No Image Problem for Platinum

Description

Platinum is as much a brand as it is a traded metal:  That is, well-heeled members of customer loyalty schemes, from everything from airlines to credit cards, work their way up through various tiers of membership to eventually reach the coveted elite ‘platinum status’.   This positioning of platinum as a premium metal is no accident of course.  Indeed platinum, until very recently, has traditionally traded at a higher $ price per ounce than that ‘other’ precious metal - gold.

 

In detail, the precious metals space is more complex than just Pt and Au.  Platinum Group Metals (PGMs), for example, is a collective term used to describe not simply platinum itself – but also Palladium (Pd), Rhodium (Rh), Iridium (Ir), Ruthenium (Ru) and Osmium (Os). 

 

Platinum end-use covers a range of sectors, from auto-catalysts, jewellery, electrical and electronic applications, in the chemicals sector and in glass production.   The range of end-uses mitigates some demand-side risk – however the metal’s fortunes are nonetheless closely tied to the automotive sector. 

 

Platinum’s close associate palladium is also a key autocatalyst – however the platinum market is the larger, at approximately double that of palladium.  The two metals substitute for each other in some autocatalyet applications – with rises in the platinum price historically driving increased palladium consumption and vice versa.  Industrial demand (including catalysts) is expected to continue to grow, particularly in the medium to long term, once current economic turmoil in developed world is behind us. 

 

Investment demand is growing, with 2007 seeing the introduction of platinum Exchange-Traded-Funds (ETFs) such as the ZKB (Zurcher Kantonalbank) Platinum ETF that is listed on the SIX Swiss Exchange.  

 

Platinum is sold as ingot and a range of smaller sized bars.  Futures contracts are available and traded including on the Tokyo Commodity Exchange (TOCOM) and New York Mercantile Exchange (NYMEX).

 

South Africa (4.8 million ounces), Russia (800,000 ounces), Zimbabwe (~300,000 ounes), Canada (~150,000 ounces) and the United States (~100,000 ounces) are the main sources of mine supply (2010 approximate production).    

Major platinum producers globally include Anglo Platinum, Impala Platinum and Lonmin, all operating in South Africa – and Norilsk Nickel of Russia.  North American production comes from the Stillwater mine in Montana, owned by Stillwater Mining, and from Xstrata’s Canadian (Sudbury) nickel operations.   Anglo Platinum also operates in Zimbabwe.  Recycling of PGMs augments mine production using scrap autocatalysts, electronics and jewellery. 

Primary deposits occur within layered basic igneous intrusions, with the Bushveld Igneous Complex of South Africa the principal example.  Elsewhere, PGMs occur as by-products within nickel-bearing sulphide deposits, such as those in Canada’s Sudbury Region and to a lesser extent Western Australia’s Goldfields Region.

Platinum mining is mostly via underground methods.  High-grade and low-grade in platinum deposits, to a first approximation, can be compared to high and low grades for gold deposits.  However one key difference lies in the fact that platinum mines are typically underground whereas gold mines are split between underground and open pit developments: The comparison of platinum grades to underground gold mine grades is therefore the more appropriate.  That is, grades over 5 grams per tonne combined platinum group metals are attractive, even more so if the weighting of the ‘basket’ of metals in a resource includes significant platinum and rhodium, the higher priced PGM metals.

Platinum ore is first crushed prior to flotation to produce a concentrate that is dried and smelted.  Smelting at over 1500 degrees Celsius produces a matte product which is then treated in air converters to liberate iron and sulphur allowing a cleansed matte to be refined. 

There are relatively few platinum investment opportunities on the ASX.  That said, there are a number of mid-tier platinum companies listed in Australia with assets in Southern Africa.  These include Aquarius Platinum (AQP), Zimplats Holdings (ZIM), Platinum Australia (PLA) and NKWE Platinum Limited (NKP).   

Outside Africa, Magma Metals (MMW) is progressing economic studies of the Thunder Bay North platinum-palladium-copper-nickel project in Ontario, Canada. Elsewhere, Platina Resources' (PGM) is aiming to develop the world-scale Skaergaad gold/palladium deposit on the east coast of Greenland.   A further example is Condoto Platinum (CPD), exploring for platinum in the Choco Province of Colombia and several other junior companies including platinum amongst diversified exploration portfolios.

The platinum sector looks set to benefit from the anticipated economic recovery in the OECD countries and in particular from the ongoing growth and development in China.

Watch that space.