Consultant’s Report

Provision of PGM market intelligence and long-term metal price forecasts

SFA (Oxford) LtdApril 2020

Strictly confidential

The Oxford Science Park

Prepared in confidence forSFA (Oxford)

SFA (Oxford) LtdThe Magdalen CentreThe Oxford Science ParkOxford OX4 4GAUnited KingdomTel: +44 1865 784366Fax: +44 1865 784368E-mail: sforrest@sfa-oxford.comWebsite: www.sfa-oxford.com

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The aim of this report is to provide an independent appraisal of PGM market. This report is

based on published statistics, company information and grass roots data collection and

analysis.

All statistics and their analyses are accurate as of April 2020. Metals market statistics, political

bearings and economic influences are fluid and dynamic; after this date, market

fundamentals, company valuations and company direction may alter. Changes in political

leadership, and company shareholding and management need to be closely monitored.

Disclaimer, Copyright and Intellectual Property

SFA (Oxford) Limited has made all reasonable efforts to ensure that the sources of the information provided in this document are reliable and

the data reproduced are accurate at the time of writing. The analysis and opinions set out in the document constitute a judgement as of the

date of the document and are subject to change without notice. Therefore, SFA cannot warrant the accuracy and completeness of the data

and analysis contained in this document. SFA cannot be held responsible for any inadvertent and occasional error or lack of accuracy or

correctness. SFA accepts no liability for any direct, special, indirect or consequential losses or damages, or any other losses or damages of

whatsoever kind, resulting from whatever cause through the use of or reliance on any information contained in the report. The material

contained herewith has no regard to the specific investment objectives, financial situation or particular need of any specific recipient or

organisation. It is not to be construed as a solicitation or an offer to buy or sell any commodities, securities or related financial instruments.

The recipient acknowledges that SFA is not authorised by the Financial Conduct Authority to give investment advice. The report is not to be

construed as advice to the recipient or any other person as to the merits of entering into any particular investment. In taking any decision as

to whether or not to make investments, the recipient and/or any other person must have regard to all sources of information available to him.

This report is being supplied to the recipient only, on the basis that the recipient is reasonably believed to be such a person as is described in

Article 19 (Investment professionals) or Article 49 (High net worth companies, unincorporated associations etc.) of the Financial Services and

Markets Act 2000 (Financial Promotion) Order 2005.

© Copyright reserved. All copyright and other intellectual property rights in any and all reports produced from time to time remain the

property of SFA and no person other than SFA shall be entitled to register any intellectual property rights in any report or claim any such

right in the reports or the information or data on the basis of which such reports are produced. No part of any report may be reproduced or

distributed in any manner without written permission of SFA. SFA specifically prohibits the redistribution of this document, via the internet or

otherwise, to non-professional or private investors and accepts no liability whatsoever for the actions of third parties in reliance on this report.

Please note: Some tabulated data may not add-up due to rounding of individual numbers.

Authors Stephen Forrest, Principal Consultant Analyst & Engineer, Director & Chairman – SFA (Oxford)

Beresford Clarke, Managing Director, Head of Research – SFA (Oxford)

Dr Jenny Watts, Principal Analyst: Demand and Technology – SFA (Oxford)

Dr Ralph Grimble, Principal Analyst: Commodities and Financial Markets – SFA (Oxford)

Tom Chandler, Senior Strategy Analyst – SFA (Oxford)

Alex Biddle, Senior Mining Analyst – SFA (Oxford)

Oksan Atilan, Consulting Market Analyst: Automotive Demand – SFA (Oxford)

Carol Lu, Associate Principal Analyst: China – SFA (Oxford)

Karen He, Consulting Market Analyst: China – SFA (Oxford)

Aisling Hubert, Consulting Mining Analyst – SFA (Oxford)

Contributing political author Professor Paul Chaisty, SFA Associate, University of Oxford

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Contents page

High-level market summary and price outlook ................................................................................ 4 PGM MARKET OUTLOOK ........................................................................................................................................................ 5 Supply-demand comparisons .............................................................................................................................................. 7 PGM market summary: fundamentals and price forecasts .................................................................................... 11 Price risk analysis ................................................................................................................................................................... 32

Supply-demand summary tables ...................................................................................................... 34

Analyst briefing ................................................................................................................................... 39 Demand ..................................................................................................................................................................................... 40 Primary supply ........................................................................................................................................................................ 70 Recycling ................................................................................................................................................................................... 83

Changes to Russia’s political system and Putin’s future ................................................................ 89

