That’s not to say the US-Iran war hasn’t had a chilling effect on the PGM sector, which Mamashela describes as “a short-term response to the global macro-environment”.

Just how short term this conflict is going to be is the question that has plagued analysts of everything from ammonia to platinum since the war began.

But Van Graan is “still quite bullish on the market”.

“In different cycles, different metals perform better than others,” he says. If platinum suffers, he points to the “sleeper metals” like rhodium and ruthenium that “have become meaningful in this cycle”, which would help lift the overall price of the PGM basket.

On top of that, and as major investors like BlackRock know, the biggest reason the market continues to hold on despite the impact of the war is that the “supply base remains constrained”.

“That’s the one thing that hasn’t changed from the start of the year,” Van Graan says of the deficit. “A lot of things have changed with the war, but that’s the one thing that hasn’t.”

Playing the long game

While most South African mining companies have been reluctant to throw money at expansion projects, Northam is breaking new ground.

Last week, it opened its brand new shaft 3 at the Zondereinde mine: a R6.3bn project that has taken the company five and a half years to complete. The point of the shaft, Dunne says, is to both maintain and grow production levels as it drills into an extra 4km of virgin ground.

“We’ve just produced at Zondereinde, for the year ending June 2026, 333,000 ounces of 4E (platinum, palladium, rhodium and gold), and the addition of 3 and 4 shaft will enable production not only to go for another 40 years but to increase production above 400,000 ounces,” Dunne said at the shaft opening ceremony.

Guessing what PGM prices may be in 40 years’ time is clearly impossible, which is why some might consider the expansion a risky move, but Northam, and Dunne especially, has long believed in investing in itself.

Mamashela says the company’s UG2 reef “has the highest percentage of minor metals, we’re talking about iridium, ruthenium, rhodium”.

“So its exposure to a higher basket price pegs it better than its peers. It’s a younger, smaller producer.”

What most sets it apart, says Van Graan, is that “Northam is one of the few companies that have actually got countercyclical investment right”.

“A lot of CEOs talk about that, but very few actually do invest countercyclically. And [Northam] have done that. They built Booysendal during the down cycle and that has served them well, and they continue to push through with Eland and their processing capacity expansion during very tough times, so I think it is going to stand them in good stead. And I think it’s why they have been able to grow the company in the way they have.”

For all miners it’s a constant juggling act of paying dividends to shareholders, spending capital and keeping an eye on debt.

“We still hold the view that PGMs have a bright future well into the next couple of decades”, Dunne explains. “And that’s why we do what we do.”

Mining the AI boom

Increasingly, Northam’s “sleeper metals” are coming into their own.

Take ruthenium, its third most produced metal, which has shot up in demand and value due to its two major applications.

“One is a product called Nylon 6,” Dunne says, which is the second most common synthetic after polyester in clothing. It also happens to be a super durable metal that can replace steel parts in cars.

The second, and maybe more famous use, comes from the present need to store huge volumes of data in data centres, thanks to the AI computing boom.

“Data is stored on something called a hard disk drive, an HDD. And the surface of all hard disks has a little coating of ruthenium,” Dunne explains. This is behind a more than doubling in the ruthenium price, from about $700 an ounce a year ago to $1,550 now.

A long winter

Still, the PGM market is colloquially known for its long winters and short summers, and analysts are split as to what season the sector is currently in.

“If we spoke about this back in 2022 or 2023, I would have said it looks like it’s going to be a long winter,” says Mamashela. “Prices were looking really desperate, and all of the miners were pulling out, reducing their capex on the back of the less supportive basket price.”

“If we see internal combustion engine demand declining, then a long winter might set in. Until then, we see a healthy PGM sector,” she says.

Van Graan views it a little differently. “I think we’re probably in a bit of a winter now. We had a very good start to the year, but with the war things started to change. We could be in an uncertain period for an extended period of time; this war is just not going away. And that’s not great because it ultimately impacts the demand outlook.”

Van Graan has seen more than a few cycles in his experience; as he tells Currency, the winters can last longer than you think, until, when circumstances change, “you have these very strong rallies, and everyone thinks prices are going to go up forever [and] they just end abruptly”.

For now, Northam will just keep digging.

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_{Top image collage: Facebook/Northam/Khoni Johannes Mokhonoana; Rawpixel; Currency}

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