Aquarius Platinum to Halt Marikana Mine Due to Weak Price Outlook
ANGLO American Platinum Ltd. and Aquarius Platinum Ltd. have announced plans to halt production at their jointly owned Marikana platinum mine in South Africa due to low platinum prices. The move is likely to trigger wider production cuts across the industry, analysts say, as other platinum mining companies opt to shut down rather than sell platinum at a loss.
Platinum is scarcer and more expensive to extract than gold and traditionally trades at a higher price, but weak industrial demand for platinum – coming amid worries that the euro-zone debt crisis will sap global growth – have pressured platinum below the price of gold, and below the cost of production for a growing segment of the industry.
The Marikana closure could signal a willingness on the part of Anglo Platinum, the world’s largest platinum producer, to remove excess and inefficient capacity from the market, say analysts. However, the production cutbacks–even if other mining companies follow suit–aren’t expected to dent supplies for some time to come.
Metals consultancy, Thomson Reuters GFMS, estimates that the platinum market will have a surplus of 735,000 ounces this year, while Johnson Matthey said the 2012 surplus will be similar to last year’s-which was 430,000 ounces. Anglo Platinum has already cut capital spending plans at its South African platinum mines, by about 1 billion rand ($13 million) throughout 2011/2012. The company has decided to prioritize less capital-intensive projects in the near term given volatility in the platinum markets and escalating costs. In May, Lonmin PLC, the world’s third largest primary platinum producer, warned there was a risk production plans in the industry could change, given ‘an unrelenting depressed pricing environment’.