Platinum: Influnced by recent market turmoil

By Leia Michele Toovey- Exclusive to Platinum Investing News

Platinum is following the base metal trend of recent, seeing a round of selling, as fears about the health of the U.S. economy were re-ignited by the Lehman bankruptcy.

Oil, base metals such as copper, European equities, and U.S. stock futures, all slipped sharply on the news. Although platinum is technically classified as a precious metal, due to its majority use as an auto catalyst, it behaves more like an industrial metal. As such, it is hypersensitive to threats to economic growth.

The Lehman Brothers news was not all doom and gloom for the metals. Gold saw gains as worried investors sought out a safe-haven. But gold’s situation like all the metals is complex and the dropping U.S. currency will likely extend negative sentiment. For a more complete picture of how gold is responding to the market news, look up gold investing news for current market commentaries.

In early morning trade, October platinum was lower as investors abandoned the metals and looked for safety in government bonds. By mid-morning trade in New York, platinum had dropped US$36 to US$1,174.50 per troy ounce. The benchmark contract for August 2009 delivery on the Tokyo Commodity Exchange fell to 3,703 yen per gram, the lowest for a benchmark since January 2006.

Platinum Group Metals Ltd. (TSX: PTM) is embarking on a new exploration joint venture. This new project will result from adjoining the Xstrata Eland Platinum Project area at the eastern end of the prolific Western Bushel Complex in South Africa. Platinum Group Metals has been granted an 8.290 sq kms mineral rights position by filing prospecting permit applications with the Department of Minerals and Energy. A further 2.772 sq kms have also been applied for and are pending review and approval. This new venture will be a joint cooperation between Platinum Group Metals and Sable Platinum Ltd, with a private empowerment group also holding a share.

Sable Platinum Ltd. is a corporate finance company that has the right to earn a 51 per cent interest in the joint venture by spending roughly US$6.2 million in exploration costs over five years. A private empowerment group will hold 26 per cent, and Platinum Group Metals will operate the exploration program and retain a 23 per cent interest. The initial phase of field work to target areas for drilling has started. Drilling is expected to commence before the end of the year.

South Africa’s Impala Platinum (Implat) is performing strategic endeavours in order to turn more profits in the near future. Their recent move was the purchase of assets from two of its competitors. This move will help Implat move away from deep, expensive projects while diversifying away from dependence on Zimbabwe .Impala Platinum Holding’s more difficult projects have pushed back expansion targets by years, forcing the world’s number two producer to change course by seeking assets it can develop fast while placing its tougher projects on hold.

Impala announced last Friday the deal it was negotiating with diversified Mvelaphanda Resources (Mvela) and Mvela’s unit Northam Platinum, has the potential to give the world’s number one producer, Anglo Platinum, a run for its money. The new deal would add mining and production assets in the form of a new mine as well as a new refinery. In addition, Impala would add a new project, the vast Booysendal project, a shallow asset that may come on-stream faster than its current Leeuwkop project.

Implat has struggled to get the 160,000 ounces a year Leeuwkop project off the ground owing to spiraling costs that have hit US$735.4 million since it acquired it over a year ago, and a lack of enough power to mine. Northam’s Booysendal project may start production as early as 2010, making it ideal for the impatient Implats. As things stand, Booysendal would help whoever owns it to lift production of platinum, palladium, rhodium and gold to a combined total of more than 700,000 ounces a year by 2015.

An Implat-Northam joint venture would help both companies, with Implats benefiting from precious metals output, and Northam benefiting from Implat’s deep pockets. Implats has said it would put the brakes on new investment in Zimbabwe, a politically troubled country with the world’s second-biggest platinum reserves. By pouncing on Mvela and Northam, Implats is eyeing options nearer home.

Questions about this article? Leave a comment below or contact our editorial team at editor@resourceinvestingnews.com.