Coronation Reverses Stance on Platinum, Acquires 5% Stake in Northam Platinum
Asset manager Coronation has changed its position on platinum group metals (PGMs), acquiring a 5.07% stake in Northam Platinum, just a year after labeling the sector a "value trap" due to declining prices and demand. Northam informed the market of the acquisition on Thursday, marking a significant shift for Coronation, which had previously recommended disinvesting from the PGM sector.
In 2022, Coronation's head of SA equity research, Nicholas Hops, urged companies in the PGM industry to close unprofitable mines and halt projects, citing the sector's struggles with cash losses and overproduction. Hops was unavailable for comment regarding the asset manager's recent change of heart.
The shift comes amid a broader restructuring of the PGM sector, as major producers adjust to low prices by impairing assets and reducing costs. Northam Platinum’s stock has surged by 20% over the past month, with the company now valued at just under R47 billion.
Despite Coronation's renewed interest in PGMs, a recent Bank of America survey shows that asset allocators remain underweight on platinum stocks, even though many expect broader South African equities to perform well over the next year. PGM producers, including Impala Platinum, have expressed caution about developing new mines due to the long-term outlook for electric vehicle demand, which has dampened enthusiasm for expanding the sector.
However, the growing demand for hybrid vehicles, which require catalytic converters that utilize PGMs, has provided a lifeline for the metals. Sibanye-Stillwater and other industry players remain optimistic about the future of PGMs in the automotive industry, particularly as hybrid vehicles and the hydrogen economy gain traction.
The hydrogen economy, which uses PGMs in hydrogen electrolysers, continues to gain momentum, with the European Commission recently announcing €7 billion in funding for hydrogen projects. The World Platinum Investment Council also emphasizes platinum's expanding role in hydrogen applications, further supporting the long-term outlook for the metal.
