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Firms’ approach to mitigating risks in the platinum group metals sector

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  • Gracelin Baskaran

    (University of Cambridge
    University of Cape Town)

Abstract

With platinum prices declining due to a seismic demand shift and firms grappling with the high cost of labor and prolonged production-stopping labor strikes, the financial sustainability of platinum group metal (PGM) firms has come under duress since 2012. This article seeks to understand how mining firms have reshaped their strategies to ensure financial sustainability while also meeting external expectations of increasing shared-value outcomes by assessing how firms are deploying buffers and bridges. Firms use buffers when they seek to protect core business activities from supply-side and demand-side volatilities by shifting their overall business strategy and bridges to conform with external expectations of improving shared-value outcomes. The article constructs a case study using five sets of data to assess (i) what supply and demand shocks firms are facing; (ii) how they are reshaping their strategies and undertaking activities to protect the firm from these shocks; (iii) what challenges firms face with reaching shared-value outcomes; and (iv) how firms are undertaking activities to improve shared-value outcomes. This article finds that although buffering activities have been successful at increasing the financial sustainability of mining activities, bridging activities have been less successful given that royalties are vulnerable to maladministration, the impact of corporate social investments often short-lived, and insular and local procurement is limited to low-value-added activities, particularly in the context of mechanization. This article seeks to contribute to the body of literature on how extractive firms are responding to supply and demand shocks and argues that a paradigm shift may be necessary in which traditional bridging activities become part of protecting core business activities to ameliorate the risk of losing a firm’s social license to operate.

Suggested Citation

  • Gracelin Baskaran, 2021. "Firms’ approach to mitigating risks in the platinum group metals sector," Mineral Economics, Springer;Raw Materials Group (RMG);Luleå University of Technology, vol. 34(3), pages 385-398, October.
    • Handle: RePEc:spr:minecn:v:34:y:2021:i:3:d:10.1007_s13563-021-00249-4
    DOI: 10.1007/s13563-021-00249-4
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    References listed on IDEAS

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    1. Sven Renner & Friedrich W. Wellmer, 2020. "Volatility drivers on the metal market and exposure of producing countries," Mineral Economics, Springer;Raw Materials Group (RMG);Luleå University of Technology, vol. 33(3), pages 311-340, October.
    2. Gavin Capps & Sonwabile Mnwana, 2015. "Claims from below: platinum and the politics of land in the Bakgatla-ba-Kgafela traditional authority area," Review of African Political Economy, Taylor & Francis Journals, vol. 42(146), pages 606-624, October.
    3. Andrew Manson & Bernard Mbenga, 2003. "'The Richest Tribe in Africa': Platinum-Mining and the Bafokeng in South Africa's North West Province, 1965-1999," Journal of Southern African Studies, Taylor & Francis Journals, vol. 29(1), pages 25-47.
    4. Mutti, Diana & Yakovleva, Natalia & Vazquez-Brust, Diego & Di Marco, Martín H., 2012. "Corporate social responsibility in the mining industry: Perspectives from stakeholder groups in Argentina," Resources Policy, Elsevier, vol. 37(2), pages 212-222.
    5. World Bank, 2019. "Digging Beneath the Surface," World Bank Publications - Reports 32107, The World Bank Group.
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