South Africa’s platinum sector faces crunch time as prices slide – by Ed Stoddard, Jan Harvey and Silvia Antonioli (Reuters Africa – July 1, 2015)

JOHANNESBURG/LONDON, July 1 (Reuters) – South Africa’s platinum sector is at a crucial juncture as the metal’s price, near six-year lows, maintains a steady decline, with analysts now contemplating a move below $1,000 an ounce.

Platinum has fallen nearly 10 percent so far this year, and at current prices of less than $1,100 an ounce, many shafts in the world’s top producing country are losing money.

“(Platinum is) still firmly in a bear market, with little evidence of a bottom as yet,” independent technical analyst Cliff Green said last week. Its break through recent technical levels is “likely to trigger acceleration closer to $1,000, then $950,” he said.

The outlook could hardly be bleaker for an industry that was hit by a five-month strike last year that resulted in big wage increases it can ill afford in the face of soaring costs.

“Half of the industry, including major producers such as Lonmin, is cash-flow negative and if platinum slides below $1,000/oz nearly two thirds of the industry could be underwater,” said Cape Town-based Investec fund manager Hanré Rossouw.

Investors have taken note: the share price of top producer Anglo American Platinum on Tuesday hit 10-year lows while world no. 2 producer Impala Platinum is also trading around decade troughs.

Margins for the trio hit by last year’s crippling strike – Amplats, Implats and Lonmin – are razor thin.

According to Thomson Reuters data, on Dec. 14 Amplats’ return on equity was 0.4 percent, Implats’ was 0.5 percent and Lonmin’s was a negative 2.5 percent.

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