Why the Zimplats (ASX:ZIM) share price just hit an all-time high

The Zimplats Holdings Ltd (ASX: ZIM) share price surged over 10% higher today to hit an all-time high. Here’s what the platinum miner has been up to.

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The Zimplats Holdings Ltd (ASX: ZIM) share price surged over 10% higher today to hit an all-time high. For the first time ever, shares in the platinum miner closed at $20.05 – up on yesterday’s close of $18.15.

The S&P/ASX 200 Index (ASX: XJO) by comparison, performed at a more mediocre level. The index was only up 0.5% at close of trade.

Let’s take a closer look at what Zimplats does and why investors are going crazy for it.

What does Zimplats do?

Zimplats is a platinum miner based in Zimbabwe. It specialises in the extraction of six elements: platinum, palladium, iridium, ruthenium, osmium, and rhodium. The last element, rhodium, is the key to its astronomical share price rise.

According to the Royal Society of Chemistry, rhodium is the rarest non-radioactive element on Earth. Only 30 tonnes of the metal are produced a year. Some of its uses include fibre optic cable coating, crucible manufacturing, and headlight reflectors.

Rhodium’s most important use, however, is in car exhausts.

The element is used as a catalyst in cars to reduce the amount of nitrogen oxide in exhaust fumes. Nitrogen oxide is an air pollutant. The website Trading Economics claims many car manufacturers are increasingly demanding rhodium as nations around the world increase environmental regulations. Supply has also diminished due to COVID-19 work stoppages. As a result of this increasing demand and decreasing supply, rhodium’s price is surging.

The other element going gangbusters on increased environmental considerations is lithium.

At the moment, the metal is selling for US$29,200 an ounce in the commodities market. It’s up 34% in the past month and 71.8% over the year. To put that in perspective, gold is valued at $1,689 an ounce and has fallen 8.37% in the past month.

Zimplats performance reflects the success of rhodium. In its half-yearly report for FY21, the company’s net profit after tax increased 209% on the prior corresponding period (pcp) to total $251 million. Revenues were up 79% on the pcp.

The company paid a 40.88 cent dividend to its shareholders for the half-year.

Zimplats share price snapshot

Only 1 month ago, the Zimplats share price was $12.33. At today’s price that’s a 62.6% increase in just over 4 weeks! Near the end of March last year, the share price was at a 52-week low of $6.96. If an investor was smart enough to purchase into the company then, they would be sitting on a monumental 188.1% return on investment.

After today’s successes, Zimplats market capitalisation is now $2.2 billion.

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Motley Fool contributor Marc Sidarous has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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