Platinum fever
In South Africa's mines, workers are struggling to keep up with rising demand for the precious metal, a key element in catalytic converters - and now worth almost twice as much as gold.
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| A worker takes a break in Shaft 10 at Impala Platinum's mine in Rustenburg, South Africa. |
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| A block of platinum is buffed and shined by hand at the refinery. |
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| Impala miners at Shaft10 praying at the beginning of their shift. |
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| It takes tons of ore to produce a few ounces of platinum. Here, in Impala's smelting room, the ore goes through a second stage of refining. |
(Fortune Magazine) -- Half a mile below the red-rock African landscape, mine manager Charl Geldenhuys points to an array of fluorescent-orange circles spray-painted at a dark tunnel's rocky end. "That's where we blast tomorrow," he shouts over the din of a machine drilling dynamite holes.
Every day the sweat-drenched miners here blast and clear a meter farther into Shaft 10, one of 13 operating mineshafts at Impala Platinum's complex in Rustenburg, South Africa. For each ton of ore they load onto hopper cars, only a tablespoon of platinum will be extracted after milling, smelting, and refining. But with platinum prices doubling over the past four years to $1,480 a troy ounce, South Africa's mining companies and a slew of new contenders are finding it worth the effort. "We are forging ahead at full capacity," says Impala CEO David Brown, sitting in his company's headquarters in Johannesburg. Producing two million ounces of platinum last year, Impala is the world's second-largest platinum company, after Anglo Platinum, better known as AngloPlat, a subsidiary of the giant Anglo American group.
Since the days of South Africa's gold rush in the late 1800s, Johannesburg has been known as the city of gold. An earlier rush made Kimberley the city of diamonds. But over the past decade, provincial Rustenburg, about an hour's drive west of Johannesburg, has staked its claim as the city of platinum. The nation's fastest-growing metropolis, Rustenburg lies on the western limb of what geologists call the Bushveld igneous complex, an ancient formation that holds nearly three-quarters of the world's known platinum reserves.
With prices still climbing, the potential worth of those reserves - more than a billion ounces in proven and predicted deposits down to a depth of two kilometers - is astronomical. "Of all the metals, platinum probably has the strongest outlook," says Henk de Hoop, a former mining engineer considered South Africa's top platinum analyst. Despite new technologies that use less of the metal in catalytic converters and a growing trend to recycle, the demand for platinum has continued to rise, while production lags. Industrial demand has been the primary factor driving up the metal's price, but the consumer image of platinum as purer than gold - think platinum blond, platinum anniversary, platinum records - continues to make the metal popular in the jewelry market, particularly in Asia.
Worth not quite twice as much as gold, platinum has little of gold's glamorous history. Chemists and jewelers have known about it for centuries. But for seven decades after the metal was discovered in 1924 in South Africa by a German geologist, the region's platinum mines weathered boom-to-bust cycles. Then, in the late 1990s, platinum struck gold, as it were. The impetus wasn't jewelry but rather green technology: Stricter auto-emissions standards led to the development of catalytic converters requiring small amounts of platinum for diesel-fueled engines. (Gasoline-powered engines get by with a less expensive sister metal, palladium.) Suddenly the demand for platinum took off, resulting in a boom that, with some ups and downs, has led to today's record prices. The demand for some of the metals found in the same ore as platinum - palladium, rhodium, ruthenium, osmium, and iridium - as well as the mining byproduct nickel, has also increased substantially.
While the overall outlook for platinum demand looks favorable for the next few years, AngloPlat and Impala are straining to keep up the supply, and smaller firms are scrambling to expand. One survey found that several new platinum mining companies planned listings on the Johannesburg Stock Exchange to raise money for operations. Some of the new players have benefited from government requirements that big mining companies transfer part of their assets and mineral rights to firms with black South African owners. About 13% of Impala's shares are now held by the Royal Bafokeng Nation, an indigenous people who own much of the land around Rustenburg. In September, AngloPlat announced a series of transactions that resulted in two black-owned firms, Anooraq Resources and Mvela Resources, controlling, respectively, the nation's third- and fifth-largest platinum resource holdings.
Empowerment rules are only one of the challenges faced by the big companies. The major issues today have less to do with the quality or quantity of platinum reserves than with human factors such as safety, morale, and skill shortages. South Africa's mining and construction booms are sharply increasing the costs of labor (though miners typically start at about $450 a month), materials, and utilities. And social pressures are intensifying: A recent report by the Bench Marks Foundation, a South African human rights group, alleged that miners continue to live in substandard housing and that platinum mining areas are plagued by poor air quality, heavy-metal pollution, and problems related to waste and energy management. Outside South Africa, a nagging concern for companies like Impala, whose Zimplat and Mimosa mines are operating in Zimbabwe's platinum-rich Great Dyke formation, is the future of that government's policies requiring indigenous owners.
At Impala, Brown's management team has tried to boost morale by increasing miners' salaries by about 9%, strengthening the bonus-incentive plan, instituting employee shareholding, and improving miners' housing. AngloPlat has taken similar steps, and both firms, along with No. 3 Lonmin, have announced no-harm safety policies with the goal of preventing all job-related deaths and injuries. Even so, mine safety has emerged as a significant issue, in part because deep platinum mines are not easily mechanized. Last year 40 workers died at South Africa's platinum mines, among 199 mine fatalities nationwide. Earlier this year a dozen workers died at AngloPlat's largest mine in Rustenburg, leading the firm to shut down for a week to improve conditions. When AngloPlat's then-CEO Ralph Havenstein resigned in August, he cited safety as a serious problem, and that problem has not gone away: Both AngloPlat and Impala had to temporarily shut mineshafts this fall after fatal accidents. The mineworkers' union held a one-day strike Dec. 4, and, responding to South African President Thabo Mbeki's call for a crackdown on unsafe mines, the nation's mining department plans to conduct safety audits of every mine. Says the union's top safety official, Eric Gcilitshana: "The companies have tried to improve safety, but it's clear that the platinum mines have to do more."
At Impala's Shaft 10, safety signs are plastered every few yards - placards with slogans such as WE ARE PROUD TO BE SAFE! AND ARE YOU DOING WHAT YOU CAN TO PREVENT ACCIDENTS? Mine managers say everything possible is being done to make the mines safer, and Impala has vowed to end all mine injuries by 2012. But analyst de Hoop contends that some mine injuries are inevitable: "You can have the best safety programs in the world, but there are also attitude problems, and the offered safety equipment is often not used correctly or at all."
How long will the platinum boom continue? Johnson Matthey, a British chemicals company that manufactures catalytic converters, predicted last month that, because of supply pressures, platinum could trade as high as $1,575 an ounce within the next six months. De Hoop agrees that production shortfalls are "likely to place upside pressures on prices." That means that even if demand falls off, platinum isn't likely to lose its shine anytime soon.
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