The platinum story nobody is talking about – by Patrick Cairns ( – March 9, 2015)

Reasons for optimism.

Most investors currently view South Africa’s platinum industry with a huge amount of scepticism. Platinum stocks on the Johannesburg Stock Exchange have been shedding value in an environment where their balance sheets are deteriorating and free cash flows are close to zero.

Impala Platinum and Anglo American Platinum have both announced that they are looking to sell non-profitable mines. Glencore also recently told its shareholders that it will be unbundling its stake in Lonmin, which suggests that there is little hope for finding a buyer.

This is all taking place at a time when the prices of platinum group metals (PGMs) have remained depressed, with even the CEO of Impala Platinum, Terence Goodlace, recently commenting that he expects above-ground stocks to keep the platinum price low for another two to two-and-a-half years. On top of this, the seemingly hostile labour environment, power shortages and regulatory uncertainty make South Africa’s platinum mining sector appear like a place few would fear to tread. However, there is another side to the story.

Consider that 35 kilometres north west of Rustenburg, there are three new platinum mines being developed on the western limb of the Bushveld Complex. In total, $3.5 billion worth of capital is going into these ventures, which are all more or less within eyesight of each other.

This is investment on a fairly significant in scale, and suggests all may not be as dire as it seems when it comes to platinum. And this is largely because, whatever the external factors may be, South Africa has world-leading deposits that are of enormous strategic importance over the long term.

“Everybody always forgets the rocks,” says Michael Jones, CEO of Canadian-headquartered Platinum Group Metals (PTM). “We’re enormously optimistic about the country and its position in the world because the rocks aren’t going away.”

PTM is one of the companies involved in new mine development on the western limb. It owns 82.9% of the Western Bushveld Joint Venture (WBJV), which is scheduled to show its first production this year.

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