Best of the Week
Most Popular
1.The Gallery of Crowd Behavior: Goodbye Stock Market All Time Highs - Doug_Wakefieldth
2.Tesco Meltdown Debt Default Risk Could Trigger a Financial Crisis in Early 2015 - Nadeem_Walayat
3.The Trend Every Nation on Earth Is Pouring Money Into - Keith Fitz-Gerald
4.Do Tumbling Buybacks Signal Another Stock Market Crash? - 26Mike_Whitney
5.Could Tesco Go Bust? How to Save Tesco from Debt Bankruptcy Risk - Nadeem_Walayat
6.Gold And Silver Price - Respect The Trend But Prepare For A Reversal - Michael_Noonan
7.U.S. Economy Faltering Momentum, Debt and Asset Bubbles - Lacy Hunt
8.Bullish Silver Stealth Buying - Zeal_LLC
9.Euro, USD, Gold and Stocks According to Chartology - Rambus_Chartology
10.Evidence of Another Even More Sweeping U.S. Housing Market Bust Already Starting to Appear - EWI
Last 5 days
Gold And Silver – Elite Supernova Death Dance In PMs? - 1st Nov 14
Pretium - Canadian Golden Elephant - 31st Oct 14
What USA Today Got Wrong About the Stock Market Fear Gauge - 31st Oct 14
Election Result - Labour Wins South Yorkshire Police and Crime Commissioner - 31st Oct 14
Gold Price Falls, Stocks Record Highs as Japan Goes ‘Weimar’ - 31st Oct 14
EUR/USD - Double Bottom Or New Lows? - 31st Oct 14
More Downside Ahead for Gold and Silver - 31st Oct 14
QE Is Dead, Now You Tell Me What You Know - 31st Oct 14
Welcome to the World of Volatility - 31st Oct 14
Stocks Bear Market Crash Towards New All Time Highs as QE3 End Awaits QE4 Start - 31st Oct 14
US Mortgages, Risky Bisiness "Easy Money" - 30th Oct 14
Gold, Silver and Currency Wars - 30th Oct 14
How to Recognize a Stock Market “Bear Raid” on Wall Street - 30th Oct 14
U.S. Midterm Elections: Would a Republican Win Be Bullish for the Stock Market? - 30th Oct 14
Stock Market S&P Index MAP Wave Analysis Forecast - 30th Oct 14
Gold Price Declines Once Again As Expected - 30th Oct 14
Depression and the Economy of a Country - 30th Oct 14
Fed Ends QE? Greenspan Says Gold “Measurably” “Higher” In 5 Years - 30th Oct 14
Apocalypse Now Or Nirvana Next Week? - 30th Oct 14
Understanding Gold's Massive Impact on Fed Maneuvering - 30th Oct 14
Europe: Building a Banking Union - 30th Oct 14
The Colder War: How the Global Energy Trade Slipped From America's Grasp - 30th Oct 14
Don't Get Ruined by These 10 Popular Investment Myths (Part VIII) - 29th Oct 14
Flock of Black Swans Points to Imminent Stock Market Crash - 29th Oct 14
Bank of America's Mortgage Headaches - 29th Oct 14
Risk Management - Why I Run “Ultimate Trailing Stops” on All My Investments - 29th Oct 14
As the Eurozone Economy Stalls, China Cuts the Red Tape - 29th Oct 14
Stock Market Bubble Goes Pop - 29th Oct 14
Gold's Obituary - 29th Oct 14
A Medical Breakthrough Creating Stock Profits - 29th Oct 14
Greenspan: Gold Price Will Rise - 29th Oct 14
The Most Important Stock Market Chart on the Planet - 29th Oct 14
Mysterious Death od CEO Who Went Against the Petrodollar - 29th Oct 14
Hillary Clinton Could Be One of the Best U.S. Presidents Ever - 29th Oct 14
The Worst Advice Wall Street Ever Gave - 29th Oct 14
Bitcoin Price Narrow Range, Might Not Be for Long - 29th Oct 14
UKIP South Yorkshire PCC Election Win is Just Not Going to Happen - 29th Oct 14
Evidence of New U.S. Housing Market Real Estate Bust Starting to Appear - 28th Oct 14
Principle, Rigor and Execution Matter in U.S. Foreign Policy - 28th Oct 14
This Little Piggy Bent The Market - 28th Oct 14
Global Housing Markets - Don’t Buy A Home, You’ll Get Burned! - 28th Oct 14
U.S. Economic Snapshot - Strong Dollar Eating into corporate Profits - 28th Oct 14
Oliver Gross Says Peak Gold Is Here to Stay - 28th Oct 14
The Hedge Fund Rich List Infographic - 28th Oct 14
Does Gold Price Always Respond to Real Interest Rates? - 28th Oct 14
When Will Central Bank Morons Ever Learn? asks Albert Edwards at Societe General - 28th Oct 14
Functional Economics - Getting Your House in Order - 28th Oct 14
Humanity Accelerating to What Exactly? - 27th Oct 14
A Scary Story for Emerging Markets - 27th Oct 14
Could Tesco Go Bust? How to Save Tesco from Debt Bankruptcy Risk - 27th Oct 14
Europe Redefines Bank Stress Tests - 27th Oct 14
Stock Market Intermediate Correction Underway - 27th Oct 14
Why Do Banks Want Our Deposits? Hint: It’s Not to Make Loans - 26th Oct 14
Obamacare Is Not a Revolution, It Is Mere Evolution - 26th Oct 14
Do Tumbling Buybacks Signal Another Stock Market Crash? - 26th Oct 14
Has the FTSE Stock Market Index Put in a Major Top? - 26th Oct 14
Christmas In October – Desperate Measures - 26th Oct 14
Stock Market Primary IV Continues - 26th Oct 14
Gold And Silver Price - Respect The Trend But Prepare For A Reversal - 25th Oct 14
Ebola Has Nothing To Do With The Stock Market - 25th Oct 14
The Gallery of Crowd Behavior: Goodbye Stock Market All Time Highs - 25th Oct 14
Japanese Style Deflation Coming? Where? Fed Falling Behind the Curve? Which Way? - 25th Oct 14
Gold Price Rebounds but Gold Miners Struggle - 25th Oct 14
Stock Market Buy the Dip or Sell the Rally - 25th Oct 14
Get Ready for “Stupid Cheap” Stock Prices - 25th Oct 14
The Trend Every Nation on Earth Is Pouring Money Into - 25th Oct 14 - Keith Fitz-Gerald
Bitcoin Price Decline Stopped, Possibly Temporarily - 25th Oct 14

Free Instant Analysis

Free Instant Technical Analysis


Market Oracle FREE Newsletter

Free Forex Forecasts

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