Best of the Week
Most Popular
1.Scottish Independence YES Vote Panic - Scotland Committing Suicide and Terminating the UK? - Nadeem_Walayat
2.Independent Scotland Will Disintegrate as Unionist Regions Demand Referendum's to Rejoin UK - Nadeem_Walayat
3.Bank of England Panic! Scottish Independence Bank Run Already Underway! - Nadeem_Walayat
4.Gold and Silver Price Ready To Go BOOM - Austin_Galt
5.Gold and Silver Potential Price Meltdown Scenario - Rambus_Chartology
6.Scottish Independence UK Catastrophe - The Balkanisation of Britain - Video - Nadeem_Walayat
7.The Price Of Gold And The Art Of War Part I - Darryl_R_Schoon
8.Main Reason Why Scotland Will Vote NO to Independence, 70% Probability - Nadeem_Walayat
9.Heavy Gold and Silver Shorting is Bullish - Zeal_LLC
10.10 Year U.S. Treasury Short Best Place to be Remainder of 2014 - EconMatters
Last 5 days
Nervous Investors Will Hate the Money You Make With This Strategy - 20th Sept 14
Cheap Gold Stocks Upleg Intact - 20th Sept 14
Monetary Policy Killing The System - 20th Sept 14
Scotland and the Spirit of Our Time - 20th Sept 14
Bitcoin Price Charts In-Depth Analysis - 19th Sept 14
Alibaba is Focused, Will Use Money in Emerging Areas - 19th Sept 14
Bird's Eye View of the Gold Stocks - 19th Sept 14
Scotland Independence Result NO Win 55% to Yes on 45% - 18th Sept 14
Silver Price: A Collapse and a Rally - 18th Sept 14
Here's Why Trendlines are Your New Trading Best Friend - 18th Sept 14
Silver Buyers Keep Stacking And Demand Higher Despite Falling Prices - 18th Sept 14
The "Hidden" Billions in the Alibaba IPO - 18th Sept 14
Russian Union Of Engineers Accuses Ukraine Airforce In MH17 Crash - 18th Sept 14
Monetary Policy Weighs on Gold and Silver - 18th Sept 14
Global Currencies Analysis...The World According to Chartology - 18th Sept 14
Gold Price Hammered by Strong U.S. Dollar - 18th Sept 14
Is Citigroup the Dumbest Bank Ever? - 18th Sept 14
Scotland Must Vote Yes! For All Of Us - 18th Sept 14
Scottish Independence Referendum Result NO 55%, YES 45% - Vote Forecast - 18th Sept 14
A Public Bank Option for and Independent Scotland - 17th Sept 14
The Charade of Independence for Scotland and UKIP - 17th Sept 14
Gold Report - U.S. National Debt Surges $1 Trillion In Just 12 Months - 17th Sept 14
How to Find Trading Opportunities in ANY Market Using Fibonacci Analysis - 17th Sept 14
Why Money Is Worse Than Debt - 17th Sept 14
Can Gold Price Finally Recover? - 17th Sept 14
Scotland Independence - Europe Holds Its Breath - 17th Sept 14
The Energy Prices at Risk with Scottish Independence - 17th Sept 14
Scottish Independence SNP Lies on NHS, Economy, Debt, Oil and Currency - 17th Sept 14
The Truth Behind the Dangerous "Helicopter Money" Delusion - 16th Sept 14
Central Bank Balance Bullying: Investor Implications - 16th Sept 14
U.S. Dollar and Gold Elliott Wave Projection - 16th Sept 14
The Origins and Implications of the Scottish Referendum - 16th Sept 14
The Collapse Of U.S. Silver Stocks As Public Debt Skyrockets - 16th Sept 14
Emerging Markets Are Set Up for a Crisis, What’s on Your Radar Screen? - 16th Sept 14
Scottish Independence Bank Run Already Underway - Video - 16th Sept 14
The Emergence of the US Petro-Dollar - 16th Sept 14
Economic GDP Drives Stock Prices Inestment Myth - 16th Sept 14
Don't Miss This Gold Buying Opportunity - 16th Sept 14
Why ECB QE Is Bearish For Gold Prices - 15th Sept 14
Property Rights and Property Taxes—and Countries That Don’t Have Them - 15th Sept 14
Junior Miners Breaking Out Higher Forecasting Gold and Silver Price Bottom? - 15th Sept 14
Stock Market Patiently Waiting for Mean Reversion - 15th Sept 14
A Closer Look at the US Dollar - 15th Sept 14
The Silver Price Sentiment Cycle - 15th Sept 14
Stock Market Correction Underway - 15th Sept 14
Marc Faber - “I Want To Be Diversified, I Want To Own Some Gold” - 15th Sept 14
The Myth of Nuclear Weapons - 15th Sept 14
US Dollar Forecast to Go Much Higher - 15th Sept 14
Analysis And Price Projection Of The Uranium Market - 15th Sept 14
Bank of England Panic! Scottish Independence Bank Run Already Underway! - 15th Sept 14

