Now the organization, which tracks platinum group metal (PGM) markets closely, expects an overall platinum deficit of 265,000 oz this year. The reason is that, while demand has grown as anticipated, South Africa’s PGM mines, which supply 75% (5.220 million oz out of a total of 6.660 million oz) of the world’s platinum, will come up 400,000 oz or more short of predictions.

South Africa’s platinum sector has had a difficult year, and in fact will see its 2007 output fall some 70,000 oz below its 2006 level of 5.29 million oz. All the major producers, Anglo Platinum, Impala Platinum and Lonmin, have experienced problems. These range from processing setbacks, to geological problems, to the impact of skills shortages and safety related issues.

In February 2007, the world’s largest platinum producer, Anglo Platinum, predicted its output for the year would be 2.8 million oz to 2.9 million oz but, due to factors such as lower recoveries from oxidized ore at its PPRust north pit and rolling shutdowns of its predominantly underground operations motivated by intensified safety concerns, the company’s full year forecast for refined platinum production has been reduced to 2.45 million oz to 2.5 million oz. Anglo Platinum anticipates though, that its total platinum production will increase at about 5% a year.

At Impala’s lease area on the Western Limb of the Bushveld Complex, refined platinum output in the first half of 2007 declined by 5% to 510,000 oz reflecting lower recoveries, but the group did acquire a 74% stake in the Leeuwkop project in 2007 when it bought out a junior, Afplats. It will begin to develop that mine in 2008. Impala has also approved smelting and refining capacity expansions that will allow it to treat up to 2.8 million oz of platinum annually by 2010.

Lonmin’s platinum sales for its financial year ending September 2007 was 800,000 oz, well below expectations due to a four month closure of its No 1 smelter early in the year, as well as due to difficult geological conditions at its mines. Lonmin says that high labor turnover and skills shortages negatively impacted all its operations.

While the majors have all suffered setbacks, contributions by the smaller platinum producers in South Africa are on the increase. “However, this progress is being hindered by the lack of availability of skilled staff,” Jeremy Coombes, of Johnson Matthey’s precious metals marketing division, said.

On the Eastern Limb of the Bushveld Complex, where once-sleepy locales such as Steelpoort and Burgersfort have become mining boom towns, the Blue Ridge platinum project, owned by Ridge Mining, due to start production at the end of 2008, faces intense competition for a limited pool of skilled, semi-skilled labor. This competition comes not only from other mines—Aquarius and African Rainbow Minerals are ramping up production at mines such as Everest and Two Rivers on the Eastern Limb—but from major infrastructure projects in South Africa as the country builds up to host soccer’s World Cup in 2010.

Mine overseer Pieter Rooy, who works for Murray & Roberts Cementation, a mining contractor operating Assmang’s 120,000 mt/month Dwarsrivier chrome mine, situated right next to Two Rivers, said dealing with high competition for skilled artisans is a reason some companies are opting for mining contractors over self mining. Rooy said in some cases the mining contractor is paying a bonus $3,000 (R20,000) sign-on fee to artisans provided they agree to remain with the project for at least two years.

The existing smaller platinum producers operating in South Africa’s Bushveld Complex are Northam Platinum; Aquarius Platinum which has a number of mines in a pool-and-share agreement with Anglo Platinum and owns the Everest mine which is outside that agreement; African Rainbow Minerals (ARM) Platinum which has stakes in three PGM producing joint ventures, Two Rivers (with Impala), Modikwa (with Anglo Platinum) and Nkomati Nickel (with Norilsk); and then there is the Crocodile River mine owned by Toronto-listed Eastern Platinum.

Political pressure on South Africa’s mines to improve their safety records has also increased. As some platinum mines begin to approach depths of 1,500 m below surface and beyond, the fear is they may begin to suffer from seismic events similar to those that plague the country’s deeplevel gold mines, though many of those now operate at depths of 3,000 m and beyond.

The upshot of all this is that platinum supply from South Africa will continue to grow, but at a slower rate than was predicted as recently as six months ago. This is in spite of a raft of projects planned over the next decade, as well as two new projects, both open-cast, entering their rampup phases next year. These are Anglo Platinum’s PPRust expansion on the Northern Limb of the Bushveld Complex and Xstrata’s Eland Platinum project on the southeastern part of the Western Limb. Eland Platinum will be a five year project with a steady state output of 160,000 oz of PGMs a year before the mine goes underground. The PPRust expansion, where a new pit to the north of the existing Platreef pits is being established, will enable Anglo Platinum to produce an additional 230,000 oz of refined platinum a year.

Supply from southern Africa’s other notable platinum producing country, Zimbabwe, has remained remarkably steady considering its rapidly disintegrating economy under Robert Mugabe. Zimbabwe’s two operating platinum mines, Mimosa and Ngezi Platinum, produce about 160,000 oz of platinum a year between them, and should the country’s socio-economic situation improve Impala Platinum, owned Ngezi, in particular has the potential to ramp up production significantly.

Johnson Matthey’s prediction is for the platinum price to range between $1,575/oz and $1,350/oz over the next six months, the lower number being a support level should investment sentiment falter.