Platinum Miner Sees Opportunity in Supply Cuts

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Canada’s Platinum Group Metals Ltd. (PTM) says its low-cost South African projects will benefit platinum stocks as competitors shut down old unprofitable mines, slashing global output by as much as 35 percent.

South African producers, the source of more than 70 percent of the precious metal, are under pressure to close or sell their least-efficient operations amid the lowest platinum prices in five years, dwindling ore grades and higher labor costs they agreed to during a five-month strike, according to Platinum Group Chief Executive Officer Michael Jones.

The biggest platinum miners may reduce as much as 2 million ounces of annual capacity in the next six months, Jones said in a Sept. 26 interview at the company’s Vancouver headquarters. “The change platinum stocks in the business environment is going to allow room for new deposits to come on,” he said.

While Jones’s forecast drop is “a bit aggressive,” there’s no denying the largest platinum miners, including Anglo American Platinum Ltd. (AMS) and Lonmin Plc (LMI), are under pressure to shed unprofitable operations, said David Davidson, a Toronto-based analyst at Paradigm Capital Inc.

“At these prices, nobody’s really making any money,” Davidson said last week by phone.

The dynamics of the industry will spur interest in moves by Platinum Group to develop its shallow, lower-cost South African projects.