Free Instant Analysis

Free Instant Technical Analysis


Market Oracle FREE Newsletter

Huge Stocks Bear Market

How to Invest in Platinum in 2013

Commodities / Platinum Jun 19, 2013 - 03:27 PM GMT

By: Money_Morning

Commodities

Tony Daltorio writes: Anyone following how to invest in platinum this year has noticed the importance of South Africa to this metal's price.

That's because most of the world's platinum supplies come from South Africa. The country produces nearly 70% of the world's platinum and is home to 80% of the world's reserves.


Both Johnson Matthey's Platinum 2013 report and Thomson Reuters GFMS' Platinum and Palladium Survey 2013, released in May, point to South Africa as a growing problem for the global platinum market.

Continued labor unrest in South Africa has created a supply/demand scenario favorable for investing in platinum. While global platinum demand is steady to rising slightly, the labor situation in South Africa is beginning to put a crimp into supplies.

That's why exchange-traded products such as the ETFS Physical Platinum Shares (NYSEArca: PPLT) have received the largest investor inflows in eight months.

But it's not too late to learn how to invest in platinum to bank these profits in 2013, as June looks to make the situation even worse...

How South Africa's Labor Unrest is Shaping the Platinum Market

Last year there was a small 2.6 million metric ton platinum deficit according to previously mentioned platinum reports. This followed a seven-year period of market surpluses.

The deficit was entirely caused by a 12% drop in South African production of the precious metal.

Now June is set to bring even more trouble to South Africa's labor fights.

William Tankard, mining research director at GFMS, stated "the pieces are in place for further labor unrest as we move into the wage negotiation period (started in early June) in South Africa."

The deficit is forecast to grow this year and into 2014.

The problem results from South African mining being very labor-intensive (the mines are very deep underground) with harsh conditions. The mines are deep and hot with lots of dust requiring ventilation systems to keep the air breathable. The mining industry in South Africa does not have a good track record when it comes to safety either.

Production always continued along when the dominant labor union was the National Union of Mineworkers, which is closely tied to the ruling party, the African National Congress.

But at many of the major platinum mines, such as the mine in Marikana owned by Lonmin PLC ADR (LNMIY), their membership is dwindling rapidly. Marikana was the site where close to 50 people died last year in clashes and one person has been shot dead this year.

The miners are switching their allegiance to the Association of Mineworkers and Construction Union (AMCU), which is growing very rapidly under the leadership of Salvation Army preacher-turned-union-boss, Joseph Mathunjwa.

The union now represents the majority of lower category workers, with over 100,000 members, in South Africa's platinum mining industry. The AMCU is particularly powerful in the most troubled platinum mines, such as Marikana.

It has become the trend setter in demands for improved working conditions and demands.

It is believed the AMCU will present demands to the mining companies for wage increases from 15% to as much as 60% in the current round of wage negotiations.

The platinum mining companies consider these demands as ridiculous considering the financial condition the industry is in. The cash flow return on operating assets for the five largest South African platinum companies last year was a terrible -0.6%, the worst level since 1992.

According to Rick Rule of Sprott Holdings, the industry "does not meet its cost of capital." In addition, Rule says "More than half the shafts are loss making."

This is the backdrop behind the biggest platinum miner, Anglo American Platinum Ltd. (AGPPY), cutting 6,000 jobs earlier this year. It had wanted to cut 14,000 jobs but was talked out of it by the government.

