Aquarius Platinum Share Discussion Threads

[salpara111] 24/5/2013 17:53

I have been reading more articles suggesting that we are going to enter a structural platinum deficit but as of yet the futures market is not pricing in any shortage.
My timing estimate for getting on board will be at the end of the summer once the strikes/wage negotiations are over.

[hectorp] 24/5/2013 12:58

David Franklin's article is a must read. Clearly plat output is going to fall , leading to considerable! shortfall of supply. It has already turned to supply deficit.
I agree, the metal, not the producers.

[serge gnabry] 23/5/2013 11:32

May 22, 2013



The Dire State of the Platinum-Palladium Miners
David Franklin ([e-mail])
Sprott Asset Management LP

During the third week of May each year, representatives of the platinum industry gather in London, for an event that has become known as 'Platinum Week'. Platinum Week centers on an industry dinner sponsored by the London Platinum and Palladium Market (LPPM) which marks the anniversary of the inauguration of the London Platinum Quotation (the forerunner of the present London Fixings) in 1973.

This event is attended by platinum group metals (PGM) producers, refiners, fabricators and traders. The first major event of the week is the publication of Johnson Matthey's annual review of supply and demand for the PGM markets.

According to Johnson Matthey, the platinum market was in deficit by 375,000 ounces in 2012, close to their forecast made last November. The palladium market was also undersupplied but by a much larger margin of more than 1 million ounces.

For platinum and palladium, this was a reversal of the position a year earlier when both were in surplus. Gross demand for these metals continues to recover from the slump in 2008. Overall, gross demand for platinum fell by only 50,000 ounces year-over-year to 8.045 million ounces, a stronger performance than might have been expected.

The automotive market has been a major focus of attention and we believe that many observers will be surprised that demand from this sector grew from 3.185 million ounces in 2011 to 3.24 million ounces last year.

In Europe, auto catalyst demand fell from 1.505 million ounces to 1.33 million ounces as the car industry continued to slow. The surprise growth in demand comes from the Chinese jewelry market, where demand grew strongly to 1.95 million ounces. According to Mitsui, in net terms Chinese jewelry demand was larger than gross automotive demand for platinum in Europe for only the second year ever. The launch of a platinum ETF in South Africa is also positive for demand this year. The ABSA fund has already purchased 283,000 ounces of platinum as of the 17th of May. Overall we view the demand statistics from 2012 as very bullish for platinum and palladium in 2013.

While demand is expected to remain solid for 2013, the bull case for the PGM story is on the supply side. As we analyze the state of the miners, their situation is getting progressively worse, even more so than we expected.

Investors in platinum stocks have dumped their shares in a panic over the last six weeks, fearing that the platinum sector is in terminal decline. Since April the sector has fallen by 20%, bringing the cumulative decline for the year to 30%. What has caused this exodus? The results coming in from the PGM miners have been awful. Take Impala Platinum, the world's second-biggest producer of the metal, which said that more of its shafts are producing at a loss as prices decline and costs rise. "These units are being monitored on a continuous basis to determine their ongoing viability."

According to 'Implats', average extraction costs increased 23% to 15,957 rand ($1,766) an ounce for the nine months through March from a year earlier.1 This implies that at today's platinum price, Implats is losing close to $300 per ounce produced.

For a longer-term view of the industry, we were intrigued by an article by David Holland and Brian Kantor entitled: "Thinking in the same old way will not rescue the platinum industry". The analysis highlights why we have had such a negative view on the miners. For this study the authors aggregated the historical financial statements of the five largest South African platinum miners (Anglo American Platinum, Impala, Lonmin, Northam and Royal Bafokeng) and calculated the inflation-adjusted cash flow return on operating assets ("CFROI"), which is the real measure of return on capital for the industry.

The glory days for platinum mining were between the years 1999 to 2002 and provided the first wave of extraordinary fortune for platinum miners. The real return on capital exceeded 20%, making it one of the most profitable industries in the world at that time (the average CFROI for global industrial and service companies is 6%).

The second wave of fortune occurred during the global commodities "super cycle" from 2006 to 2008. Again, platinum mining became one of the most profitable businesses in the world. The good times ended abruptly at the end of 2008, when platinum miners saw their real return on capital drop to 1% - much less than their cost of capital.

