Platinum surges after South Africa mining massacre

 

As a result of the spike in the platinum price, investor interest in North American platinum producers has begun to pick up, says Canaccord.

The price of platinum continued to surge after the shocking massacre of miners at Lonmin PLC’s South African platinum mine near Rustenburg, writes Canaccord Wealth Management in itsMorning Coffee newsletter. Last Thursday, 34 striking miners were gunned down at the mine when they stormed a police line. Ten other people, including two police officers, died in violence earlier last week.

The strike was sparked by a demand for better wages. However, it appears that the issues run deeper than that. The traditional union in the area, the NUM, is a key ally of the African National Congress (ANC). Its backing is critical for President Jacob Zuma in his fight to retain his position in the ANC’s party elections this December. Miners accuse leaders of the ANC of abandoning their grassroots concerns, focusing instead on politics. So they turned to an alternative union to fight in their corner.

A key detail in this is the civil war that appears to have started between the two unions. While the price of platinum has spiked over the last couple of days, there could be more to come. [at US$1,492.50 an ounce on Monday, the price of platinum had jumped from US$1,395.00 last Wednesday].

Lonmin, which produces 12% of global platinum, has shut-in all production and given the enormity of [last week’s events], this situation will likely not be resolved quickly.

As a result of the spike in the platinum price, investor interest in North American platinum producers has begun to pick up. Stillwater Mining Co. (NSYE: SWC,Stock Forum) and North American Palladium Ltd. (TSX: T.PDL, Stock Forum) are the only two North American based platinum/palladium producers, withETFs Physical Platinum Shares (NYSE: PPTLStock Forum) giving investors an ETF option.

Trading at $1.71 on Monday, North American Platinum has a market cap of $298.2 million, based on 174.4 million shares outstanding. The 52-week range is $3.94 and $1.47. Stillwater, which traded at $10.15 on Monday, has a market cap of $1.17 billion, based on 115.1 million shares outstanding. The 52-week range for the stock is $15.95 and $7.31.

Given the severity of the news, one gets that feeling that this dispute will not be short-lived, Canaccord writes.

 

http://www.stockhouse.com/Community-News/2012/Aug/20/Platinum-surges-after-South-Africa-mining-massare

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