Abstract:
Global supply and demand for platinum benefited from favourable local and global economic environments over the past decade, and presented unique growth opportunities for platinum mining companies. Companies operating in a growing industry, such as platinum during the past decade, are expected to deliver superior returns, and to create economic value for shareholders. With markets becoming more globalized, deregulated, and liquid, investors move their capital to where they believe it will be most productively employed, and companies therefore need to demonstrate their ability to meet increasing shareholder demands for growth and economic value added. Economic Value Added (EVA®), as a measure of company performance, has been widely adopted by companies and securities analysts globally but its use in South African platinum mining companies has been limited to date. In order to address this gap through this research, EVA® was calculated for the three primary South African platinum mining companies, Anglo Platinum, Implats, and Lonmin. EVA® for the respective companies was then compared to company growth rates, share price performance, and alternative, conventional performance metrics. Through analysis it was found that, although the respective platinum mining companies experienced similar production and turnover growth rates during the review period, 2000 to 2006, Anglo Platinum was able to generate higher EVA® than Implats and Lonmin respectively. Share price has been found to correlate well with EVA® for both Anglo Platinum and Implats respectively, but this relationship was not statistically significant for Lonmin, and EPS was the only metric among the alternative performance metrics, EPS, P/E, ROA, and EBITDA, found to have a correlation with EVA® for Anglo Platinum and Implats respectively. The correlation between the other metrics and EVA® was found not to be statistically significant.