Supply trends ....................................................................................................................................... 94 2019 review of primary supply ......................................................................................................................................... 95 2020 projection of primary supply ............................................................................................................................... 100 2021 projection of primary supply ............................................................................................................................... 101 2020 supply profile ............................................................................................................................................................. 102 Additional COVID-19 outbreaks (scenario) ............................................................................................................... 106 COVID-19 second wave (scenario) ................................................................................................................................ 107 Extrapolation of supply for the next two years ........................................................................................................ 108 Process inventories, Section 54 stoppages and Anglo Converter Plant shutdown ................................... 110 Longer-term outlook .......................................................................................................................................................... 112 Quantifying the supply gap ............................................................................................................................................. 115 Projects review ...................................................................................................................................................................... 117 Producer snapshots ............................................................................................................................................................ 125 New SFA base case methodology ................................................................................................................................. 128

Producer economics ......................................................................................................................... 133 PGM prices and exchange rates ..................................................................................................................................... 134 Producer costs ....................................................................................................................................................................... 135 Mine closure inducement price ...................................................................................................................................... 144 Producer cost league tables ............................................................................................................................................ 145 Revenue tables ...................................................................................................................................................................... 148

Environmental, Social, and Governance (ESG) .............................................................................. 151 Inaugural ESG assessment of the upstream PGM sector ..................................................................................... 152 ESG reporting ........................................................................................................................................................................ 153 PGM mining offsetting ....................................................................................................................................................... 155 PGM industry greenhouse gas emissions .................................................................................................................. 161 PGM industry energy usage ............................................................................................................................................. 163 PGM industry pollutant emissions ................................................................................................................................ 164 PGM industry human resources ..................................................................................................................................... 166 ESG conclusions.................................................................................................................................................................... 181

Recycling ............................................................................................................................................ 183

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Summary ................................................................................................................................................................................. 184 Autocatalysts ......................................................................................................................................................................... 187 Jewellery .................................................................................................................................................................................. 191

Macroeconomic influences .............................................................................................................. 192 Global growth forecast ...................................................................................................................................................... 193 United States ......................................................................................................................................................................... 194 Europe ...................................................................................................................................................................................... 196 Japan ......................................................................................................................................................................................... 197 China ......................................................................................................................................................................................... 197 Emerging markets................................................................................................................................................................ 198 Medium-term growth forecasts ..................................................................................................................................... 199 South Africa and the rand ................................................................................................................................................ 200 The US dollar ......................................................................................................................................................................... 203 Financial markets ................................................................................................................................................................. 205

Demand outlook ............................................................................................................................... 209 PGM summary ....................................................................................................................................................................... 210 Platinum................................................................................................................................................................................... 211 Palladium ................................................................................................................................................................................ 213 Rhodium .................................................................................................................................................................................. 214 Automotive PGM demand ................................................................................................................................................ 216 Automotive platinum demand ....................................................................................................................................... 218 Automotive palladium demand ..................................................................................................................................... 219 Automotive rhodium demand ........................................................................................................................................ 221 Automotive sales ................................................................................................................................................................. 223 Automotive production ..................................................................................................................................................... 225 Chinese vehicle sales recovery ....................................................................................................................................... 228 European automotive industry post-COVID-19 ...................................................................................................... 231 Tightening emissions legislation: PGM loadings upside...................................................................................... 236 Intra-PGM substitution in autocatalysts ..................................................................................................................... 237 Automakers’ alliances ........................................................................................................................................................ 238 Western Europe light-duty diesel ................................................................................................................................. 238 Western Europe heavy-duty diesel ............................................................................................................................... 240 Scrappage schemes ............................................................................................................................................................ 241 Diesel autocatalyst developments ................................................................................................................................ 241 48 V mild hybrids: low-CO2 powertrain ...................................................................................................................... 243 US roll-back of light-vehicle CO2 emissions standards ........................................................................................ 245 Platinum jewellery ............................................................................................................................................................... 248 China’s jewellery market ................................................................................................................................................... 250 India’s jewellery market ..................................................................................................................................................... 255 Japan’s jewellery market ................................................................................................................................................... 257 Western Europe’s jewellery market .............................................................................................................................. 258 US jewellery market ............................................................................................................................................................ 259 Rest of the World’s jewellery market ........................................................................................................................... 260

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Summary ................................................................................................................................................................................. 184 Autocatalysts ......................................................................................................................................................................... 187 Jewellery .................................................................................................................................................................................. 191

Macroeconomic influences .............................................................................................................. 192 Global growth forecast ...................................................................................................................................................... 193 United States ......................................................................................................................................................................... 194 Europe ...................................................................................................................................................................................... 196 Japan ......................................................................................................................................................................................... 197 China ......................................................................................................................................................................................... 197 Emerging markets................................................................................................................................................................ 198 Medium-term growth forecasts ..................................................................................................................................... 199 South Africa and the rand ................................................................................................................................................ 200 The US dollar ......................................................................................................................................................................... 203 Financial markets ................................................................................................................................................................. 205

