If any sector of SA's mining industry has a worthwhile future, it is platinum. So the developments of the past year must have been worrying both for platinum company shareholders and the economy in general.
There is a continuing squeeze on the industry caused by the strength of the rand against the US dollar. That has hammered the profits of the existing big producers, and has forced a further scaling back in industry leader Anglo American Platinum's (AngloPlat) ambitious expansion plans, as many of the proposed new platinum mines are not viable at present exchange rates.
Last year AngloPlat CEO Ralph Havenstein announced a revision in the group's expected growth to an output of 2,9m oz/year of platinum in 2006 from the original target of 3,4m oz/year. This year he reduced that estimate again to between 2,7m oz/year and 2,8m oz/year.
The revenue squeeze has also claimed its first victim - Canadian-listed Southern Platinum. Southern Platinum controls the Messina mine in Limpopo province. In March it announced it was selling to rival Lonmin.
Southern Platinum CEO Patrick Evans blamed this primarily on the strength of the rand. The Messina mine was unable to generate enough revenue to service the debt incurred for its development. Mounting losses eventually forced the sale of the company. The Messina mine had lagged behind schedule in its forecast production because of mining problems. Lonmin intends rectifying that.
The acquisition adds another 20m oz of platinum resources to Lonmin. That could allow the group to expand more rapidly. But market reaction to the deal was generally negative. Mining conditions at Messina are difficult and some platinum industry executives believe Lonmin has overpaid for the assets.
But the Messina mine was not the only one suffering from operational problems. All the new developing mines ran into trouble of some kind, bearing out the industry adage that there are two kinds of SA platinum mine - those on the Western Limb of the Bushveld Complex, and the rest.
SA has the world's greatest known platinum reserves, hosted in a geological formation known as the Bushveld Complex. It is split into two main sections or "limbs" - the Western Limb around Rustenburg and the Eastern Limb running north from Lydenburg.
The full extent of the Bushveld Complex was traced out in the mid-1920s by famous geologist Hans Merensky and all but four of the established mines are located on the Western Limb. Of the four, only one - AngloPlat's Potgietersrust operation - has been an outright success. The others are Messina, Northam Platinum (the highest-cost producer in the SA industry) and AngloPlat's Atok mine, which is marginal.
This year, Impala took a R1,45bn impairment charge against its developing Marula mine, dropping the book value from R2,2bn to R724m. The mine is running two years behind schedule because of geological and mining problems.
Like Messina, Impala has been forced to change the mining method - but in the opposite direction. At Marula, Impala had initially gone for a more mechanised system but is now changing to a traditional, more labour-intensive method.
Modikwa Mine - a 50/50 joint venture between AngloPlat and Patrice Motsepe's ARM - is doing better but is still losing money. The schedule to full production is running behind and Modikwa lost R53m in the six months to end-December.
Despite all these problems, the flood of listed Australian, Canadian and UK exploration and junior mining companies into the SA platinum industry continues.
Their role model is Australian-listed Aquarius Platinum, which has established itself in the sector with two mines up and running - Kroondal and Marikana - and a third under development.
Aquarius is going from strength to strength. Last year CEO Stuart Murray negotiated a "pool and share" deal with AngloPlat, which substantially extends the life of the Kroondal mine.
In December, Aquarius was the first foreign mining company to list on the JSE Securities Exchange after the changes to foreign exchange controls, which now permit such dual listings.
All this exploration interest from foreign companies is welcome, given SA's increasingly poor image in terms of attracting exploration investment. That is the result of the complications and confusion linked to the process of obtaining a prospecting permit in terms of new mining legislation.
So far only one platinum exploration company has actually left SA. London-listed Eurasia Mining sold out last year to Australian explorer Nkwe Platinum and went off to prospect in Russia, saying the potential was greater there.
But many of these new ventures are not going to be successful and many investors are going to burn their fingers - a minority will get very rich.
That is the high-risk, high-reward reality of exploration and SA investors, in particular, would be well advised to keep it in mind.
A case in point is the Platreef region north of Mokopane (the former Potgietersrus), where AngloPlat has developed its Potgietersrust mine.
There are seven foreign-listed companies exploring in the region, though many platinum company executives say the grade on many sections of the Platreef is too low.
The case for the explorers was put to the Indaba mining conference in February by MSA Geoservices senior geologist Keith Matier. He believes the Platreef projects are viable even at R6/US$1, with the main factor being the relatively high nickel grades on the Platreef. Nickel is a by-product from the platinum mines and would be a huge contributor to revenues at present high nickel prices.
Impala has continued to perform far more efficiently than larger competitor AngloPlat, showing a superior cost performance on the group's established mines around Rustenburg.
But Impala had to face up to problems of a different sort when events in Zimbabwe finally affected the group's operations there, which are held by subsidiary Zimplats.
Until last year Zimplats had escaped almost unscathed from Zimbabwe's runaway inflation, because it had complete freedom with its foreign revenues in terms of a special dispensation. But the forex-starved Zimbabwe government changed the rules last year, with the result that Zimplats' profit margins dropped sharply as local cost inflation took its toll.
Impala's proposed large-scale expansion plans for Zimbabwe are now on hold until the group gets clarification on a string of issues. It is worth recalling that when Impala bought control of Zimplats, CEO Keith Rumble made it clear that this was a high-risk venture. Impala was prepared to accept that risk because it was acquiring the assets so cheaply.
The company that has completely bucked the negative trend is Barplats, which owns the Crocodile River mine near Brits, initially developed by Loucas Pouroulis in the late 1980s.
Pouroulis lost control of the operation to Rand Mines, which also managed it inefficiently and was forced to sell it to Impala, which promptly shut it down. Impala re-opened Crocodile River three years ago but was unable to run the mine profitably.
Pouroulis last year "bought back the farm" when his mining holding company Salene bought control of Barplats from Impala. The Barplats share price subsequently soared from a 12-month low of 160c in April last year to a high of 650c by April this year.
Interim results for the six months to end-December show that Barplats is still losing money, so the fundamental reasons for the increase in the share price have yet to be made clear.
