Understanding the PGM Supply Chain: Toll Refining vs. Local Refineries

Overview of PGMs Production

1. Ore Production: PGMs are typically extracted from ore bodies found in specific regions, primarily in South Africa, Russia, and Canada. The ore is mined and processed to extract the PGM concentrates.
2. Refining Process: After mining, the concentrates undergo refining processes to isolate the individual PGMs. This is where the concept of toll refining and local refineries comes into play.

Toll Refining vs. Local Refineries

Toll Refining

• Definition: Toll refining is a process where a third-party refiner process concentrates for a fee. The ownership of the material often remains with the producer, while the refiner charges a tolling fee for the service.
• Example of Toll Refining in Action:

Local Refineries (Non-Toll Refineries)

• Definition: Local refineries that do not use toll refining processes typically own and operate their own refining facilities. They process ore or concentrates directly from mines, maintaining full control over the refining process
• Example: A local refinery may partner with several mining companies to receive concentrates and refine them in-house, ensuring that they can cater directly to specific markets and customers.

Contrast Between Toll Refining and Local Refineries

Toll refining typically retains ownership of the concentrates, while local refineries own both the ore and the refining facilities. In terms of cost structure, toll refiners charge a tolling fee for their services, whereas local refineries generate profits directly from refining without incurring such fees. Additionally, toll refiners offer more flexibility in the quantities they process, as they can adjust based on the producer's needs. In contrast, local refineries are less flexible and depend on their own sourcing capabilities. When it comes to control, toll refiners have limited oversight over the refining process, while local refineries maintain complete control over every aspect of their operations. Finally, market relationships in toll refining are often managed indirectly, whereas local refineries foster direct relationships with clients, enhancing customer engagement and loyalty.

Large Refineries in the PGM Sector

1. Impala Platinum Holdings Limited (Implats): One of the largest producers of PGMs in the world, Implats operates its own refining facilities and has significant mining operations in South Africa.
2. Anglo American Platinum: A leading PGM producer, Anglo American operates several refineries, including the Precious Metals Refinery in South Africa, which processes concentrates from its own operations as well as toll refined materials.
3. Sibanye Stillwater: This company operates significant mining operations in South Africa and the United States and has its own refining facilities to process PGMs extracted from its mines.
4. Northam Platinum: Operating in South Africa, Northam runs its own refinery and has invested in expanding its refining capacity to enhance its production capabilities.
5. Metalor Technologies: While not exclusively a PGM refiner, Metalor operates a large refining facility that processes various metals, including PGMs, and provides toll refining services.

Conclusion

The refining of platinum group metals plays a critical role in the overall supply chain, with both toll refining and local refineries serving essential functions. Toll refiners provide flexibility and cost efficiency, especially for smaller or less established mining operations, while local refineries offer greater control and potentially higher profit margins. Understanding these processes is vital for stakeholders in the PGM market, including producers, refiners, and end-users. The landscape is characterized by a mix of large integrated companies and specialized refiners, each contributing to the dynamics of PGM production and distribution.

References

1. World Platinum Investment Council (WPIC): The WPIC publishes regular reports on PGM market trends, production, and refining processes. Website: worldplatinuminvestmentcouncil.com
2. Johnson Matthey - Platinum 2024 Report: This annual report provides a comprehensive analysis of the PGM market, including refining and production statistics. Available at: Johnson Matthey
3. International Platinum Group Metals Association (IPA): The IPA offers insights into the production, processing, and application of PGMs globally. Website: ipa-news.com
4. Sibanye Stillwater - Annual Reports: The annual reports of Sibanye Stillwater detail their mining operations, refining capabilities, and market strategies. Available at: Sibanye Stillwater
5. Anglo American - Platinum Business Overview: This page provides information on Anglo American's PGM operations and refining facilities. Website: Anglo American
6. Platinum and Palladium Market Analysis by the U.S. Geological Survey (USGS): The USGS provides annual summaries and mineral commodity reports, including those on platinum and palladium. Available at: USGS Minerals Information
7. Metal Bulletin - PGM Market News and Analysis: Metal Bulletin provides news and analysis on the PGM market, including details on refiners and market dynamics. Website: Fastmarkets
8. Research Articles and Journals: Journals such as Minerals Engineering and The Journal of Precious Metals often publish articles on PGM extraction and refining processes. You can access them through academic databases like ScienceDirect or Wiley Online Library.