African platinum production shifts catch attention of precious metals investors

African platinum production shifts catch attention of precious metals investors

July 5, 2012 177 view(s)

July 5, 2012 - Africa is one of the richest sources of platinum in the world today; changes in how the metal is mined on that continent have caught the eye of financial media observers. Those who invest in precious metals pay close attention to mining companies in Africa because political and environmental shifts can signal impending fluctuations in platinum prices down the road. Earlier this year, mining in Rustenburg, South Africa took a 6-week hiatus due to a situation involving the Impala Platinum Company. They lost the chance to produce 3 and 3/4 tons of the metal that would have otherwise ended up being traded on the precious metals market. Since this is already the world's rarest commonly invested precious metal, even a seemingly small change in production can affect prices at the global level.

Due to its many industrial uses, as well as its rarity, investors often select platinum to hold in their portfolios. In the last week of June 2012 alone, the Aquarius Platinum company announced it will cease mining not only in its Marikina mine but also the mine it has at Everest. Analyst David Jollie, speaking on behalf of Mitsui & Co. Precious Metals, told the press that the rising costs of mining the metal in South Africa mean that many companies here are struggling because it's difficult to justify the continued mining of the first generation mines they are working with.

"You can see wage increases; you can see all kinds of things," Jollie told reporters. "And that is an environment where you have got weak commodity prices at the moment that has just made life quite difficult."

As much as changes like this can cause big problems for some companies, for others in the precious metals market, opportunities still exist. Many analysts are saying that instead of South Africa, mining companies looking for platinum may begin shifting their operations over to Zimbabwe. There, growth continues to be possible, and costs would be significantly lower. Zimbabwe is already the 3rd largest producer of platinum in the world, with only Russia and South Africa producing larger quantities of the metal.

Zimbabwe currently exports well over 200,000 tons of platinum each year which accounts for roughly a third of the minerals it exports. There are already 3 major mines located in the African nation: Mimosa, Unki, and Zimplats.

Some investors in precious metals mining companies that focus on platinum today remain confident that operations while changing, will continue into the future. The demand for platinum in the automotive sector continues to be strong, but the real change is more regional in nature. As the CEO of the Precious Metals Group, Mike Jones told Mining Weekly, the big story here is that demand in Asia is picking up in a big way and the market in Europe has now become less crucial to platinum prices.

These events paint a brighter picture for platinum's future than some in the precious metals market had been projecting. This is one more illustration that shows those investing in precious metals for its long-term ability to remain valuable despite shifts in the global economy usually do come out on top. Like gold often does, platinum is proving this once again.