S. Africa’s PIC invests $7.4B in platinum betting on sustained rally

South Africas largest money manager, Public Investment Corp., estimates that the platinum miners would continue to make enormous payouts as stringent vehicle-emission regulations impel the demand and earnings of metals.

The state-owned entity, which primarily manages South African government worker pensions, stated that it has made investments of over 110 billion rand (USD 7.4 billion) in mining companies such as Anglo American Platinum, Sibanye Stillwater, and Impala Platinum Holdings.

According to PICs portfolio manager for mining and resources, Mdu Bhulose, this investment has brought great returns over the last three years.

Bhulose stated that the cycle should persist for some time. The dynamics of supply and demand are quite strong, and they are talking to a tightening market which is supposed to favor the prices.

After facing stagnation for a decade, platinum miners across South Africa are reportedly increasing the payouts as they make windfall profits from significantly higher prices of palladium and rhodium.

Speaking on this, Bhulose stated that except for the possibility of decline in demand from automotive manufacturers who are the largest consumers of platinum-group metals for the antipollution devices that they install in diesel and gasoline powered cars, platinum miners would continue to make profits.

According to RMB Morgan Stanley analysts, the PGMs cycle is expected to remain stronger for a longer duration and returns closer to historical peaks is apparently indicating a maturing cycle. The analysts also added that although the reason for retaining the exposure to the sector can be seen, a reasonable approach would be for investors to minimize the overweight positioning.

Meanwhile, Bhulose stated that the lack of investment in the new mining projects over the last decade implies that supply deficits will remain. However, the longer-term threat to the demand resulting from electric vehicles means that miners must remain apprehensive about the expansion.

Source credit: https://www.pionline.com/pension-funds/s-africas-pic-bets-74-billion-platinum-metals-sustaining-rally