In 2012, the CFROI in the platinum sector of South Africa's economy was a miserable -0.6%, the lowest return on capital since 1992. Suffice to say, platinum miners are not producing sufficient returns to satisfy shareholders, or to support their operations. This has resulted in unavoidable cost-cutting, lay-offs and scaling back of capital expenditure plans.

And what does the future hold? The authors took analysts' expectations for this year and next and estimated the real return on capital at a value destructive level of 0% for this year and a depressed 3.4% until 2017. There is no hint of a return to superior profitability in the share prices of platinum miners. In a nutshell, South Africa's platinum miners are destroying value and are expected to continue to do so. They are in a dire state.2

Adding to this 'perfect storm' for platinum miners are the wage negotiations with the largest union of mineworkers. The South Africa National Union of Mineworkers in two weeks' time will present a demand for a wage increase of "no less than 10%" and up to 60% for its industry members to take effect from July, union spokesman Lesiba Seshoka said Monday.3 Given the financial state of the largest platinum miners these new demands will be difficult, if not impossible to meet. This aggressive stance has rattled mining investors after wildcat strikes last year at platinum and gold mines killed 50 people and cost billions in lost output.

Investors are not sticking around to find out what happens next with the miners and are taking positions in the metal itself, which we believe will be rewarding in the long term. As reported by Bloomberg, holdings of all platinum ETFs have increased by 30% since the beginning of this year and palladium holdings have increased by 16%. Both are healthy increases over a short period of time, highlighting investors' preference for the metal over the miners. Given the data and opinions provided at Platinum Week, we continue to believe in a bright future for these two precious metals.

[mrminister] 23/5/2013 08:29

strong demand on the buy side in the first 30 mins ....250k v 120k .......marked down 7% on only 30k traded ....lol .....was always going to level up after that


silver lining might be the dollar index is falling and should be good for commod's

[mrminister] 23/5/2013 08:10

fill ur boots .......nice

[serge gnabry] 22/5/2013 15:59

Platinum and Palladium: A Fundamental Shift
Jeff Clark, Senior Precious Metals Analyst

Platinum is a precious metal, as is palladium, though to a lesser degree. However, like silver, both are also industrial metals. Unlike silver, it's their industrial use that is the primary price driver for both platinum and palladium – and that use is undergoing a fundamental shift.

The largest source of demand for platinum and palladium is the automotive industry, for use in autocatalysts. In turn, the fortunes of the auto industry are sensitive to the health of the world's major economies. We've been bearish on platinum-group metals for years, primarily because we weren't convinced a healthy – much less roaring – world economy could be sustained when so many governments continue spending beyond their means.

We reconsidered the market last year, when strikes in South Africa – home to 75% of global platinum production and 95% of known reserves – threatened supplies. But as we wrote last December, the strikes ended without great impact on long-term supply.

Since then, however, the fundamentals of this market have changed. Others may disagree with our economic outlook, which is still bearish, but it's due to supply issues – not demand – that our interest is now drawn to these metals, and particularly to palladium.

Here's a look at global supply against auto-industry demand for both metals.



Approximately 55% of platinum and the bulk of palladium supply was used in catalytic systems last year. The shrinking supply that's under way with both metals is obvious, and palladium is approaching a supply/demand crunch.

Here's what's going on...

Platinum

The fall in platinum supply has been so great that it moved from a surplus in 2011 to a deficit in 2012, with Johnson Matthey estimating that deficit to hit 400,000 ounces, the highest level since 2003.

Why the shift?

