Platinum Strong - Palladium Contrary as Anglo Platinum and Xstrata Launch $200 Million South African JV Mine

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Researched by Industrialinfo.com (Industrial Information Resources Incorporated; Houston, Texas). The light duty diesel auto sectors in Europe, China, India, Korea, and southeast Asia will see the demand for platinum to be used in autocatalysts rise during 2005, according to Johnson Matthey (JM) (LSE:JMAT)(London, UK), the world’s largest distributor of platinum group metals (PGM). Tougher emission standards in all these regions as well as a focus on particulates as a cause of health problems will propel an increased use of catalyzed particulate filters. This trend will continue in Japan as cars and trucks must comply with tougher emissions standards.

North American demand for platinum is expected to continue on a downward trend as the substitution of platinum by palladium in gasoline catalyst systems continues, says Matthey.

Against a background of an approximate balance of supply and demand for platinum in the market, Anglo Platinum (Angloplat)(Johannesburg, South Africa), the world’s largest platinum producer, and Xstrata Alloys (Zug, Switzerland), have launched a new project that is expected to produce approximately 132,000 ounces of platinum and 82,000 ounces of palladium per annum.

The Mototolo Joint Venture will develop a PGM miner and concentrator on the eastern limb of the Bushveld Complex in Mpumulanga Province in South Africa. Both partners in the JV will share the $200 million investment in the project on a 50/50 basis. They will also contribute similar amounts of PGM reserves available to the plant. Xstrata’s resource will come from Thorncliffe farm adjacent to the company’s Thorncliffe chrome mine, while Angloplat’s ore will come from the Richmond facility, which is a part of its Der Brochen project area.

The project will see construction start in the current quarter of 2005 with the first production of PGM coming in the last quarter of 2006 and with the mine running at full production by the third quarter of 2007. The mine is scheduled for a life of about twenty years at a planned milling rate of 200,000 tons per month and an estimated head grade of 3.74 gms per ton.

The development and operation of the underground mine will be the responsibility of Xstrata using its expertise in room and pillar mining. Angloplat will construct and manage the 200,000 tons per month concentrator. The mine will employ 1,100 people.

In the Mototolo JV pooling and sharing arrangement, Angloplat will purchase Xstrata’s 50% share of PGM concentrate for further smelting, refining and marketing of finished product. A beneficiation plant to process the UG2 chrome tailings coming from the PGM concentrator will be constructed by Xstrata at its own cost and the company will purchase Angloplat’s share of chrome concentrate. Both JV partners will comply with the requirements of South Africa’s Mineral and Petroleum Resources Development Act and Charter.

With platinum purchases for use in autocatalysts rising to a record of 3.51 million ounces out of a total demand of 6.58 million ounces in 2004, the metal saw a price-driven fall in jewelry usage. But industrial demand continued to grow and with the market supplies in deficit, the price peaked at $937 per ounce in April and is currently above $900 per ounce.

Palladium demand rose by 22% in 2004 to 6.6 million ounces, reports Matthey. Autocatalyst purchases rose 10% to 3.81 million ounces as US automakers came into the market after running down stocks. With growth in the electronics market rising and palladium jewelry in China using 920,000 ounces in 2004, supplies still exceeded demand, producing a weak price. Russia made sales from its large stockpile, while production in South Africa and North America increased. Supplies in 2004 exceeded demand by more than one million ounces. With high availability a feature set to continue through 2005, palladium could trade at between $160 and $230 dollars an ounce.

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