African Rainbow Sees Platinum Mergers Boosting Margins

African Rainbow Minerals Ltd., the mining company founded by billionaire Patrice Motsepe, is seeking to merge platinum assets in South Africa to improve profit margins.

“The platinum industry is ring-fenced by little boundaries and no one is making any money,” Mike Schmidt, chief executive officer of Johannesburg-based African Rainbow, said in an interview on March 7. There is “duplication of capital, duplication of infrastructure, duplication of resources, power, water, people. It’s not very sensible.”

African Rainbow’s platinum unit operates the Modikwa mine, a venture with Anglo American Platinum Ltd., and the Two Rivers venture with Impala Platinum Holdings Ltd. in the eastern part of the Bushveld Complex. Platinum producers in the country, where more than two-thirds of the precious metal used for jewelry and catalytic converters is mined, have seen their margins squeezed by falling prices and higher costs.

Platinum sales, which made the biggest contribution to African Rainbow’s earnings in 2007, have since been overtaken by manganese and iron ore, Schmidt said.

Platinum for immediate delivery fell 1.1 percent to $1,466.13 an ounce by 9:26 a.m. in Johannesburg, extending to 16 percent the decline from its highest level in 2013 of $1,736.80 an ounce.

African Rainbow, whose operations haven’t been affected by strikes at South African platinum mines, is increasing annual output at Modikwa to 240,000 metric tons of ore from 200,000 tons as it seeks to improve margins. The company may further increase output to as much as 320,000 tons, Schmidt said.

“That’s not where you want” to end, Schmidt said. “ARM believes it is in a unique position with its partnership with the two biggest majors to allow us to manage, mine, operate and go to a level of consolidation.”

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