All good things must come to an end. The platinum party seems to be quietening down after three festive years . But the three major SA producers are still churning profits out and their share prices remain at or near record highs.
There's a strong case to be made that Anglo American Platinum (Angloplat), Impala Platinum (Implats) and Lonrho Platinum (Lonplat ) are merely taking a breather before getting back into the swing of it.
After three years of unprecedented growth during which profits doubled year on year as platinum and palladium prices soared, there was a return to reality during 2001: the prices of both precious metals spiked and then dropped sharply.
The platinum price peaked at US645/oz in January last year and then fell back to just above 400/oz, from which level it has recovered to above $500/oz. The palladium price peaked at 1 094/oz in January and then slumped to $360/oz at end-September. The metal continues to trade around those levels.
The falling metal prices knocked Angloplat's basket price received on metal sales (made up of gold and six different platinum group metals) down 16,2% for the year to end-December. Implats' basket price came off 30% for the six months to end-December.
That translated into pedestrian increases in attributable profits over these accounting periods of 2,4% for Implats and 16% for Angloplat, but both operations are still showing margins above 50% and the profit levels are mouthwatering.
Angloplat made R8bn in attributable earnings for 2001 and Implats reported attributable income of R2,1bn for the six months to December.
The outlook for platinum remains favourable. It is, at any rate, much better than for palladium. That suits SA companies because they are primarily producers of platinum, accounting for more than 70% of world supply.
Palladium is a by-product of the operations of the SA producers, which account for just 27% of world supply. Russia is the main supplier with 60%.
The two foundations of platinum demand - jewellery and auto catalyst - have held up well against the global recession, and both markets are expected to continue growing.
In auto catalyst, which is used in catalytic convertors to clean up vehicle exhaust emissions, platinum is gaining market share from palladium, and ever-tightening legislation on exhaust emissions means higher demand for platinum. The rising popularity of diesel engines, especially in Europe, also translates into greater demand for platinum because palladium cannot handle emissions from a diesel engine effectively enough.
On the jewellery side, the Japanese market has dropped but is expected to stabilise. It has been replaced as the biggest consumer of platinum for jewellery by China, where growth is expected to continue. Development of the Chinese market from nowhere to number one over the past five years has been accomplished through an innovative marketing campaign paid for by the SA platinum companies.
Not surprisingly, the share prices of the three main SA platinum producers have staged sharp recoveries after the pullbacks experienced in the middle of last year. They continue to push ahead with their respective growth strategies to meet expected demand.
The largest expansion is that of Angloplat, which intends pushing output from 2,1m oz/year now to 3,5m oz/year by 2006.
Anglo Plat chairman Barry Davison says on-going research shows Angloplat's expansion to be an "appropriate" strategy.
Good times for the platinum business have also triggered a boom in the numbers of new entrants wanting to break into the business in SA and elsewhere.
In SA, interest in getting into the platinum game has been intensified by the drive for black economic empowerment (BEE) in the mining industry.
Outside SA, the spur is the search for alternative platinum-bearing geological formations like the Bushveld Igneous Complex (BIC), which hosts the Merensky and UG2 reefs being exploited by the SA producers.
In geo-speak, the BIC is a "layered, intrusive ultramafic formation" and the search around the world has, until now, concentrated on similar geological formations. But that mindset seems to have been broken by junior mining companies looking at different structures in North America and Australia that could host platinum group metals in more diverse orebodies, such as the Lac des Isles deposits in Canada.
The SA platinum majors are right in there alongside the juniors through joint ventures that will give them sizeable equity stakes, and often control, of any new platinum mines that may be developed.
Lonplat has been the most active in Australia, taking equity stakes in the two most promising developments , controlled by listed Australian juniors Platinum Australia and Helix Resources.
The projects are tiny at this stage compared with what is being developed in SA, but Australian geologists think this is just the tip of the iceberg and that, as more money and effort is put into the search, more platinum strikes must take place.
Outside SA, the most dramatic developments in bringing new platinum output on line have taken place in neighbouring Zimbabwe, where another Australian junior, Zimplats, has started production on the Great Dyke from its Ngezi mine.
Lonplat tried to buy into that operation but failed, apparently because it wanted outright control and the Australian controlling shareholder, Delta Gold, wanted to retain a substantial minority stake in the mine.
Delta found its partner in Implats, which formed a joint venture with Absa Bank to take a 30% stake in Zimplats. Delta, now called Aurion after merging with Gold Fields of Australia, ended up with a 21% share.
The attraction of the deal for Implats is that all platinum metal produced by Zimplats will be refined by Implats in SA and then marketed by the group.
Initial production from Ngezi will be small - about 98 000 oz of platinum and 82 000 oz of pal-ladium annually. Implats' total output is about 1,3m oz. But it could be the start of bigger things .
Zimplats now controls the bulk of Zimbabwe's platinum deposits and estimates its total resource position at about 163m oz of platinum and 114m oz of palladium.
There has also been plenty of activity on the corporate side of the business, with particular focus again on Implats, which could face big changes after July 1. That's when controlling shareholder Gencor is scheduled to unbundle its 46% stake in Implats to its own shareholders.
That action could open the door to corporate merger and acquisition action affecting the future control of Implats. One possibility is the resurrection - in modified form - of the merger proposal with Lonplat that was previously vetoed by the European Commission.
Implats' new CEO, Keith Rumble, has identified the company's lack of international investor exposure as a key issue to be tackled in the effort to get a higher investor rating for Implats stock. Implats lags well behind Angloplat and Lonplat shares.
Turning to Angloplat, the key question is just how much longer this heavyweight, blue-chip mining group will remain listed on the JSE Securities Exchange, given the way parent Anglo American has been steadily building up its shareholding.
That is now up to 59,4% from 51% a year ago and some observers believe it's just a matter of time before Anglo takes it all and delists Angloplat. That would be yet another blow to the JSE as Angloplat, with a market cap of R108bn, is one of its most important remaining listings.
Lower down the platinum pecking order, Aquarius Platinum finally succeeded in taking over Kroondal and delisting it from the JSE. Aquarius's next strategic step is to move its listing from the Alternative Investment Market (AIM) in London to the main board of the London Stock Exchange.
Aquarius has a string of projects to be developed in SA in partnership with Implats, and the man responsible for making them work will be Stuart Murray. Last year he left Implats, where he ran the new business division, to join Aquarius as MD.
Last year was not a particularly good one for Northam Platinum because, in addition to the downturn in platinum revenues, it was on the receiving end of a five-week strike over wages that rated as one of the worst in SA mining history.
That's despite Northam's status as a black empowerment mining operation jointly controlled by Angloplat and Mvelaphanda Resources, whose chairman, Tokyo Sexwale, is also the chairman of Northam.
The strike cost Northam R180m in lost revenues, resulting in a 45% drop in operating profits for the six months to end-December. Despite this and the high working cost of its operations, the Northam share price has also recovered well so far this year, moving back towards its 12-month high of R18,50.