PGM price recovery to lift Valterra Platinum earnings, but outlook remains cautious – S&P

S&P Global Ratings expects the recent recovery in PGM prices to provide some support for potentially higher earnings for JSE-listed Anglo American spin-off, Valterra Platinum, although analysts at the ratings agency are cautious about the outlook for prices of the precious metal.

The recent recovery in PGM prices is expected to carry through to 2027, with the potential of providing some support for Valterra to grow its earnings. The SA and Zimbabwe focused PGM miner now operates as a stand-alone entity after it was spun off Anglo American this year.

“We expect adjusted earnings before interest, tax, depreciation and amortisation to increase by about 43% to R30.8 billion from R21.5bn in 2024, and we see adjusted margins expanding to 27.9% from 19.7%,” said S&P Ratings.

However, analysts at the ratings agency remain cautious in their price outlook for PGM. They said while changes to US tariff policy in 2025 have reduced clarity in the auto market outlook, the slowing pace of the transition to electric vehicles from internal combustion engine vehicles has supported PGM demand.

This has been further underpinned by the sustained growth in hybrid vehicles sales and tightening emissions standards, both of which require higher PGM content. There has also been a pickup in platinum jewelry demand, partly linked to substitution given the rising price of gold.

These demand factors, when considered against limitations in PGM supply from primary sources and recycling point to the persistence of platinum and rhodium deficits beyond 2025. Since the second quarter of 2025, prices of platinum and rhodium--have risen based on these and other factors.

Thus Valterra is expected from next year to be in a net cash position, illustrating the company’s resilience to future periods of potentially lower prices. Ebitda earnings in Valterra are expected to be between R30bn and R33bn in 2026 and 2027 compared to R21.5bn in 2024.

This is on the basis of expectations that Valterra will refine and sell 3 million to 3.4 million ounces of PGMs annually over the next two years.

Valterra Platinum chief finance officer, Sayurie Naidoo, said the assessment by S&P reflects the company’s “strong balance sheet and compelling free cash flow generation at various PGM price assumptions” underpinned “by the quality of our assets and disciplined capital” allocation.

Nonetheless, there are limited risks from country exposures, margins, and cash flows being impacted by volatility in PGM prices and currencies.

“We see some risks inherent in the South African mining operations. South Africa as a mining jurisdiction is notable for its evolving regulatory environment, including empowerment-linked mining license renewals and fractious labor and community relations,” said S&P Ratings.

It estimated an average country risk exposure of about 95% to South Africa and a moderate 5% to Zimbabwe over the next few years. Although the “exposure to Zimbabwe is quite small,” the Southern African country has been in arrears on at least 40% of its debt stock since year-end 2018.

This raises Valterra’s exposure to foreign currency devaluation risks, cash upstreaming challenges, and changes in regulatory and operating conditions in Zimbabwe. 

However, Valterra’s cost position is further supported by ongoing open-pit optimization at the Mogalakwena mine in SA, including improvements in drilling, blasting, and haulage efficiency.

The analysts expect Valterra’s mines to maintain or improve their relative positions, helped by the fact that very limited new global PGM supply is expected to come on line in the coming years, apart from Ivanhoe’s recently commissioned IvanPlats mine.

On a 6E basis, S&P views Valterra as having low- to mid-range average cash costs compared with peers; better than Sibanye-Stillwater and Impala Platinum and broadly in line with Northam Platinum on a consolidated basis.

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