Potential mining supercycle on the way – Froneman

The mining sector saw R75bn in sales in March, up from R51bn March 2020.
Move to fuel cell batteries is driving demand, says Neal Froneman. Image: Waldo Swiegers, Bloomberg

The mining sector is about to enter a potential “supercycle” says Sibanye-Stillwater CEO Neal Froneman.

Speaking during a Ninety One webinar earlier this week, Froneman said the global movement away from fossil fuels is one of the main drivers of this trend, as it has encouraged the migration to more eco-friendly fuel-cell-based energy storage, which is largely constructed of platinum group metals (PGMs).

This move away from fuels that lead to greenhouse gases is expected to see the global automotive fuel cell market grow from about 20 168 units in 2021 to over 596 000 units by 2028, according to MarketResearch.com.

Platinum records

This transition can already be seen somewhat in Sibanye-Stillwater’s results for the first quarter to end-March, which saw its PGM production in South Africa rise 6% to 13.83 tons.

Higher PGM prices saw its adjusted earnings before interest, taxes, depreciation, and amortisation ­­(Ebitda) rise a massive 90% to R15.2 billion.

There is a similar story at rival Anglo American Platinum, which saw total production for PGMs increase 7% to 28.95 tons for the quarter.

Froneman says this new cycle is not limited to PGMs, but applies to commodities in general. His view has been backed up by the latest mining production figures released by Statistics SA, which showed a massive 21.3% year on year in March.

In a research note, the Nedbank Group Economic Unit says copper production, which was up 63.4%, grew for the first time in seven months. The same was true for gold output, which rose 10.5% after 11 months of contraction.

“Sales continued to benefit from increased global demand, higher commodity prices and improved operations at major ports,” Nedbank said.

Mike Schüssler, chief economist at Economists.co.za, noted on Twitter that the quarter saw the mining sector earn R75.1 billion sales in March 2021 alone, compared to the R51.1 billion it made in March 2020.

Source: Stats SA

Sunrise

The positive momentum in the industry has seen Sibanye-Stillwater commit to investing R6.3 billion in three new projects – two in PGMs and one in gold – which will create 7 000 long-term jobs.

The change in prospects for the mining sector has been so stark that Froneman said Minister of Mineral Resources and Energy Gwede Mantashe recently told him that he informed the cabinet that mining was no longer seen as a sunset industry.

But is the talk of another commodities supercycle that drove the mining sector in the early 2000s too soon?

Hannes van den Berg, Ninety One co-head of SA equity and multi-asset, was reluctant to be drawn on whether the mining sector is about to enter a supercycle. He did say the group had foreseen disruption to supply as a result of the Covid-19 crisis.

It is his view that this “supply chain disruption is forcing commodities to where they are now”.

Not-so-super SA 

Although the industry’s prospects look strong, Froneman still has concerns when it comes to investing in the local mining sector, despite the greenlighting of the three projects.

Policy uncertainty, along with extraordinary delays when it comes to getting the government’s approval for mining projects, are all things that are holding back the development of the industry.

“We have many projects that are good projects in a normal environment, however, when you can’t predict the price of electricity, which is 20% of your costs, or the reliability of supply, or the legal tenure of ownership … these investments are unlikely to be approved by the board.”

This lack of certainty is costing the country.

When asked in the webinar if Sibanye-Stillwater would consider investing in SA ahead of expanding abroad, Froneman said given the obstacles faced in the local industry, this was unlikely.

“We are proudly South African. We are not leaving SA, but we do need to grow our business in a way that mitigates some of the risks that I’ve mentioned.”

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” Potential ” supercycle. This does not take into account the ANC and its destructive policies.
Had the ANC not destroyed the Mining Industry it would be a real boon for the economy. The zamazama’s will be smiling. As it is the boon will be muted.

Correct, just wait till Oom Gwede hears about this. He will surely p** on this parade.

Super cycle and he sells his shares.

That says everything.

Thank you Eskom and ANC for chasing away investments! Amandla!

I take my hat off for Neal Froneman,
I see him as an economic visionary in the mining sector.

When everyone was negative about Gold he went in and started buying mines at the lowest possible price.

Look today, he took Sibanye from R15 to R63!

I don’t listen to all the negativity about resources/metals companies,
they are cash flush! and will continue to do so, I will buy some more.

The oracle has evolved into a bewhiskered guru. A new word for the dictionary, how about Oragure? or the more fragant Fromagure? He got it wrong with Uranium but there is still time for that if you put it in your will or family trust.

Bat Mountain also lies next to Death Valley. The chasm of post euphoric quantitative easing still lies ahead, before any super cycle.

