Platinum shares drop, but spot price gains
FEARS of labour issues spreading across the platinum industry in South Africa lifted the platinum spot price on Thursday to its highest level in more than five months, but sent platinum shares sharply lower.
Shares in Anglo American Platinum dropped more than 3% after the world’s largest platinum producer reported intimidation of its workers at its Rustenburg mine.
Impala Platinum, the world’s second-biggest producer, confirmed on Tuesday it had received a wage demand from the interim workers’ committee at its Rustenburg mine, while Lonmin is yet to resume production following last month’s violence that resulted in 44 deaths, including two police officers.
Should the unrest continue, the platinum price could reach $2,000/oz within the next nine months, due to supply concerns, said Rob Spanjaard, investment director at Rezco Asset Management.
"Investors are well aware of this shortfall and have already begun using various instruments such as exchange traded funds to profit on the platinum price rising substantially," he said.
UBS Investment Research said in a note that with no clear resolution in sight and with risks now skewed towards further deterioration, this uncertainty should help keep platinum prices supported.
Mr Spanjaard noted, however, that despite the increase in the platinum price, the same could not be said for platinum shares. "We do not see any value at the moment for investing in platinum stocks, the reason being that few producers are actually making money at the moment."
At 12.30pm, Anglo American Platinum was down 3.47% to R420, Lonmin had shed 2.61% to R78.30 and Impala had recovered slightly to be down just 0.38% at R139.76, all lagging the JSE-all-share index, which was up 0.75%.
The platinum price was up 3.14% to $1,651.20/oz, about 16% higher since the start of August.
Cost of strike
Lonmin has potentially lost close to R320m since strike action started at its Marikana mine in July.
Kobus Nell‚ a portfolio manager at Stanlib‚ said the platinum miner was potentially losing R10m-R12m a day due to the strike — "assuming 30%-50% of their concentrating and firing costs are fixed and that Lonmin is employing a no-work, no-pay policy".
He warned that‚ given its losses‚ Lonmin was close to breaching its debt covenant.
"They are very close to breach; chances are good that they would have reached their debt covenant by September. They recently warned that a rights issue was being considered as an option, and it seemed likely at this stage‚" Mr Nell said.
Sue Vey‚ spokeswoman for Lonmin, said the mine had lost 32 days of production, and that the platinum miner had been producing 2‚500 platinum ounces per day prior to the strike.
Ms Vey also said abour 1.6% of Lonmin’s workforce had arrived for work on Wednesday.