On March 23, the price of rhodium, one of the six platinum group metals, reached a new all-time high of $29,800 per troy ounce as a result of rising demand from the automotive sector in response to stricter international pollution rules. Since August 2016, when the price of the precious metal was $625/oz, it has increased forty times.
Since Europe, China, and the United States have agreed to increase their pollution limits as part of the Paris Agreement on global warming, rhodium has seen significant demand as a critical component in the construction of catalytic converters for vehicles. Rhodium production was considerably disrupted by the COVID-19 epidemic and months of strikes in South Africa, which contributed to the element’s price increase, which is anticipated to continue.
So, we think now is the ideal opportunity to invest in rhodium mining stocks. These businesses have sound business concepts and healthy balance sheets. We believe they are in an excellent position to increase sales volumes and benefit from increased rhodium prices.
Table of Contents
What is Rhodium?
The chemical symbol for rhodium is Rh, and its atomic number is 45. It is a transition metal that is uncommon, hard, corrosion-resistant, silvery-white, inert chemically, and rigid. It is a platinum group element and a noble metal, and it only contains the isotope 103Rh naturally. Rhodium occurs naturally in minerals including bowieite and rhodplumsite, generally, as the free metal, alloyed with other comparable metals, and very seldom as a chemical compound. It is one of the most expensive and rarest precious metals.
Along with the other platinum group metals, rhodium is found in nickel or platinum ores. It was called for the rose hue of one of its chlorine compounds, which was created after it reacted with the strong acid combination aqua regia and was found in one of these ores by William Hyde Wollaston in 1803.
About 80% of the world’s rhodium output is used as one of the catalysts in three-way catalytic converters for cars, which is the element’s main application. Rhodium is typically alloyed with platinum or palladium and used in high-temperature and corrosion-resistant coatings because the metal is inert against corrosion and the majority of nasty chemicals and is rare. Rhodium is frequently used to enhance white gold’s look and increase the tarnish resistance of sterling silver.
Rhodium is used in catalytic converters, which catalyze the conversion of nitrogen oxide to nitrogen. Like the industries for platinum and palladium, the car sector accounts for the majority of the demand for rhodium, and platinum mining generates rhodium as a byproduct. As a result, similar to platinum, the Bushveld Complex in South Africa accounts for the vast bulk (80%) of the world’s supply of rhodium. It is complicated and expensive to separate rhodium from other elements in the ground.
In recent years, the price of rhodium has fluctuated considerably. It increased by 2,112 percent from $452 per ounce to $10,000 per ounce between 2004 and 2008 before falling to just under $1,000 per ounce in less than a year. From 2012 to 2016, the price of rhodium fluctuated between $1,800 and as low as $600 per ounce, mainly remaining stable at roughly $1,000 per ounce. Rhodium’s price increased by about 150 percent from 2017 to 2018, reaching almost $2,500 per ounce. Rhodium surged to over $5,000 per ounce at the end of 2019. Rhodium had the best first quarter performance of any commodity in 2020 because of increased demand from China for vehicle manufacture and decreased supply from South Africa. The price of rhodium has likewise surged to an all-time high of $21,900/oz to start 2021.
Why Invest in Rhodium?
Rhodium is a pricey precious metal, as previously noted. Jewelry, the glass industry, catalytic converters, and even specific medical gadgets employ it. Its availability is constrained nonetheless. We will discuss it shortly, but first, let us evaluate how much rhodium costs concerning gold.
Today, the price of an ounce of gold is around $1,850. Although expensive, that cost is insignificant in contrast. A troy ounce of rhodium costs well over ten thousand dollars. Additionally, for a brief while in 2021, it even approached $30,000. How come rhodium is so much more expensive?
An uncommon member of the platinum family is rhodium. Analysts calculate its rarity in the Earth’s crust to be 0.0002 parts per million, making it one of the rarest elements. Rhodium is also challenging to extract industrially, and Rhodium-bearing minerals are scarce, and the ore is combined with other metals.
As a result, certain geographical restrictions exist on investing in rhodium stocks. Most deposits are recognized and easily accessible in South Africa, Russia, and North America. South Africa has been the primary exporter, followed by Russia. Moreover, it helps to explain why rhodium prices increased in light of the conflict in Ukraine.
