The group's view of the PGM market will clearly influence the outcome of the operational review. A view that a persistent deficit will develop in future would lead to a volume maximisation strategy- this view seems to have been dominant in Amplats over the past decade. However, an alternative “low demand + zero mined-supply growth” scenario is a strong possibility in our view. In this context, we think the most appropriate strategy is for Amplats to run a very lean organisation, focusing on the highest margin, scaleable and low-capex intensity mines.

Restructuring is not without its challenges
There are large challenges in restructuring the platinum portfolio, in our view. A sale of assets or an unbundling would need a willing and able buyer that would meet with the approval of the SA government and preserve Amplats' BEE credits. In becoming leaner, Amplats would need to overcome the challenges of high fixed processing and centralised costs: the closure of mines burdens the remaining operations with a higher proportion of fixed costs, while the sale of mines without smelting capacity merely reduces Amplats' ability to ensure economic smelter utilisation.

Eoin Treacy's view After trading at a discount to gold for a good part of last year, platinum has returned to a premium over the last couple of weeks. At close to parity platinum is still at the lower side of a decades long range which has seen it trade occasionally at more than double the price of gold. This would suggest that even in a bearish scenario platinum is likely to fall less quickly than gold from current levels. In absolute terms, platinum has been ranging in the region of the lower side of last year's overhead congestion area. It will need to sustain a move above $1700 to indicate a return to medium-term demand dominance.

South African platinum miners have returned to a position of outperformance versus South African gold miners over the last three months by remaining largely rangebound while gold shares pulled back. In absolute terms, the South African Platinum Mining Index has been ranging mostly above 60 since August and will need to sustain a move above 68 to suggest a return to medium-term demand dominance. Anglo Platinum has a similar pattern to the Index.

UK Listed Lonmin, USA listed Platinum Group Metals (an explorer) and South African listed Northam Platinum are among the better performers in the sector. They have all exhibited an upward bias since early January and a break of the short-term progression of higher reaction lows would be required to question potential for some additional higher to lateral ranging.