If Gustav continues, platinum may find support

By Leia Michele Toovey- Exclusive to Platinum Investing News.

In Tokyo, Spot platinum fell more than three percent on Monday on renewed concerns about demand for the metal. The cash price stood at $1,421.50/$1,441.50 per ounce, compared to late New York levels of $1,474.50/1,494.50. Earlier this month spot platinum briefly fell below $1,300, the lowest intraday level since mid-September 2007, amid concerns about waning demand from automakers. Spot prices rose 3.6% last week, as a firmer tone in precious metals and oil amid hurricane Gustav and Russia-Georgia war worries extended support. Five percent of global platinum consumption is as a component of auto-catalysts in the US, whereas half of European consumption is for the auto industry; annualized car sales in the U.S. are down 19% and European vehicle sales slid 8% in July.  Analysts are predicting that demand will remain soft.  At the same time, output is recovering in the largest producing nation, South Africa, after an energy shortage dampened production and many of the nation’s mines.

Platinum Group Metals Ltd. (TSX: PTM)(AMEX: PLG) has agreed to a term sheet with Anglo Platinum Limited and Wesizwe Platinum Limited to consolidate and rationalize the Western Bushveld Joint Venture (WBJV).Platinum Group Metals and Wesizwe will work together to maximize the value of the projects. In the transaction, Anglo Platinum gave up its 37% interest in the WBJV to Wesizwe for common shares representing a 26.5% interest in Wesizwe. Under the terms Platinum Group will control 74% of the WBJV Projects 1 and 3 and Wesizwe will control 100% of Project 2 and 26% of Projects 1 and 3. Projects 1 and 3 will be operated by Platinum Group and Wesizwe will operate their core project. The term sheet is subject to regulatory and other approvals and the completion of definitive agreements. In a separate announcement today, Wesizwe Platinum and Platinum Group Metals claimed they are about to embark on separate capital raising efforts in the South African and North American markets. Both Wesizwe and PTM said they would “phase” fundraising for the development of their platinum mines over the full project periods.

Lonmin continues to keep their back up against Xstrata’s $8.9 billion hostile takeover bid. On Tuesday, Lonmin published a document for shareholders that underline the standalone value of the company. In this document, Lonmin urges shareholders to reject the $58.77 per share offer, stating that it fundamentally undervalues the Company’s unique assets, resources and reserves.”It is not in the interests of Lonmin’s shareholders, and the board will continue to oppose it vigorously,” it said. The statement marks the fourth time that Lonmin, the world’s No. 3 platinum producer, has publicly urged shareholders to reject the Xstrata offer since the firm made its approach public on Aug. 6. Analysts have said Lonmin will struggle to fend off the approach from Xstrata, which wants to develop a significant platinum business, unless another bidder comes to the rescue. Lonmin struggle will be the fact that 2008 was a very weak year for the company. Fiscal 2008 marks a low point in production for Lonmin, as operational difficulties arising from power shortages in South Africa hampered 2008 platinum production. Lonmin stated that the long-term demand fundamentals for platinum remain positive, and said that each $100 per ounce increase in the platinum price equated to additional value of around $5.17 per Lonmin share.

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