Southern Palladium Cautions on PGM Price Volatility Affecting Bengwenyama Project Sentiment

Southern Palladium expressed concerns yesterday that fluctuating prices of platinum group metals (PGM) could potentially dampen investor interest in its prominent Bengwenyama project, currently at an advanced exploration stage in South Africa's Bushveld Complex. This revelation comes despite a 6.58% increase in the company's share price, closing at ZAR 5.99 (USD 0.32) on the Johannesburg Stock Exchange (JSE).

The company pinpointed the volatility of platinum, palladium, and rhodium prices as a major uncertainty factor, stating, “A significant decrease in commodity prices is likely to adversely affect sentiment towards the company and market support towards the company’s development of the project.”

Amidst subdued platinum prices leading to operational cutbacks and layoffs among larger South African PGM miners, stocks like Sibanye-Stillwater, Impala Platinum, and Anglo American Platinum have seen a rally on the JSE in recent days. For instance, Impala Platinum shares surged by 33.05% to around ZAR 73.97 (USD 3.93), and Anglo American Platinum rose by 15.81% to ZAR 764.45 (USD 40.61) over the past week.

Analysts speculate this uptrend in PGM stocks, including Southern Palladium's 24.89% increase to ZAR 5.99 (USD 0.32) on the JSE, is driven by anticipated recovery in palladium prices globally. Seleho Tsatsi, an analyst at Anchor Capital, observed a recent upturn in palladium, although he noted that the current price range of USD 1,070 to USD 1,080 remains significantly lower than the 2023 average of about USD 1,300 per ounce.

Southern Palladium also highlighted the “exchange rate risks” it faces, with initial public offering (IPO) funds raised in Australian dollars (AUD) while exploration expenses are predominantly in South African rand (ZAR) or US dollars (USD). The company anticipates that future project revenues will be primarily in USD, which could naturally hedge against debt servicing requirements linked to external financing possibly denominated in USD.

For the half-year ending December, Southern Palladium reported an 819% increase in revenues to AUD 435,475 (USD 287,413), up from AUD 47,391 the previous year. The operating loss narrowed to AUD 3.2 million (USD 2.11 million) from AUD 3.8 million, with both basic and headline loss per share decreasing by 33%.