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Posts tagged ‘Impala Platinum Holdings Ltd (IMPUY)’

Industrial-strength bullion

June 4th, 2013

Sprott’s David Franklin says the time’s right for platinum and palladium

by Greg Klein

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Sprott’s David Franklin says the time’s right for platinum and palladium

David Franklin

Bullion metals with industrial demand—or the other way around—platinum and palladium show a looming supply/demand/price scenario that should interest investors, according to David Franklin. That was the message the Sprott Asset Management market strategist brought to his May 26 presentation at Vancouver’s World Resource Investment Conference 2013.

Referring to the “madhouse at the Fed” and Japan’s “unprecedented” macro-economic policy, Franklin briefly went over the case for precious metals “as a way to protect yourself against this ongoing grind of negative real interest rates.” He said the recent sell-off in precious metals was “probably overdone… the fundamental backdrop hasn’t changed.”

Unlike gold, however, “almost all platinum and palladium goes into industrial production.” Traditionally a moderate amount has went into jewellery, but the price has mostly been determined by the automotive industry. “You can follow the use of platinum and palladium in headlines by following auto sales,” he maintained. American and Chinese sales rose 10% last year, although Germany’s numbers have declined.

Sprott’s David Franklin says the time’s right for platinum and palladium

Some investors might be moving from
gold and silver into platinum and palladium.

The metals are used in auto catalysts, with gasoline engines using palladium and diesel using platinum, which withstands higher temperatures. Palladium sells for roughly half platinum’s price.

Gasoline-powered cars are primarily found in the U.S., China and parts of India, Franklin said, while diesel is used in other parts of India and in Europe. But over the last six months platinum and palladium investment has increased mostly through coins and ETFs, he emphasized.

As of May 24, platinum ETFs rose 30% year-to-date, with palladium showing an almost 20% increase. “So investors are moving out of silver and gold, presumably, and into platinum and palladium.”

Although the two metals are generally found together, South Africa produces by far the bulk of world platinum supply while Russia remains the top palladium miner.

A supply deficit for both platinum and palladium set in last year, largely due to South African strikes. “In platinum, we’re expected to be in a slight deficit this year… and 2014. For palladium, we’re a million ounces short this past year” and he sees “a five-year deficit of a million ounces or more in an eight-million-ounce market.”

He said palladium investment was previously forecast at 200,000 to 300,000 ounces this year. But “today already, between ETFs and coin sales around the world, we’re close to 400,000 ounces. Investor demand has already gone above where most analysts think investment was going to be for this year, and we’re only five months in. And it’s a very similar story for platinum…. So if we continue to see money flowing from investors into platinum and palladium, the deficit expectations will continue upwards.”

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Week in review

February 2nd, 2013

A mining and exploration retrospect for January 26 to February 1, 2013

by Greg Klein

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Search for quarry workers postponed, victims believed dead

Efforts to find two workers missing in a gravel quarry accident at L’Epiphanie, Quebec were postponed on Thursday. The truck drivers, employed by Maskimo Construction, were buried by a landslide two days earlier. High winds and unstable ground made it unsafe to operate the helicopter and heavy equipment involved in the mission. Searchers hope to resume their efforts on Saturday but “police have acknowledged they don’t expect to find survivors,” the CBC reported.

One co-worker described the landslide in a Canadian Press story reprinted in Wednesday’s Montreal Gazette.

Colombia exploration workers remain in captivity

A mining and exploration retrospect

Five people kidnapped from Braeval Mining’s TSX:BVL Snow Mine project in Colombia remain missing. The Monday edition of Colombia Reports stated the military, which arrested four more suspects on Sunday, claimed it was making progress. But, the journal added, the National Liberation Army (ELN) kidnappers warned that any rescue attempt would endanger the hostages.

Among the ELN’s demands are stricter regulation and heavier taxation of the mining industry, legalization of small-scale mining and a national debate on mining policy, Colombia Reports stated.

The victims—a Canadian, two Peruvians and two Colombians—were abducted on January 18 in northern Colombia’s Bolivar department.

On Thursday the country’s biggest rebel army, the Revolutionary Armed Forces of Colombia (FARC), released three Gran Tierra Energy TSX:GTE contractors after one day in captivity. But, Reuters stated, the guerrillas killed four soldiers in southwestern Colombia’s Narino department on Wednesday.

More mid- and large-cap companies selling royalties

The streaming business has grown tremendously, both from the amount of money available and the size of companies seeking it. As Bloomberg reported on Thursday, “the biggest miners have joined the queue of capital-hungry companies requesting funding.”

Silver Wheaton TSX:SLW CEO Randy Smallwood told the news agency that his company has seen increased interest from miners with market caps “up into the tens and hundreds of billions.… Doors that we’ve been knocking on for a long time, they are all of a sudden knocking on our door.”

If an operator goes down from say a one-gram cutoff to a 0.5-gram cutoff, the operator may not make any money but the royalty-holder makes money…. It’s one of the best business models that I have ever seen.—Franco-Nevada chairman Pierre Lassonde in an interview with BNN

Although Silver Wheaton completed only one transaction last year, it was a $750-million deal with HudBay Minerals TSX:HBM, which has a press-time market cap of $2 billion. Such deals obviously benefit Silver Wheaton, which has been outperforming both silver prices and metal producers, Bloomberg stated.

Not surprisingly, success brings competition. But the founder of the first royalty company, Franco-Nevada TSX:FNV chairman Pierre Lassonde, considers most of the newcomers to be small fish. In an BNN interview posted Thursday, he said, “Every week we must have two, three, four, five companies coming and approaching us, but they’re of a size that there’s only two or three royalty companies that look at them.” Over the last six months his company has been working on three “really large deals” of half a million to a billion-plus, he said.

With each transaction Franco-Nevada gets a free perpetual option on any further discoveries on the same property. “It is this optionality that has given us the kind of rate of return that we give the shareholders,” he explained.

Lassonde attributed “de-ratings in the gold stocks” to smaller, lower-grade deposits than those found in the 1980s and ’90s. “At Franco, as far as we’re concerned, if an operator goes down from say a one-gram cutoff to a 0.5-gram cutoff, the operator may not make any money but the royalty-holder makes money…. It’s one of the best business models that I have ever seen.”

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