PLATINUM GROUP METALS

Is platinum ready to rock?

Aquarius Platinum's bold intention to raise fresh capital is underpinned by significantly higher platinum metal prices, recovering from massively oversold levels.

Author: Barry Sergeant
Posted: Friday , 27 Mar 2009

JOHANNESBURG - 

Few metals - or commodities - have bounced by 50% or more from trough prices, typically seen around October 2008; among them may be counted platinum, silver, lead (a small base metal) and cocoa. For platinum miners, the return to some respectability of key platinum group metal (PGM) prices may have averted a general and painful disaster within the specialised global subsector.

Platinum prices crashed by way more than half from records around $2 225 an ounce during 2008 to around $744 during October and have since cruised upwards to potentially disaster-saving levels around $1 150 an ounce, the best seen since September. Palladium has shifted up by 38% from its lows to around $221 an ounce; rhodium, driven by insane speculators to around $10 000 an ounce during 2008, is trading around $1 000 an ounce.

Nickel prices, important to Russia's Norilsk - the world's biggest miner of nickel, but also a world class platinum producer, and the single biggest palladium miner - and also PGM mines in southern Africa, is only just showing signs of coming out of a horrific slump, with a bounce of around 10% from lows.

While PGMs may well have been overbought during 2008, the crash in the latter part of the year could equally have been a case of panic overselling. PGMs are relatively small in metal markets, underpinning the likelihood of overbuying, and were exposed to overselling given that demand for auto catalysts, the key PGM market, collapsed in line with developments in the global auto and truck sectors.

By the same token, PGM miners were quick to react on the supply side, cutting and rationalising across the board, underpinning the case for PGM prices to regain some respect. There have been recent reports that jewellery demand, stimulated by lower PGM prices, has been firming in parts of Asia.

The apparent turn of fortunes for PGM prices has been sufficient, to date, for Aquarius Platinum to boldly announce this week an intended rights issue and an intended sale of convertibles, along with confirming its intention to complete a friendly takeover of

Ridge Mining, which is close to converting from developer to producer.

Stock prices for listed PGM developers and miners remain way below highs set during the froth of 2008. The market value of Anglo Platinum, the No 1 name in the business, declined from $37bn to as low as $8.8bn, but has since recovered to $12.9bn. Measured on a weighted aggregate, PGM miner stock prices are on average 65% below high prices, but have bounced by a convincing 78% from recent lows. Stock prices for developers such as Platmin, which is nearing production, have bounced by 99% off low points, on average.

An analysis of global investment portfolio flows over the past month in and around listed mining stocks shows that investors have favoured platinum names highly, fourth from the top after copper, nickel, and uranium names. In terms of composite stock price performance over the past 12 months, the best performance among the three Tier I platinum names has come from Lonmin, with Aquarius leading Tier II names. In terms of absolute performance, Impala Platinum leads the Tier I sector, while Northam stands out in the Tier II sector.

Among developers, Colossus Minerals, which has made some truly astonishing high grade intercepts at its Serra Pelada project in Brazil, has turned in a very convincing stock price pattern over the past year. The extent of the orebody at Serra Pelada will no doubt be further defined in due course. Vale, the world's No 2 miner by value, held the underlying title to Serra Pelada until 2007, having explored the area from 1980 to 1998, completing more than 200 drill holes in the Serra Pelada mineralised system.

However, platinum developers overall continue to be challenged by deeply depressed stock prices. Platmin may have bounced nearly 200% from its lows, but it remains 89% below its high stock prices seen during 2008. Measured on a weighted basis, developer stock prices are trading 82% below high points. However, Aquarius, trading 78% below its high point currently, has been bold enough, as mentioned, to announce its intention to raise capital and get on with life.

