Simon Brown (00:00)
JC Direct, this week we’re looking at PGMs, both the metals and the miners.

Simon Brown (00:05)
Welcome to Worldwide Markets. This is episode 695 for 23 September. I’m recording early Tuesday afternoon, and then obviously publishing later this afternoon. Worldwide Markets, powered by Standard Bank Global Markets Retail, and Shyft, the global money app that puts travel, shopping, payments, and investments in the palm of your hand. Enjoy the cheapest forex rates anytime, anywhere. Shyft, powered by Standard Bank.

Simon Brown (00:28)
before we get into P PGMs, central banks, we had the FOMC last week. That’s the Federal Reserve. Unanimous raised their rates a quarter of a percent. They have a problem with their inflation. 3.4 percent. We would like 3.4%. We’re gonna get inflation tomorrow or Wednesday, depending when you’re listening. we’ll see how that goes. But the the point is that they’ve been above their inflation target for, I don’t know, five years, more than five years. So they raised a quarter percent.

Simon Brown (00:58)
We have now got our MPC on Wednesday. three o’clock will be the time, will be the announcement. I gotta say, I don’t know what the inflation print for August is. We saw July down at 4.3, nice number, but we’ve got petrol around two rand up in October, diesel around three, a lot of moving parts between now and then. I appreciate. I think we’re gonna get a rate hike from from Saab. And and the reason is aside from the worry about inflation, fair enough.

Simon Brown (01:30)
You also, and they’ve said it before, that you want to stay sort of anchored around the US, because the worry is that if you get too far, that has an impact on the RAND. The RAND, which is being very, very stable. I was doing an interview earlier with webcast with Tom Gale from Standard Bank talking the currency, and it is become just less volatile. It strength, yes, but a markedly less volatile currency, which I think has been very important.

Simon Brown (02:00)
But let’s get to PGMs. I’m also going to create, and I want to do this more often with the shows. I’m going to create a document that that goes along with it, particularly when I’m doing investment themes like we’re looking at today. So look at the PGMs, platinum group metals, and then dive into the locally JSC listed miners. I will then create a document.

Simon Brown (02:25)
But I don’t know, eight to ten pages or so that you can then download. It’ll be free. you’ll find it on the show notes. So you’re gonna to go to the show notes wherever that might be, either in the podcast pod app, pod podcast app that you’re using, YouTube, or just go to just onelap.com slash WWM and look for the the PGM show and you will find it there. You can download the the only requirement is that we ask you to sign up for our newsletter.

Simon Brown (02:57)
And if you’re already a subscriber to that, no problem. And if you don’t like the newsletter, you unsubscribe. No problem. But the report is free. But let’s get into it and let’s start off, I suppose, with the actual metals themselves. And we’re in a bit of a bull market, but it’s absolutely come back. platinum spiked well above where demand could sustain it. and it’s gone from deficit into surplus. That is significant. We’ll come back to that. and price has

Simon Brown (03:28)
Traded from from where it was. So platinum hit those all-time highs 26 January of this year, smashing 2008 records, and then fell almost 50%, now trading around 1780. it was as low as 1535 back in July. Still some 39% off the highs and about 16% off those lows. the 26 so far year-to-date average 1954.

Simon Brown (03:49)
Way above anything that miners have seen since that boom in 2021. Palladium, pretty much the same thing. Peak to trough 47%. different demand profiles. We’ll dig into those. But let’s have the the the the charts themselves, I think, tell a fairly interesting story in terms of of of what we’re seeing for the for the commodity. So platinum has definitely pulled back. We’re certainly seeing some strong support.

Simon Brown (04:14)
Around about that 1600, and then probably some resistance at around about the 2000 level, trading at 1800, so kind of smack in the middle of those two. At this point in time, the miners are profitable, and that perhaps is the key point. We’ve then also got, of course, palladium, different dynamics, but imagining a a a chart that that that that looks different, but perhaps not as different as we think. Again.

Simon Brown (04:41)
The support down around 1200 is really the biggie that has held. And then we’ve got a resistance at around about the 1500 level. So a a lot of important numbers there. Short version, we’re kind of in the middle. So the price story is really two stories rather than one. It’s those all-time highs, smashing records. It’s falling back quite markedly. And we’ve seen a bit of a bounce since then. Point was that the high price has killed the demand.

Simon Brown (05:11)
So the demand created the high prices, of course, and then the high price destroys the demand. demand destruction. This is, you know, cycles commodities 101. 2025 deficit of almost one and a half million ounces was driven by 1.1 million ounces of investment demand and a Chinese jewelry restock. But it you know, almost $3,000 Chinese fabrication.