Demand outlook ............................................................................................................................... 209 PGM summary ....................................................................................................................................................................... 210 Platinum................................................................................................................................................................................... 211 Palladium ................................................................................................................................................................................ 213 Rhodium .................................................................................................................................................................................. 214 Automotive PGM demand ................................................................................................................................................ 216 Automotive platinum demand ....................................................................................................................................... 218 Automotive palladium demand ..................................................................................................................................... 219 Automotive rhodium demand ........................................................................................................................................ 221 Automotive sales ................................................................................................................................................................. 223 Automotive production ..................................................................................................................................................... 225 Chinese vehicle sales recovery ....................................................................................................................................... 228 European automotive industry post-COVID-19 ...................................................................................................... 231 Tightening emissions legislation: PGM loadings upside...................................................................................... 236 Intra-PGM substitution in autocatalysts ..................................................................................................................... 237 Automakers’ alliances ........................................................................................................................................................ 238 Western Europe light-duty diesel ................................................................................................................................. 238 Western Europe heavy-duty diesel ............................................................................................................................... 240 Scrappage schemes ............................................................................................................................................................ 241 Diesel autocatalyst developments ................................................................................................................................ 241 48 V mild hybrids: low-CO2 powertrain ...................................................................................................................... 243 US roll-back of light-vehicle CO2 emissions standards ........................................................................................ 245 Platinum jewellery ............................................................................................................................................................... 248 China’s jewellery market ................................................................................................................................................... 250 India’s jewellery market ..................................................................................................................................................... 255 Japan’s jewellery market ................................................................................................................................................... 257 Western Europe’s jewellery market .............................................................................................................................. 258 US jewellery market ............................................................................................................................................................ 259 Rest of the World’s jewellery market ........................................................................................................................... 260

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Palladium jewellery ............................................................................................................................................................. 260 Industrial end-uses .............................................................................................................................................................. 261 Chemical .................................................................................................................................................................................. 266 Electrical................................................................................................................................................................................... 270 Glass .......................................................................................................................................................................................... 273 Medical ..................................................................................................................................................................................... 276 Dental ....................................................................................................................................................................................... 277 Petroleum ............................................................................................................................................................................... 279 Other end-uses ..................................................................................................................................................................... 281

Fuel cells and electrolysers .............................................................................................................. 283 The ‘hydrogen society’ ....................................................................................................................................................... 284 Electrolysis technologies for hydrogen production ............................................................................................... 289 Key role of PGMs in electrolysers and fuel cells ...................................................................................................... 293 Barriers to electrolyser adoption ................................................................................................................................... 300 Energy policy and funding post-COVID-19 .............................................................................................................. 303 FCEVs – drivers for uptake ............................................................................................................................................... 305 Platinum demand forecast ............................................................................................................................................... 306 Heavy-duty vehicles – trucks ........................................................................................................................................... 308 Heavy-duty vehicles – buses ........................................................................................................................................... 312 Light-duty vehicles .............................................................................................................................................................. 317 Closed-loop recycling of fuel cell PGMs ..................................................................................................................... 319

Investment, trade flows and stocks ................................................................................................ 320 ETF holdings ........................................................................................................................................................................... 321 Futures contracts .................................................................................................................................................................. 322 Bar purchases ........................................................................................................................................................................ 325 Trade flows ............................................................................................................................................................................. 326 Lease rates .............................................................................................................................................................................. 329

Appendix ............................................................................................................................................ 330 PGM demand by region .................................................................................................................................................... 331 Platinum demand by end-use ........................................................................................................................................ 332 Palladium demand by end-use ...................................................................................................................................... 333 Rhodium demand by end-use ........................................................................................................................................ 334 PGM recycling by end-use ............................................................................................................................................... 335 Platinum supply by mine (new base case) ................................................................................................................. 336 Palladium supply by mine (new base case) ............................................................................................................... 338 Rhodium supply by mine (new base case) ................................................................................................................ 340 Platinum supply summary by company (new base case) .................................................................................... 342 Palladium supply summary by company (new base case) .................................................................................. 343 Rhodium supply summary by company (new base case) .................................................................................... 344 PGM supply by region (new base case) ...................................................................................................................... 345 PGM supply from probable and possible projects ................................................................................................. 346 Client notes ............................................................................................................................................................................ 347

Consultant’s Report

Provision of PGM market intelligence and long-term metal price forecasts

SFA (Oxford) LtdApril 2020

Strictly confidential

The Oxford Science Park

Prepared in confidence forSFA (Oxford)

SFA (Oxford) LtdThe Magdalen CentreThe Oxford Science ParkOxford OX4 4GAUnited KingdomTel: +44 1865 784366Fax: +44 1865 784368E-mail: sforrest@sfa-oxford.comWebsite: www.sfa-oxford.com

Co

nsultant’s Rep

ort

Ap

ril 2020

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