July 28, 2025

Structure of the Precious Metals Industry

Structure of the Precious Metals Industry

The precious metals industry is one of the most complex and high-value sectors in the global economy. Comprising metals such as gold, silver, platinum, palladium, rhodium, and iridium, the industry plays a crucial role in various sectors, from finance and jewelry to automotive and technology. The structure of the industry is shaped by several key processes, including mining, extraction, refining, product fabrication, and recycling. While these processes are common to all precious metals, the operational dynamics between gold, silver, and platinum-group metals (PGMs) differ significantly, especially in refining operations, market structure, and recycling practices.

Gold and Silver Refining Operations

Gold and silver, both traditionally viewed as stores of value, have relatively simpler refining processes compared to the more complex platinum-group metals. These two metals are often produced together in doré, an impure alloy typically containing about 65% gold and 30% silver. Because refining gold and silver is less technically demanding, independent refining companies play a significant role in the industry. The refining process for these metals usually involves smelting and chemical processes to purify the metal to a high degree of purity, often exceeding 99.99%.

Independent refiners bid aggressively for doré bars, as refining gold and silver is straightforward and allows refiners to operate with low fees. Refining companies offer competitive pricing to miners, ensuring that miners often opt to send their doré to third-party refiners rather than investing in their refining operations. The payment terms in this sector are also favorable to miners, with 90% of the value being paid within one or two days, and the remaining balance settled within a week. This fast turnaround, combined with low refining fees, makes it economically unfeasible for miners to run their refineries.

Harmony Gold Mine, a South African producer, attempted to establish its refinery in the late 1990s. While the refinery initially produced high-purity gold, it struggled with operational issues such as security, logistics, and inventory management. As a result, Harmony eventually returned to sending its doré to the Rand Refinery, an independent refinery that was able to offer better pricing and more efficient services. This example illustrates the challenges faced by mining companies when they try to vertically integrate their operations by running their refineries.

For silver, refining operations are often tied to gold refining due to the shared production of doré bars containing both metals. However, some larger silver operations, especially those integrated with base-metal extraction, run their refining operations. Companies such as Teck (Canada), Kazzinc (Kazakhstan), and Met-Mex Peñoles (Mexico) are examples of base-metal mining firms that have integrated silver refining into their operations. These companies benefit from economies of scale by processing both precious and base metals in the same facilities.

Platinum-Group Metals (PGMs) Refining Operations

The refining process for platinum-group metals is far more complex and costly compared to gold and silver. PGMs, which include platinum, palladium, rhodium, iridium, ruthenium, and osmium, are not only rarer but also have different chemical properties that require more specialized technologies to refine. As a result, PGM refining operations are usually integrated with mining companies, which often operate their refineries. These refineries use advanced proprietary technologies that are specifically designed to handle the unique challenges posed by PGM ores and concentrates.

For example, in South Africa, companies like Anglo American Platinum, Impala Platinum, and Lonmin run their refineries to process PGM ores from their mining operations. Similarly, Russia’s Krastsvetmet refinery processes concentrates from the Norilsk Nickel mining company. These refineries are integral parts of the mining operations, as the technical complexity of PGM refining requires a level of specialization that independent refiners typically cannot afford.

Moreover, some base-metal smelters, such as Umicore’s Hoboken facility in Belgium and Aurubis in Germany, also refine PGMs. These facilities are designed to handle the dual challenge of refining both base metals and precious metals, recovering PGMs from low-grade materials. Since base-metal smelters are often already equipped with the necessary infrastructure, they are well-positioned to recover PGMs from secondary sources like scrap materials, which are increasingly important in the context of rising PGM prices and environmental concerns.

In contrast to the gold and silver sector, which often relies on independent refiners, the PGM industry has a higher degree of vertical integration. Mining companies tend to control the refining process to ensure that they can capture the maximum value from their operations. Additionally, these refineries often deal with more complex feedstocks, such as spent autocatalysts from the automotive industry, which require specialized knowledge and technology to process. Recycling plays a critical role in the PGM sector, helping to offset some of the challenges associated with primary mining. Mining companies like Impala Platinum and Stillwater Mining Company have developed significant capabilities for recycling PGM-rich materials, particularly spent autocatalysts, in their refining processes.

Differences in Market Dynamics and Business Integration

The fundamental difference between the gold and silver industry and the PGM sector lies in the level of integration and specialization required for refining. While gold and silver refining is relatively simple and widely dispersed among independent refiners, the PGM sector is highly integrated, with mining companies often owning and operating their refineries to handle the complex extraction and purification processes. The technology and expertise required for PGM refining are more advanced, and as such, the refining market for PGMs is less competitive than the gold and silver markets.

In addition to refining, the market dynamics also differ in terms of recycling. While recycling is an important part of both sectors, it plays a particularly vital role in the PGM industry. Due to the high value and technical challenges associated with PGM ores, mining companies have a strong incentive to recycle materials, especially spent catalysts and industrial scrap. This recycling process helps reduce the environmental impact of primary mining and provides a more sustainable source of precious metals.

Furthermore, the market for PGMs is more prone to fluctuations due to the complex interplay of factors such as automotive demand (for catalytic converters), industrial use, and investment speculation. In contrast, gold and silver are often considered as stores of value, with gold in particular playing a role as a hedge against inflation and economic uncertainty. This difference in market behavior leads to contrasting dynamics in pricing, production, and demand for each of these precious metals.

Conclusion

The precious metals industry is marked by significant structural differences between the gold and silver sectors and the platinum-group metals market. Gold and silver refining operations are generally simpler, leading to a decentralized and competitive market dominated by independent refiners. In contrast, PGM refining requires advanced technologies and is typically more centralized, with mining companies controlling their refineries to process complex ores. Both sectors rely heavily on recycling, but recycling is especially crucial for PGMs due to their high value and limited supply.

Despite the differences, both the gold and silver industries and the PGM sector share common challenges and opportunities, particularly in the areas of rising prices, production costs, and sustainability. As the demand for precious metals continues to grow, particularly for PGMs in industrial applications, innovation in refining technologies and recycling practices will play a key role in shaping the future of the industry.