PGMs - cost benchmarking

Fundamental to SFA (Oxford)’s research and analysis of current and future PGM markets is our database of all the main producers and juniors, whose mine performance and profitability are meticulously modelled and extrapolated to 2030 and beyond. Our unique database, based on bottom-up, shaft-by-shaft analysis, enables us to track year by year the cost and profit dynamics within each operation. This analysis pinpoints and explains an individual producer’s position on the cost curve, enabling us to devise strategies to improve the operation’s profitability.

Our benchmarking is derived using weighted individual producer statistics to evaluate the total cash costs in dollars and rand per refined 4E PGM ounce, platinum ounce, and equivalent platinum ounce. Cost data include by-product producers in North America and Russia (Norilsk Nickel) and all the primary PGM producers in South Africa, North America, Zimbabwe and Russia, as well as the emerging junior companies, thereby covering more than 90% of global primary production. The cost modelling also computes varying configurations, such as the cost per platinum ounce only. These extrapolations give an overview of PGM producers, in addition to providing an in-depth understanding of cost characteristics and profit dynamics, which takes account of by-product revenues. All operations are profiled as stand-alone mines, and not in terms of attributable ounces. The analysis of producer costs focuses initially on performances in 2005, then on cost profiles, including those of new producers, for specific intervals out to 2030 and beyond.

The costs of these producers are adjusted to reflect the proportion of their revenues from 4E as a share of total producer revenues. This ratio is also applied to the base metal credit calculations which compute net total cash costs and margins per 4E oz.

SFA (Oxford)’s cost and benchmarking analysis can be tailored and adjusted to meet the requirements of individual producers including the selection of the most relevant peer group, expansion of models to cover costs on a 6E basis, as well as exchange rate scenarios to account for potential changes in the relevant producing economies.