On 16 October 2017, Impala Platinum (Implats) announced a 15% strategic investment in the Waterberg Development project. Implats had the right to take a majority stake in the project, based on the outcome of a feasibility study. 

The ore body in question is particularly rich in palladium. At the time, the price of palladium was close to $1,000 an ounce, which was hardly shooting the lights out. But it was about to surge, propelled by moves toward petrol from diesel engines in key markets such as Europe. 

Palladium is the platinum group metal (PGM) of choice in petrol catalytic converters, which reduce emissions from vehicle engines. By late 2019, palladium was over $2,700 an ounce, almost triple its price since Implats announced its participation in the project. 

So it was looking like a done deal, with Implats, which was generating nice cash flows, seen likely to take its option to lead the project into development and production. 

This tidy narrative has been upended, like so much else, by the Covid-19 pandemic. 

“The original investment decision was informed by Implats’ stated strategy to rebalance its portfolio of mining assets towards lower risk, shallow and mechanisable orebodies,” Implats said in a statement on Wednesday, 17 June. 

Implats has not been alone in the pursuit of such a strategy. Anglo American Platinum (Amplats) has made a profitable pivot to mechanisation, a structural shift triggered in part by the explosive rise of the Amcu union and years of violent social and labour unrest on the platinum belt.  

Implats said a number of factors have gone into its decision, including its funding and shareholder requirements, which are focused on shoring up its balance sheet and returning value to shareholders. It also pointedly noted “the implications of the Covid-19 pandemic on the global economic outlook” and “Investor financing appetite for large greenfield projects in general.”

There is little investor appetite at the moment for such undertakings. And developing a mine in the ecologically fragile Waterberg region will certainly be on the radar screen of conservationists if it ever gets off the ground, raising its risk profile. 

“After taking these considerations into account, the Implats Board resolved that the Group will not exercise its option to increase its shareholding in the project at this time.” 

Implats spokesperson Johan Theron told Business Maverick that: “With big greenfield projects, you need all the planets to be lined up to do them successfully.” And the planets currently are not in the right orbit. 

MiningMX noted that this “leaves the Waterberg JV’s [joint venture] other partners, such as Hosken Consolidated Investments (HCI) in the lurch”. 

It also raises other questions. Palladium just a few months ago was red hot. If a company of Implats’ size and experience is not about to take the plunge into a new palladium project – one that would create jobs and contribute to South Africa’s GDP and export earnings – who will? Amplats and Sibanye-Stillwater come to mind, but they also need to conserve cash in these uncertain times. 

There is little investor appetite at the moment for such undertakings. And developing a mine in the ecologically fragile Waterberg region will certainly be on the radar screen of conservationists if it ever gets off the ground, raising its risk profile. 

A big new mining project in South Africa is a rare species and one that might be on the road to extinction. DM/BM