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World platinum prices tipped to level out

DEALS this year with South Africa’s third largest platinum producer, Lonmin, and Perth-based companies, Platinum Australia and Helix Resources, have underscored the state of flux in the world platinum scene.

Prices for the precious, strong, dense metal with a high melting point have risen substantially as world demand has continued to exceed supply for the past two years.

Increasingly tough vehicle emissions regulations in Europe and the US fuelled a 14 per cent increase in the demand for platinum as a catalytic converter during 2000, while the demand for other industrial applications rose by eight per cent.

And although Russia has huge reserves and more than doubled its production last year, two factors appear to have unsettled the world’s markets.

Much of what Russia has exported recently has reportedly been from stockpile and, in the past two years, some Russian producers have experienced delays in obtaining export permits from the Russian Government.

The supply and production picture is changing, not only in relation to demand, but also in terms of locality.

The world’s major platinum producers, mostly in Russia and South Africa, have promised to increase production to match demand. But South African production last year fell by almost 3 per cent against an increase in North American production of 6 per cent.

Understandably, London-based Lonmin, with a smelter in South Africa, has been keen to get its hands on as much platinum as possible.

Lonmin has invested $12 million in Platinum Australia, owner of the Panton platinum group element project, and has signed a Memor-andum of Understanding for an $8 million investment with Helix Resources in the Munni Munni project near Karratha.

Both projects are forecast to be online during 2003.

Lonmin also holds an option to top up its share subscription investment in Platinum Australia to $40 million, following a bankable feasibility study.

The Panton deposit, in a chromitite reef, has been estimated to contain 2.2 million ounces of platinum group elements and Lonmin, which also produces its South African platinum from chromitite reefs, is keen to investi-gate a hydrometallurgical rather than smelter process for the production of platinum group metals.

With smelting facilities as well as metallurgical processing experience in South Africa, Lonmin has built a reputation as the country’s lowest cost platinum producer.

Meanwhile, with results from Platinum Australia’s latest Panton drilling program due next month and off-take and technical services agreements forming part of the Lonmin deal, DJ Carmichael has suggested that Platinum Australia could “effectively become Lonmin’s platinum arm in Australia, if not for the rest of Asia”.

However, Helix Resources’ Munni Munni project, reportedly a larger deposit than Panton, will likewise keep end-user Lonmin well supplied with the precious metal.

Both Platinum Australia executive director John Lewins and Helix Resources managing director Robert Mosig see the major increase in demand coming from platinum’s use as a catalytic converter to control vehicle emissions.

Mr Lewins said more stringent vehicle emissions legislation forecast for India, Singapore, Korea, Taiwan and Indonesia spelt “huge growth potential” for the platinum market.

But while prices for both platinum and palladium – a platinum group mineral with very similar properties to platinum – have increased beyond predictions, Mr Lewins expects an automatic cap.

Both auto catalytic and dental demand for palladium fell during the past year because the price was too high, Mr Lewins said, subsequently increasing demand for lower-priced platinum.

And, despite forecast growth in palladium use in computers and mobile phones, manufacturers began substituting other materials last year as prices went up. Platinum, again, was the choice for manufacturers of hard disks.

The demand for platinum also increased by 28 per cent in the high quality glass industry, propelled by the increasing appeal of flat screen liquid crystal displays and lighter vehicle components from glass-reinforced thermoplastics, rather than steel.

While environmental regulations in place in Europe and the US are increasing the demand for platinum, slowdowns in the world’s largest two economies are also altering platinum applications markets.

The two largest importers of platinum and palladium are the US and Japan, but economic recession in Japan and persistent talk of a downturn in the US economy have subdued the demand for investment platinum and sales of platinum jewellery.

Investors have taken advantage of favourable prices, selling bars, coins and jewellery back to the market.

And while the growing trend for white metal jewellery has continued in most countries, high platinum prices have sent buyers in the US and Japan to lower-priced white gold pieces. Japanese jewellers produced less platinum pieces during 2000, reducing the country’s demand for platinum by 20 per cent and world platinum jewellery demand by 1 per cent.

Mr Lewins is undaunted by the drop in one sector of the platinum market.

The downturn in the jewellery market is the first in 16 years and the increased demand in both the industrial and electronics markets is enough to buoy Platinum Australia’s optimism.

Neither is competition from Helix Resources a dampener.

“Helix has got a good resource there,” Mr Lewins said. “But there’s huge growth potential in the auto catalytic and electronics markets.”

When it decided it could not manage both projects and opted for Munni Munni 18 months back, Helix retained a 14 per cent interest in Panton.

“Both operations will achieve real gains for Australia,” Mr Mosig said.

“There’s no race between them. All it takes is money, expertise and luck.”

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