Norilsk Sees Africa Cutting Platinum Output on Spending – by Yuliya Fedorinova (Bloomberg News – April 7, 2015)

OAO GMK Norilsk Nickel sees South African output of platinum-group metals declining in the next several years as the Russian mining company leads investors in creating a $2 billion palladium fund.

“Investments in a vast amount of projects in South Africa were delayed and it’s hard to expect an increase in output in the region,” Anton Berlin, head of strategic marketing at Norilsk, said in an interview on Monday. “Most likely, it will even fall.”

This year, South African output will recover to match its 2013 level of 4.4 million ounces of platinum and 2.4 million ounces of palladium following a sharp decline caused by five months of strikes in 2014, he said.

Production of platinum and palladium, which are mined from the same deposits and used in automobile catalytic converters, has been lower than demand since at least 2012. Opaque stockpiles held by hedge funds have contributed to price volatility, according to Norilsk.

More than 1 million ounces of potential output were lost during strikes in South Africa that ended in June, according to research by Johnson Matthey Plc. The platinum market had a deficit of almost 1 million ounces last year, which should narrow to 500,000 ounces this year, according to Norilsk’s estimates.

South Africa’s ore quality has declined over the past decade, and miners are having to seek reserves deeper underground, raising development costs, according to Berlin. Low metals prices make investments less attractive at the moment, he said.

Undisclosed Stockpiles

Platinum declined more than 18 percent in the past 12 months and traded at $1,167.25 per ounce at 11:41 a.m. in London. Palladium was little changed at $770.35 per ounce.

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