Best of the Week
Most Popular
1.Stocks Bear Market Apocalypse Imminent Crash Gets Nuked Again - Nadeem_Walayat
2.Gold And Silver – A Reality Check - Michael_Noonan
3.The Killer Ape, Human Evolution, Artificial Intelligence and Extinction End Game - Nadeem_Walayat
4.Stock Market S&P 500 Volatility-Based Price Probability Range - Richard_Shaw
5.A Stocks Bear Market Is Now More Likely Than Not - Richard_Shaw
6.Money Supply and the Fed’s Serious Inflation Risks - Zeal_LLC
7.More Selling for Stock Market, Gold? - Brad_Gudgeon
8.Gold, Silver Precious Metals: a Critical Week Ahead - Rambus_Chartology
9.Gold Price Change in Character - Gary_Savage
10.Advice for Biotech Investors: 'Hold Your Powder' 'til Winter - TLSReport
Last 5 days
Contrarian Investing - Being the 10th Man - 9th Oct 15
U.S. Can Expect Recession in 1-3 Years - 9th Oct 15
The Greater Economic Depression Deep State - 9th Oct 15
Financial Markets Calm Before the Storm? - 9th Oct 15
Stock Market History Calling, Says Performance will be Crappy for Another ~10 years! - 9th Oct 15
Why This Feels Like an Economic Depression for Most People - 9th Oct 15
Dr Copper Back from the Dead - Time to Buy or Blink - 8th Oct 15
Glencore Rout Blamed on Short Sellers Playing With CDS - 8th Oct 15
The Real Reason for the Refugee Crisis You Won’t Hear About in the Media - 8th Oct 15
US Stocks: The [Trend]Line Between Bull and Bear Market - 8th Oct 15
Bundesbank “Reassures” Re. Gold Bullion Reserves as Deutsche Bank Shocks With €6 Billion Loss Warning - 8th Oct 15
How Our Aversion To Change Leads Us Into Danger - 8th Oct 15
Moving Stem Cell Research Forward: Bernie Siegel of the Genetics Policy Institute - 8th Oct 15
Stock Market VERY IMPORTANT Turn Date - 7th Oct 15
The 5th Convergence…An Economic & Financial Superstorm That Will Devastate America - 7th Oct 15
Summers Grades Janet Yellen's Fed Performance 'Incomplete' - 7th Oct 15
Gold Versus Central Banks Paper Ponzi - 7th Oct 15
QE3 is Over Get Ready for QE4 - 7th Oct 15
How to Profit from Government Mandates in Biofuels - 7th Oct 15
A Key Oil Price Trend That Everyone Is Missing - 6th Oct 15
Stock Market Turn Appears to Have Been Made - 6th Oct 15
Designing a Dividend Growth Portfolio for a Specific Retirement Yield Objective - 6th Oct 15
Peter Schiff Predicts Gold Price Breakout - Video - 6th Oct 15
Theresa May Declares War on Immigration - Conference Speech Full Transcript - 6th Oct 15
Is Russia Plotting To Bring Down OPEC? - 6th Oct 15
Target Date Funds As Aid In Retirement Investment Portfolio Design - 6th Oct 15
Stocks Bear Market Apocalypse Imminent Crash Gets Nuked Again - 6th Oct 15
Redesigning Internet and Facebook to Explore Their Full Potentialities... - 5th Oct 15
Nightshades Curb Your Enthusiasm - 5th Oct 15
U.S. Recession Watch, High-Yield – Rising Defaults - 5th Oct 15
The Social Challenge to Find Humanity in Capitalism - 5th Oct 15
Fed Interest Rate Hike: "I don't care. It doesn't really make much of a difference" - 5th Oct 15
Gold Rose 2.2%, Silver Surged 5.4% After Poor Jobs Number On Friday - 5th Oct 15
Gold, Silver Precious Metals: a Critical Week Ahead - 5th Oct 15
Stock Market Correction Still in Force - 5th Oct 15
Gold Price Change in Character - 5th Oct 15
Putin’s Blitz Leaves Washington Rankled and Confused - 4th Oct 15
More Selling for Stock Market, Gold? - 4th Oct 15

Free Instant Analysis

Free Instant Technical Analysis

Market Oracle FREE Newsletter

How to Invest in Platinum in 2013

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

By: Money_Morning


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 :

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:

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

© 2005-2015 - 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

Biggest Debt Bomb in History