But it is highly likely that the struggles of the industry will not stop the demands of Mathunjwa and the AMCU membership.

Mathunjwa recently told foreign investors at a meeting organized by Standard Bank that he believes entry-level workers should have a take-home pay of $800-$1000 a month. This is nearly double the current wage level. It will be nearly impossible for South Africa's platinum mining firms to meet this demand without forcing the closure of a number of platinum mines with the resultant job losses.

If this occurs, it will translate immediately into lower platinum supplies, a growing deficit in the market, and a higher price for platinum.

With Mathunjwa's power growing, the trend toward more labor unrest and less platinum mined will continue for at least months, if not years.

The Best Ways to Invest in Platinum

The problems in the South African mining industry have opened the door to a profit opportunity for sharp-eyed investors.

This is especially true at the moment with weakness in all of the precious metals, no matter the fundamentals, due to the gold selloff.

Here are the best ways to go if you're hunting for how to invest in platinum...

You can go through either the mining companies' stocks or through exchange-traded products that track the price of the metal itself.

The problem at the moment with investing into platinum mining companies is that most of the major firms - Anglo Platinum, Impala Platinum and Lonmin - are South African companies, which are at the epicenter of the turmoil in the market.

One stock outside of South Africa is Stillwater Mining Co. (NYSE: SWC). This company is the only U.S. producer of platinum and palladium. It mines the precious metals in the geological formation in southern Montana known as the J-M Reef.

That largely leaves investors the choice of exchange traded products. These products are a convenient and cost-effective way to obtain exposure to the future gains expected in platinum prices.

This has not escaped the notice of some investors. ETF Trends reported recently that platinum exchange traded products had the biggest inflows in over eight months on the thought that current wage negotiations in South Africa between platinum mining companies and labor unions will break down.

Foremost among the options available is the ETFS Physical Platinum Shares (NYSE: PPLT). ETF Securities actually holds physical platinum bullion in vaults located in London and Zurich. The expense ratio is a reasonable 0.60%. It has over $825 million in assets and ETF Trends reports that in the latest period it saw inflows of $28 million.

There are also two exchange-traded notes (ETNs) designed to track the performance of platinum.

The first is the iPath Dow Jones-UBS Platinum Subindex Total Return ETN (NYSEArca: PGM). The second is the ETRACS CMCI Long Platinum Total Return ETN (NYSEArca: PTM).

The expense ratios are 0.75% and 0.65% respectively. Both ETNs track indices that are designed to match the performance of a futures contract on platinum.

One final way to play the expected rise in the platinum price also holds physical platinum. It is the Sprott Physical Platinum and Palladium Trust (NYSE: SPPP). As the name implies, it also has physical palladium in its portfolio.

It holds the platinum and palladium bullion in vaults in Canada along with London and Zurich. What is unique here is that unitholders can actually redeem their shares for physical bullion on a monthly basis (25,000 unit minimum on redemptions). Management fees are 0.50%.

For more on how to invest in platinum, check out our exclusive Rick Rule interview, How the Mining Mess Will Send Platinum Soaring

Source :http://moneymorning.com/2013/06/18/how-to-invest-in-platinum-in-2013/

Money Morning/The Money Map Report

©2013 Monument Street Publishing. All Rights Reserved. Protected by copyright laws of the United States and international treaties. Any reproduction, copying, or redistribution (electronic or otherwise, including on the world wide web), of content from this website, in whole or in part, is strictly prohibited without the express written permission of Monument Street Publishing. 105 West Monument Street, Baltimore MD 21201, Email: customerservice@moneymorning.com

Disclaimer: Nothing published by Money Morning should be considered personalized investment advice. Although our employees may answer your general customer service questions, they are not licensed under securities laws to address your particular investment situation. No communication by our employees to you should be deemed as personalized investent advice. We expressly forbid our writers from having a financial interest in any security recommended to our readers. All of our employees and agents must wait 24 hours after on-line publication, or after the mailing of printed-only publication prior to following an initial recommendation. Any investments recommended by Money Morning should be made only after consulting with your investment advisor and only after reviewing the prospectus or financial statements of the company.

Money Morning Archive

© 2005-2014 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in

Free Report - Financial Markets 2014