Buying By Big Miners Could Boost This Metal

Some significant developments from the ongoing South African platinum mine strikes this week.

With mine shutdowns here approaching their tenth week, some mining companies appear to be running on fumes. Simply not having enough inventory to meet their supply obligations.

Amongst the worst off is second-largest global platinum producer Impala. With the company saying this week it may have to buy open-market metal in order to fulfill contracted shipments.

“We definitely can’t continue to supply all our clients as we normally would’ve done,” company spokesman Johan Theron told Bloomberg. 

Impala noted that it did meet all of its supply commitments for March. But if inventories soon run low, we could see the company dipping into the physical market. With a resulting effect on prices.

The key will be to see when other major producers might need to follow suit. Top producer Anglo American Platinum (Amplats) said this week its stockpiles are running at 215,000 ounces. Down by 50% since the start of the strikes in January.

That implies Amplats should be able to last another couple of months before being forced into the market. But other, smaller producers could be driven to panic buying sooner than that. Creating the potential for upward pressure in the market.

Meanwhile, a bigger question is becoming: how much South African supply will come back, even if strikes end soon? Amplats officials noted that their major Rustenburg operations will be unable to turn a profit this year due to the current stoppage. Leading management to consider the possibility that the mines may not be worth re-opening.

This would be a shocking outcome. But Amplats’ CEO Chris Griffith confirmed last week that a final shutdown of Rustenburg is “a conversation we are having internally.”

All of which raises the possibility of a significant and ongoing disruption in global platinum supply. And a big driver for new exploration and development projects worldwide.

Here’s to tough choices,

Dave Forest

dforest@piercepoints.com / @piercepoints / Facebook

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