minesite info23 Jan 2013 21:33
Platinum hit a three month high of US$1,710.50 per ounce on Thursday 17th, trading higher than gold for the first time in several years. The following day palladium went to a 16-month high of US$797, partly on increasing confidence about the state of the global economy. US quarterly labour and housing market numbers came in positive, while there was also positive data out from China.
But there’s more to it than that. The platinum industry famously struggles with a set of complex dynamics unique in the industry. Mining costs are high, and in South Africa, which accounts for the majority of the global supply, the deeper ore can be metallurgically tricky, as Lonmin’s smelters know to their cost.
Making the numbers stack up even in an improving pricing environment isn’t easy, hence the decision last week of Anglo Platinum to sell one project and cut production at others. That news met with a mixed reaction, depending on which particular part of the global economy you are exposed to.
South Africa’s militant and sometimes violent union AMCU reacted with predictable fury to the loss the 14,000 jobs that Anglo Plats also said it was going to cut. Inevitably, an illegal strike was organised. Mines minister Susan Shabangu labelled Anglo Platinum “irresponsible”. This does not bode well in a country that allowed its policemen to massacre platinum miners in considerable numbers just a few short months ago.
On the other hand, the platinum price is rising, and for the first time in a good long while, platinum equities are on the move too. Aquarius Platinum has nearly doubled since mid November, when a new chief executive was appointed. Lonmin is also significantly better across the same period, as are Jubilee, Sylvania and Eastern Platinum.
So what will happen next? It was notable that among the risers, shares in Anglo Platinum and its parent Anglo American fell after initial strength, as investors realised the scale of the cut-backs and the likely intensity of the political and union backlash.
The industry will now face more disruption on the supply side, meaning that the platinum price should hold firm and other platinum equities should at last enjoy some respite. If the global economy continues to improve and demand rises, there could be considerable returns on offer.
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