Simon Brown (05:32)
Collapsed 76%. It just basically was saying far too much, don’t want it. ETF dumped some 200 plus thousand ounces in the quarter as well. In other words, the price got there and everyone was like, ha, thank you, but no, thank you. So, what we have got in the platinum space is a scenario where we had a deficit, almost one and a half thousand million ounces. We now have got a surplus. Now, to be clear, the surplus is 265,000 ounces, it is a small amount.

Simon Brown (06:04)
But above a certain price, buyers leave. Platinum is not like gold. Gold is a different beast. Gold is, you know, shiny and gold and central banks and store of value and all of that. Platinum has a utility. And if that utility, if the price gets out of kilter, the utility says, thanks, but no thanks. Another important point, we always talk around, not we always, but I think one of the things that comes up is the EV story, and it’s the wrong question. So 23 million odd EVs sold last year.

Simon Brown (06:38)
It’s about a quarter of global vehicle sales, but growth has slowed to around 11% and and falling. So it that makes sense, right? You’ve got the base, it now starts to fall off, but hybrids are coming into fashion. Hybrids are becoming the biggie. we’re not expecting EVs to outnumber ice until 2047. Hybrids are going to come and take a lot of the gap, and they need PGMs because they’ve still got the ICE engine. so certainly, you know, we’re not expecting this to be a cliff.

Simon Brown (07:11)
For PGMs, it is a slow bleed rather than a cliff. The the real threat to PGs, PGM miners was never really electric vehicles. So let’s put that to bed. But where is some growth? And here’s something which I was surprised when I discovered it and did the digging around it. AI. Yeah. So no one’s particularly talking around this, but the the the AI build-out needs platinum.

Simon Brown (07:36)
PGMs, but platinum is most notably platinum industrial demand up 5% in 2026. We see glass demand up, electrical demand, electricity demand. This is data center build-out. So, you know, and and it’s in many cases, it’s the minor metals. Northern has got reuterium. Is that how you say it? Up 151% to eleven hundred dollars an ounce. and that is high where do you where do you use this?

Simon Brown (08:02)
Rutheri ruthenium R-U-T-H-E-N-I-U-M. I don’t know how to pronounce that. Hard drives. Think SK Heinex. Think those folks who’d be making a killing. Iridium up 30%. And they are, in the case of Northern, 13% of revenue, but a chunk of profits. And what we are seeing, the World Platinum Investment Council explicitly pointing at China’s 300 billion and US’s what $600 billion.

Simon Brown (08:25)
AI spend as a new vector for demand in the PGM space. So it’s it’s the story’s sort of consolidation, not the price. The price is fine. We’ve seen Northam have disclosed that they’ve been approached by someone. Bloomberg says it’s probably Volterra. We’ll see what happens in that regard. that has to be done. There has to be a expression of interest by 5 p.m. one December.

Simon Brown (08:49)
So a couple of months away. If Volterra buys it, it takes us from four to three. and and Volterra Northern would be a long way the biggest story in terms of the platinum space. One December, that is an important date. so so everyone keeps on saying, what about platinum going back to 2900? the miners don’t need it. Would they like it? Well, of course they would. But you know, I mean, the implants generated 22 billion of free cash flow.

Simon Brown (09:20)
Northern earned a 44.9 cash margin margin on their 4E basket, 2,338. Volterra’s got 24 billion net cash and all in sustained costs on their 3E of $996. Importantly, some do 3E, some do 4E, some do six E. These are the different mixes. It does make Apple for Apple a little bit difficult. Point is, at current prices.

Simon Brown (09:41)
The sector is still very, very cash generative. That matters. It’s not about does the price recover, it’s what do they do with the money? And so far, that’s been dividends and well, can they buy each other? So, what are the key points? if the 2025 deficit was manufactured by investors in Chinese restocking, where’s the real underlying demand? Johnson Matthew, which strips out investment. So it says

Simon Brown (10:06)
platinum is still a 370-odd thousand deficit. The World Platinum Investment Council, which includes investment, says it’s a surplus. It’s kind of somewhere in the middle, I suspect. In fact, Metal Focus says a 300,000 deficit. It is tight in that regard. but you know, if we suddenly see investor demand coming back, if we suddenly see jewelry demand coming back, then we are definitely into it

Simon Brown (10:31)
a deficit. Rhodium, $9,000 an ounce. This one has been $30,000. It’s been $1,000 and all of that in the last five years. Legally mandated auto-demand inventories, and they’re heading below three months of cover, from what I can find. So that starts to get quite stressy. And I said before, rhodium, almost 10% of Northam’s four E ounces and 35% of revenue. That’s a biggie for Northern. Sabania Stillwater, disclaimer, I hold Sabania. It’s my holding in the space. I like the PGM gold blend.