Over the past few years, there have been numerous disruptions in the supply. However, every crisis offers a new opportunity. The United States and other nations are taking steps to lessen their dependency on specific nations. As we examine the top rhodium firms, keep this in mind.
7 Best Rhodium Stocks to Buy Now
1. Impala Platinum Holdings Limited
IMPUY, based in Illovo, South Africa, engages in mining, processing, refining, and selling platinum group metals and producing nickel, chrome, platinum, and palladium ores. It operates on the Bushveld Complex in South Africa, and the Lac des Iles Mine is Canada’s Thunder Bay region.
For the second year running, IMPUY achieved an “A” performance rating in February for its 2020 CDP Water Disclosure Project. In terms of transparency, this rate ranks the business within a small group of businesses in the top 15 percent.
The six-month period ending December 31, 2020, saw a 107 percent year-over-year growth in IMPUY’s revenue to R58.12 billion. The company’s gross profit increased by 263 percent to R22.4 billion compared to last year. Its profits increased by 328 percent year over year to R14.4 billion, while its EBITDA increased by 231% to R25.1 billion. Over this time, IMPUY produced a free cash flow of R20.1 billion.
For the quarter ending June 30, 2021, a consensus EPS projection of $4.52 reflects an increase of 222.6 percent over the corresponding figure from the previous year. The forecasted $8.76 billion in sales reflects a 110.1 percent increase over the same time last year. Over the past year, the stock has increased by 396.4 percent.
2. Sibanye Stillwater Limited
Founded in 2002, SBSW is a mining firm for precious metals with operations in South Africa, the US, Zimbabwe, Canada, and Argentina. It produces gold and platinum group metals (PGMs), including projects for palladium and rhodium. The corporation is involved in several different projects, including the Marathon PGM project in Canada, the Altar copper-gold project in the Andes of northwest Argentina, and the Rio Grande copper-gold project.
In March, Johnson Matthey, a leader in sustainable technologies, and SBSW partnered to create strategies for lowering carbon footprints and finding more effective ways to utilize the vital metals needed for battery technology. As a result, SBSW should be able to satisfy growing consumer demand for items with ethical sourcing.
To progress its advanced lithium project in Finland, the corporation invested €30 million in Keliber Oy in February. With this tactical investment, SBSW should be able to join the battery metals market and further its dominant position in PGM.
SBSW’s profit attributable to shareholders increased to R29,312 million in the six months ending December 31, 2020, from R62 million in the corresponding period in 2019. At the end of 2020, the business had a record adjusted free cash flow of R19.9 billion and R3.1 billion in net cash.
Over the next five years, analysts anticipate a rise in EPS at a pace of 53.6 percent for SBSW. For the fiscal year ending in 2021, revenue is expected to grow by 37.9 percent.
3. Anglo American Platinum
The biggest platinum producer in the world is Anglo American Platinum, which makes up around one-third of the annual supply in the world. Rhodium is an uncommon member of the platinum group, as was already noted, and this business is a significant producer of rhodium.
Rhodium prices reached an all-time high in 2021, which helped the business post record sales. Nearly 43% of the company’s overall net income came from rhodium, and moreover, that represents an increase from 32% of the total in 2020. Anglo American Platinum is one of the most excellent rhodium stocks available, thanks to its substantial mining activities.
4. BHP Group
A diverse resources corporation is BHP Group. Copper, coal, iron ore, nickel, zinc, and potash are all extracted from and processed by its fully integrated mining operations. The company has global mining assets. BHP Group also had an oil and natural gas division, but in a deal finalized in 2022, it combined those assets with Woodside Petroleum (NYSE: WDS). BHP became a mining business focused only on mining after the merger.
Although BHP Group manufactures a variety of goods, its main objective is to be a cost-effective manufacturer. It effectively manages big mines full of resources and employs technology like autonomous trucks to cut expenses. The mining company’s emphasis on cutting costs also lessens the effect of inflation.
BHP Group combines its low-cost operations with a robust balance sheet, which it maintains by frequently offloading its non-core assets and least profitable mines.
Mining companies are in a great position to invest in high-return expansion initiatives even when commodity prices are low. Its production output is comparatively steady. Even if its cash flow is somewhat unpredictable, BHP’s low expenses allow it to produce free cash flow that it can dependably use to buy stock and pay dividends.