Selected platinum stocks
	Stock	From	From	Value
Tier I platinum	price	high*	low*	$ bn
Anglo Platinum	ZAR 516.85	-65.1%	47.7%	12.991
Impala Platinum	ZAR 171.75	-52.9%	98.4%	10.970
Lonmin	GBP 14.60	-59.6%	172.1%	3.319
Averages/total		-59.2%	106.1%	27.280
Weighted averages		-60.3%	75.5%
Diversified
Anglo American	GBP 12.57	-65.9%	38.7%	24.312
Mvela Resources	ZAR 32.80	-52.5%	111.6%	0.741
Norilsk	$ 6.97	-78.0%	98.6%	13.287
ARM	ZAR 146.50	-52.3%	92.8%	3.273
Averages/total		-62.1%	85.4%	41.614
Weighted averages		-70.3%	58.5%
Tier II platinum
Stillwater	$ 3.88	-79.5%	120.5%	0.365
Aquarius	GBP 2.04	-77.9%	154.5%	0.962
Northam	ZAR 27.85	-63.9%	68.8%	1.058
NA Palladium	CAD 2.02	-70.5%	77.2%	0.142
Zimplats	AUD 4.10	-74.4%	17.1%	0.308
Eastplats	CAD 0.43	-87.6%	132.4%	0.293
Anooraq	CAD 0.85	-78.5%	286.4%	0.128
Averages/total		-76.0%	122.4%	3.256
Weighted averages		-76.3%	94.7%
Developers and explorers
Platmin	CAD 0.90	-88.8%	181.3%	0.271
WeSizwe	ZAR 1.18	-90.4%	16.8%	0.073
Noront Resources	CAD 0.75	-87.2%	72.4%	0.094
Pt Australia	AUD 0.75	-76.2%	108.3%	0.129
Sylvania	GBP 0.41	-68.3%	70.8%	0.105
Starfield	CAD 0.15	-89.1%	114.3%	0.039
Ridge	GBP 0.65	-55.1%	207.1%	0.086
PGM	CAD 1.65	-49.7%	132.4%	0.091
Solitario	CAD 1.56	-73.1%	14.7%	0.038
Colossus Minerals	CAD 2.08	-48.0%	383.7%	0.092
Jubilee	GBP 0.09	-90.1%	22.8%	0.013
Nkwe	AUD 0.16	-85.4%	55.0%	0.055
Braemore	GBP 0.02	-80.8%	106.0%	0.023
Marathon	CAD 0.45	-90.0%	80.0%	0.010
Caledonia	CAD 0.06	-69.2%	140.0%	0.024
Freegold Venture	CAD 0.13	-91.1%	23.8%	0.007
Magma Metals	AUD 0.28	-55.6%	33.3%	0.022
Franconia	CAD 0.15	-92.1%	50.0%	0.007
Cons. Puma	CAD 0.05	-96.8%	42.9%	0.002
Avalon Ventures	CAD 0.57	-70.8%	93.2%	0.031
Rusina	AUD 0.04	-86.3%	33.3%	0.008
Largo Resources	CAD 0.09	-94.6%	88.9%	0.013
Macdonald Mines	CAD 0.05	-89.0%	100.0%	0.006
Hard Creek	CAD 0.20	-76.2%	150.0%	0.010
Polymet Mining	CAD 0.96	-78.6%	60.0%	0.107
MetalCORP	CAD 0.12	-87.4%	100.0%	0.005
Wallbridge	CAD 0.10	-80.4%	185.7%	0.008
Benton	CAD 0.27	-57.9%	140.9%	0.015
Mustang Minerals	CAD 0.08	-87.9%	60.0%	0.005
Northern Shield	CAD 0.07	-90.7%	27.3%	0.003
Platina	AUD 0.22	-72.8%	57.1%	0.009
Darnley Bay	CAD 0.10	-83.3%	100.0%	0.004
Pacific NW Cap.	CAD 0.08	-80.0%	60.0%	0.004
Niplats	AUD 0.16	-73.3%	158.3%	0.008
Starcore	CAD 0.10	-73.6%	90.0%	0.005
Huston Lake	CAD 0.35	-52.7%	66.7%	0.010
Goldplat	GBP 0.12	-20.3%	44.6%	0.019
Hinterland Metals	CAD 0.03	-90.0%	200.0%	0.001
Pan Palladium	AUD 0.04	-64.1%	362.5%	0.008
Premium Exp.	CAD 0.12	-71.3%	155.6%	0.004
Eurasia Mining	GBP 0.01	-70.0%	12.5%	0.002
Silvermet	CAD 0.05	-77.5%	200.0%	0.003
Developer averages/total		-80.1%	110.1%	1.469
Weighted averages		-82.4%	99.4%
Overall averages/total		-73.6%	103.8%	32.005
Overall weighted averages		-64.7%	78.3%
* 12-month
Source: market data; table compiled by Barry Sergeant