Simon Brown (11:02)
I might be wrong, and maybe I should get a pure, I’ve also got Anglicoldish anti. Why didn’t I get a pure gold or pure PGM? But I’ve Sabania. They’ve been petitioning Russia for anti-dumping duties. Sorry, petitioning Washington for anti-dumping duties on Russian palladium. and they got a 132% final margin back in April. Does it make US operations viable? Does it mean that American car makers pay more? We’ll find in time. And then the the northern

Simon Brown (11:31)
sort of take out potential. Is it a sign of confidence or industry that can’t grow organically? I think a bit of both. I really think perhaps a a bit of a both. So some misconceptions and then we’ll get into the stocks. Platinum is not a precious metal like gold. And that is very important. It is automotive. It is industrial. Automotive industrial is about three quarters of of 26 2026 demand. It’s on the floor, factory floor being built rather than in the bank vault.

Simon Brown (12:03)
all northern all platinum miners are the same? No, not not even close. I mean, Northern almost a 45% cash margin. Sabania earned a 12% all-in-sustained cost margin on their US operations. They’re different. South Africa is a risk. Sure, South Africa is a moat. Supplies 70% of the world’s platinum, 60 to 80% of the world’s rhodium, and is expecting flat supply over the course of the year. There is no other source.

Simon Brown (12:30)
Russia a bit. Yeah, no. EVs are killing platinum, not happening. autocatalyst is 41% of platinum demand. It’s falling a little bit, maybe four percent a year. It’s gonna be it’s a it’s a very gradual playoff. This is not a cliff. So where’s the price? It as I said, it it opened, it ran, that was a lot of demand coming through. and that demand, particularly in the investment space, then collapses. So we see that coming back down.

Simon Brown (12:59)
In in in a large supply. where are we? Mine supply twenty-five versus twenty-six forecast is essentially flat. Recycling about eight percent higher makes sense. Price runs, you want to recycle, which does put total supply forecast for 2026 at about two percent up. Automotive down four percent, drawerry down fifteen, industrial down five percent, and investments just crated, which meant demand.

Simon Brown (13:21)
was down eighteen percent. And that’s where we get that two hundred and sixty five thousand ounce surplus for this year versus the deficit of almost one and a half million ounces last year. It’s a swing of of one point seven million ounces. It’s investment, it’s demand from jewelry, it it just collapsed. But it was really, really investment. So the supply is the structural fact. Mine supply is flat and has been flat for the better part of the last decade or so. South Africa is producing four thousand ounces of it.

Simon Brown (13:56)
Sorry, four million ounces, Russia about six hundred thousand ounces, and they’re down five percent. and and we metal focus has supply dripping slightly, particularly because if we’ve seen some flooding, we’ve seen st still water west closures in North America, Canada, and there’s no new supply coming. there is. There is one happening, we’ll come to that in a moment. Above ground stocks, about two million ounces, about three and a half months cover. That’s quite thin. That is quite thin.

Simon Brown (14:26)
Quite thin. at least rates of up ten percent in late twenty twenty-five. They’re back down now. They sit at around two percent. So we’ve got different ideas of where the surplus or deficit is. The point is numbers are tight. Above ground supply is tight. We’ve either got a surplus of about two hundred and sixty thousand ounces or deficit of about three hundred and ten or three hundred and seventy thousand ounces. Very, very tight. Quickly on on on palladium.

Simon Brown (14:55)
Johnson Matthew has a deficit for last year and a surplus coming in this year of around 200,000. Metal Focus looking for a price of around thousand five hundred and seventy. and we’ve seen UBS raising palladium prices going forward into the market and into next year. So there are a couple of bull cases here. Mine supply fell last year and again this year. Russian ore grades are declining.

Simon Brown (15:21)
and the shift from combustion is running slower than than than expected. I mentioned already the hybrid adoption. and this is one that perhaps matters for Sabania. Palladium’s discount to platinum has widened, that we can start to see substituting palladium back into petrol. Auto catalysts is once again economically viable. and as I said, 28 April, the US Commerce Department made a final affirmative anti dumping determination on unwrought Russian.

Simon Brown (15:47)
Palladium, basically a margin of 132.83%. We’ll see how much we’ll see exactly how that does help the Montana operations that Sabania has. Rhodium, perhaps the most interesting. And we talk about it in South Africa because of course there’s the Rhodium ETF, ETF R H O. So it excites us. price around 9,000. It’s hard to get a price, it’s very illiquid. earlier in the month it was 9,700.

Simon Brown (16:12)
Northern for financial year 26 got 8,450, which is up 76%. we’re looking metal focus, there’s a price of around ten thousand two hundred for this year. That’s up sixty-two percent. inventories below three months, which is very, very tight. and Johnson Matthew, small surplus and then a deficit from from last year, but fifteen thousand ounce surplus this year and fifty five thousand deficit of last year. So the structurals make rhodium.