BHP Group’s dividend fluctuates somewhat, similar to Barrick. The corporation pays at least half its profits as dividends each reporting period; therefore, its dividend expenditure will fluctuate with cash flow.
5. Zimplats Holdings
Since Zimplats Holdings is one of the smaller rhodium stocks, its efforts are more focused. Zimbabwe’s Great Dyke, produces metals from the platinum group and related metals. Nevertheless, it remains one of the principal sources of the metal.
Rhodium sales made over 33% of the business’s overall revenue in 2021. Furthermore, there was an increase from the total of 18% in 2020. As long as rhodium prices are high, a sizable share of Zimplats Holdings’ overall revenues should continue to come from this product.
6. Rio Tinto
A diverse mining corporation is Rio Tinto. Iron ore, aluminum, and copper are the three industrial metals that are most often consumed. Boron, salt, diamonds, titanium, and other minerals are among the numerous metals and minerals that Rio Tinto mines.
Rio Tinto aspires to be a low-cost producer of metals and minerals, similar to BHP Group. Running integrated, substantial mining assets can keep costs low. Rio Tinto invests in cutting-edge technologies that boost productivity and cut costs, such as autonomous cars and renewable energy.
Rio Tinto has demonstrated that it can turn a profit even in challenging economic times. Its solid bank sheet regularly sells non-core mines to redirect capital to more promising prospects. For instance, it has just left the coal mining industry due to its dimming prospects amid climate change concerns. It also offered to purchase any further shares of copper miner Turquoise Hill Resources (NYSE: TRQ) that were not already owned by it in 2022. The agreement would make it simpler to exploit its significant copper resources and ownership of the enormous Oyu Tolgoi mine in Mongolia.
The corporation aggressively pursues debt repayment while routinely expanding its most OK mines. Another mining corporation that distributes dividends to shareholders and buys back its stock throughout an economic cycle is Rio Tinto. It makes an effort to pay dividends that range from 40% to 60% of its cash flow, with the amount paid altering every quarter based on its profitability.
7. Barrick Gold
Barrick Gold, one of the world’s largest gold miners, operates in over a dozen countries. Additionally, it is a significant copper producer.
In part, Barrick Gold differs from other precious metals firms due to its emphasis on Tier One mining properties. Gold and copper from Tier One mines are produced in a somewhat consistent flow at low cost, allowing Barrick to continue to profit even when the price of those metals is low.
Barrick Gold can issue an attractive base dividend payment and a quarterly performance dividend payment that varies with its cash balance, thanks to the high cash flow generated by its Tier One mines.
Should You Buy Rhodium Stocks?
Mining is a capital-intensive, cyclical business. During economic prosperity, rhodium mining businesses have more money to spend on new mines and expansion plans. However, mining businesses frequently have issues due to the long lead periods needed to execute projects. Returns are impacted when projects established during boom times do not start until the cycle has changed.
The level of debt a rhodium firm carries should also be of particular concern to investors in rhodium equities. While businesses with significant debt levels sometimes suffer when the economy is weak, those with low production costs are the most successful and less likely to rely on debt to finance expansion extensively.
Investors should concentrate on the best rhodium mining firms in light of these difficulties. They have demonstrated that they can turn a profit no matter the state of the economy. Including high-quality rhodium stocks in your portfolio may be a good idea if you do not mind a little volatility and prioritizing dividend payments.
Is Rhodium a Good Investment?
Instead of purchasing the actual metal, owning rhodium stocks has several advantages. Because rhodium mining firms may grow their operations and revenues as the price of rhodium rises, they are expected to produce more significant overall returns than investments in physical rhodium alone. Their stocks should do better than the price of gold thanks to this increase. However, not all rhodium stocks perform better than the rise in the price of the precious metal. Therefore, investors must be selective when selecting rhodium stocks.
Final Thoughts
Some of the top rhodium stocks are available now. However, there are several different stocks to take into account. Moreover, diversifying your portfolio can help you reduce risk.
Take a look at the nickel stocks for further options. The demand for metals has increased across the board due to the surge in electric cars, and EV charging station supplies are also worthwhile while we are about it.
The most pleasing investment possibilities change because of how quickly the markets change. So feel free to explore Top1 Markets even more. We work hard to provide the best investing ideas and information.