“or the legal tenure of ownership” – no more needed to be said. Remove that & the sector will explode

Take the 40% increase in the money supply in the US over the last 12 months alone, multiplied by the money-multiplying effect of the fractional reserve banking system and it is clear that the share price of mining companies will have to rise by 400% just to catch up with the devaluation of the dollar.

The price of stuff is determined by the amount of money we spend on it. If we consume more of one thing, without consuming less of other things, then it is clear that we cannot have a super-cycle in anything without first having a super-cycle in money-creation. For prices to rise across the board, new money must enter the system.

Therefore, a general rise in share indices requires a cycle of credit expansion. That implies that only the Federal Reserve can create a super-cycle.

If the Fed is the only source of super cycles – perhaps you only mean resources – how did the cryptocurrency market explode?

What is exchanged for crypto? In terms of what unit of account do you measure crypto? Keep in mind that I am referring to a GENERAL rise in prices. If all investment opportunities rise at the same time, where does the money come from to support that rise? If the Nasdaq crashes as investors shift from technology to crypto, then it is understandable. That is not what is happening. Everything, even bonds, is rallying.

That brings us to the point – are share indices rallying to be at all-time highs, or is the unit of account crashing to be at all-time lows?

Don’t bet against the Fed – if I am not mistaken that is a quote from Mr Buffet. Fiat money is a means of exchange and its store of value attribute has declined in modern times. The devaluation of the dollar depends on how the Fed reacts to inflation. There have been rumours that the Fed is about to step in and already the markets have reacted. So I am not so sure that your future scenario is correct Sensei. Of course, no one can accurately predict the future but my crystal ball is showing something different to yours

I am happy for you my friend, but history is not on your side though. Your crystal ball is a shard of mirror that shows you what you would like to see. The dollar has lost 98% of its purchasing power since 1971 when Nixon took the dollar off the gold standard.

I love the Fed, don’t get me wrong. The Fed is my ally. The Cantillon effect explains how the first receivers of the newly-created money become wealthy while those who stand last in the line to receive the newly-created money becomes poor. If you want to benefit from the actions of the Fed, you have to position yourself as close as possible to the Federal Reserve Bank of New York. Then, you simply have to wait for the Fed to take the savings from those who are further removed from the new money, and to transfer it to you through the Cantillon Effect.

The Fed, in combination with the Cantillon Effect, creates wealth for some, and poverty for others.

“…there’s a global movement away from fossil fuels (that lead to greenhouse gasses)…to more eco-friendly energy storage”.

Quite ironic then, with the move AWAY from harmful fossil fuels, is one of the main drivers of the resources super-cycle.

In turn, a resources super-cycle means more funds for exploration, and resources extraction. So increased resources extraction must be good for mother nature, I presume?

The Platinum run is next, I sold half my Standard Bank shares and bought Sibanye.

Sibanye is the worlds biggest producer of Platinum and second of Palladium.

I will have rather have Platinum, Palladium and Gold in my pocket than Rands. A Good Rand hedge.

What can go wrong?

What can go wrong?

A STRONG RAND, as a result of future a regime change to a DA-led Govt.

(…if not, then a wise hedge)

A strong Rand only with resources/metals at these prices then it is back to R16 to the Dollar.

Plus the past 25 years have been sufficient proof of our Govrn. mal-administration and looting without prosecution.

R6:$1 in 2011 after last super resource cycle. Rand can probably go down to R10:$1 in the short term if this cycle continues for longer than 18 months…

My advice having been singed with Amplats; do not take your eye off the ball; do not be afraid to sell when you have made your money. These companies are not Apple, Amazon, Google etc.

Resources is South Africa’s equivalent for Google, Apple and Amazon.

The doomsday preppers tell us to be scared of Gold, Platinum and Iron ore shares, but they keep going up (even as we speak), so I’m in.

Plus even if the metal prices drop by 30% these3 companies are still loaded with super cash!

Key words. Proudly South African. He understands the lay of the land and this country has blessed him with so much! And he has taken his opportunities. Thank you for Proudly representing our country Neil! You make us proud. And this country is very lucky to have you! Thank you.

Agree here. SA needs more wealthy entrepreneurs like Neal Froneman, that can take business (and employment) forward.

(In your rightful attempt to sing praise to Neal, for starters, why not also ensure that you respectfully spell his name correct?)

I must say I’m far prouder of Froneman as a born and bred Saffa than that joker Musk. The sooner he makes himself multipanetary the better

Seems that my resources hero is timing the share buy back very well.

I doubt it will be now, resource share will go up with Covid-19 numbers shooting up and US mega inflation.

Now is the time for Mr. Froneman to short supply and the prices of Platinum will rocket.

Play the Poker game, you have the metals

End of comments.

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