Simon Brown (16:39)
very different. Global production is only about maybe 30,000 tons. It is hundred times more scarce than gold. South Africa is about 60 to 80 percent of it. Russia about 10%. and that that demand is all auto catalysts. the the euro china us EPA standards autocatalysts absolutely for the miners it is northern northern is rhodium absolutely so demand where’s it falling jewelry price gets too high

Simon Brown (17:04)
Platinum, people walk away. Falling slowly, automotive. Four percent a year sliding, neither here nor there. But AI, this is where there is a growth story. industrial platinum demand up five percent. ruthenium, ruthenium, I that one I can’t pronounce to save my life, forecasts a 200,000 deficit in in 2026. And that is, they say, a absolute proxy for for AI build out. so small base.

Simon Brown (17:28)
But running. And then, of course, hydrogen, very small base, up 72% year on year. But the hydrogen economy also needs some some PGMs, but it is absolutely tiny. And then investment. And I don’t know, investment’s a wild card. You know, if it runs again, we’ll see people coming into the ETFs, and that’ll absolutely run it. So quick look at miners. and and and let’s have a a quick squiz at at the the the simple version of

Simon Brown (17:57)
of of the the the the miners and i suppose the the key differences between them because that really is what what matters they all pgms but they all come at pgms differently so northern the best basket we’ve got a an underfloor of that potential auction floor under the price we know in December rising costs eland execution in a deal that might not come but they’ve got the the the the rhodium and other angles

Simon Brown (18:26)
Which is absolutely helping. Vorterra, lowest cost, massive balance sheet, best asset, priced at ten point two trailing, so not the cheap one. and strength hurts the USD cost line. In plats, volume diversification, highest declared yield in the sector, and a capex step up in Zimbabwe. Sabania, gold, and PGM. Also, Montana’s got some lithium, some copper, but there’s there’s a lot of

Simon Brown (18:49)
T’s and C’s around Montana. And then Theresa, which we haven’t mentioned, but they’ve got Chrome cash flow, plus the Caro as a as a triple or triple output option. But they got a fund that Caro in Zimbabwe is a 500 million project and they’ve only had 460 million market cap. So a a little bit of of ways to go there, but certainly a a a good selection here. and if we pull up some more numbers directly related to the the PGM miners.

Simon Brown (19:20)
In terms of market caps, I mean what we’ve and and and dividends, market caps, they they they I mean Theresa’s really, really tiny, but others such as you know, I mean Volterra’s the biggie implats, this then implats, the Banya moderately small. PE’s all around eight, Theresa’s at three point eight, Voltera’s at ten point two, you pay for premium. In Platz six point seven.

Simon Brown (19:44)
I like that impact. Net cash, debt. Sabania’s got debt. That’s Sabania for you. But cash, Northern’s got two billion. Volterra 23. Implots 22. Man, there is money there. The all-in-sustained costs are just messy because we don’t because we’ve got three E ounces, four E ounces, two E ounces, six E ounces. IBA DARS strong, revenue strong. The short version here seems to be the general consensus is that Volterra is the preferred.

Simon Brown (20:11)
in the space. Absolutely quality for size for everything else. Northam, I think probably the outlier, which actually really attract looks attractive in large part because of, as I said, we’ve got those other platinum group metals outside of palladium and platinum. And that might be what makes Northam important. So I’m thinking for Terra and I’m thinking Northam. And at this point we don’t need prices to change. If prices run higher, which will probably be investment demand, great stuff.

Simon Brown (20:41)
We’ll grab that with both hands, but that is not a part of the the investment thesis. Stocks are making plenty right now as it is. Worldwide markets, powered by Standard Bank, Global Markets, Retail, and Shyft, the global money app that puts travel, shopping, payments, and investments in the palm of your hand. Enjoy the cheapest forex rates anytime, anywhere. Shyft powered by Standard Bank.

Simon Brown (21:05)
Thanks to Standard Bank. Thanks to Shyft for helping with the show. Remember, as I said, we have we will publish the the report. I was doing some screenshots from it there. you can find it either in the Just One Lap website or wherever you get it. I’ll stick it in the the show notes for the podcatchers. I’ll stick it in the YouTube channels as well. Direct link, you can go and grab it. But we leave it there. it’s a short week. Looking forward to that. Next week, everything back to normal. 11. Well, as of today.

Simon Brown (21:41)
As I’m recording is 12 weeks until year end. 84 sleeps. And then I’m on holiday. 15 December. It’s a lot of sleeps. It’s a lot of sleeps. But we’re back again next week. We’re gonna talk education stocks. Stadio and I was gonna say Cura, they gone. Stadio and Advitec. my name is Simon. Look after yourself if you can. Look after somebody else as well. Cheers all.