China Goes Platinum In South Africa

China is going platinum in South Africa’s platinum belt.  China is bank rolling at least one of a handful of new platinum mines being built in South Africa in order to replace older and less profitable minds. The nation sits on approximately 80% of known global resources of the rich man’s gold, the rarest precious metal on the planet.

The first direct investment in the sector by China is Wesizwe Platinum’s Bakubung mine, which is looking to being producing the white metal in 2018 and 350,000 ounces of platinum group metals by 2023. This announced by China as mostly UK-based producers lost 400,000 ounces of platinum annually due to mismanaged strikes which rocked the region.

The 45% state held by a Chinese consortium headed by mining giant Jinchuan was bolstered last week by a $650 million loan, providing the project with the capital needed to complete the mine. Wesizwe’s CEO Paul Smith told Reuters the loan’s interest is Libor plus 350 basis points, a very low rate for a South African company that highlights the advantage of Chinese in international affairs. Observing current Libor rates, this means about 3.8% against the 8% or more South African companies would normally expect especially in the wake of the nation’s sovereign credit ratings downgrades triggered by the strikes.

“I think this is typical of the Chinese model. The terms and conditions they are offering are extremely generous and competitive. And they would be looking for some long-term benefit for their outlay at the moment,” said Gary van Staden, a political analyst with NKC Independent Economists.

But, it could be that China’s optimism for a metal whose profit depends on a stable auto market and a growing economy in many ways is a bit premature. China might not, in the end, be able to afford this.  This can be seen in the Chinese steel industry:

SHANGHAI: The combined profits of China’s major steelmakers crashed by more than 98 percent in 2012 as growth in the economy if the world’s largest steel producer slowed, an industry group said.

After-tax profits of more than 80 steelmakers reached around 1.58 billion yuan ($251 million) last year, the China Iron and Steel Industry said in a statement on its website on Thursday.