Labor strife and power outages. The mining industry in South Africa is, frankly, a mess. Labor strikes continue to haunt the platinum mining companies. The largest mining union in South Africa, AMCU, recently refused to sign a collective bargaining agreement on worker compensation, and CNBC is predicting a massive strike. Amplats, the world's largest platinum producer, is threatening to cut 14,000 jobs and mothball two operating mines due to various issues. Meanwhile, power outages, a longstanding problem, continue unresolved; they have already forced the closure of some mines and are widely expected to cause further cuts in production. As a result, supply from mining is expected to decline another 10% this year.
Recycling. This important source of supply is falling in reaction to lower metals prices. It is estimated that recycling fell by 11% in 2012.
Emission systems. Demand for platinum in autocatalysts dropped by 1% in 2012, mostly due to lower vehicle production in Europe and lower market share of diesel engines. However, emission-system demand from Japan and India is expected to increase, and diesel-emission controls recently introduced in Beijing will also support industrial demand for both metals. Auto sales in China rose a whopping 19.5% in the first two months of the year and are 6.5% higher in the US than a year ago.
Jewelry. Worldwide demand for platinum jewelry rose last year, with strong demand coming from China and growth in India, and is mainly the consequence of lower prices. Jewelry accounts for 30% of total platinum demand.
Investment. Although it represents just 6% of total demand for the metal, investor demand nonetheless grew 6.5% last year, adding to pressure on supplies.
Given these factors – primarily the first one – a supply deficit stretching into 2014 seems almost certain. Until South Africa can resolve its labor and power issues, pressure on platinum supply will remain, producing a favorable environment for rising prices.

Palladium

Palladium, platinum's "little brother," also faces a market imbalance. In 2012, the deficit totaled 915,000 ounces, the highest level since 2001.

Supply. Russia is the second-largest producer of palladium, and some analysts report that rumors of its stockpile being close to depletion are true. Recycling is also falling, and production disruptions in South Africa – the largest producer of palladium – are the same as outlined for platinum. Overall supply of the metal is falling.
Demand. Autocatalytic demand rose by 7% in 2012, as palladium can be easily substituted for platinum in emission-control systems for gas-powered motors (but not diesel-powered ones), such as are favored in China and India. In fact, several experts we consulted were more bullish on palladium than platinum due to this "substitution factor" – and China just mandated catalytic systems for all cars in the country.
Palladium investment demand was positive last year, though palladium jewelry has yet to gain traction in China, one of the world's biggest jewelry markets. Total jewelry demand for palladium was 11% lower in 2012. However, we expect a greater shift to palladium in the expanding Asian automotive market, which in turn will boost palladium prices.

The fundamental drivers of the palladium market are similar to those for platinum, which makes the palladium market an equally attractive investment.

If this all weren't bad enough, most companies' production costs are now above current platinum and palladium prices. This can only be solved one way: higher metals prices.

Bottom Line

The supply disruptions in South Africa combined with secondary factors have led to deficits in both metals that won't be erased overnight. Such imbalances, together with mainstream expectations of global economic growth, create a favorable environment for PGM price appreciation.

This much seems like a safe bet. There is, however, a great deal of speculative upside in the not-inconceivable case of South Africa going off the rails in a major way. Massive – not marginal – supply disruptions in the world's main source of both metals would send their prices through the roof. You get this speculative potential "for free" when you bet on the more conservative projections that call for rising prices regardless.

While we wait for our gold positions to rebound, an investment in platinum and palladium could be very profitable. How to invest? You can learn which company is our #1 pick for this space with a risk-free trial subscription to BIG GOLD.

Note: our longer-term outlook remains in place: most G7 economies are not fundamentally sound and continue to print money. Gold is still our priority asset class, so we don't recommend that investors replace their gold holdings with platinum and palladium investment vehicles. This PGM trend is simply an addition to and diversification of our current investment strategy.

Share or Comment on "Platinum and Palladium: A Fundamental Shift" by Jeff Clark

[mrminister] 22/5/2013 15:34

yes just need the pgm's to pick up a bit consistently [ but keeps getting dragged lower with gold ] and this will be away ....1525 a key level for platty .....some great mining stocks about that still haven't got off the floor yet .....fxpo another

[serge gnabry] 22/5/2013 15:17

i think you may see 50p a lot sooner then that imo.

[hightech] 22/5/2013 13:46

Some of the mining shares starting to recover. Is AQP one of them?
What is the target price?

I suspect 50 is achievable by August/September.

[mrminister] 21/5/2013 20:13

added 20 thou in 4 days

also ........


Chinese trade data for April were mixed for precious metals, with platinum imports up 32% year-on-year to around 294,000 ounces, the fourth strongest month on record, says Barclays. "Platinum demand remains price elastic and has continued to respond to the low price environment witnessed through April," the bank says. "Johnson Matthey noted in its Platinum 2013 review that there was surge in buying from jewelry manufacturers in China last year to supply the growing number of retail outlets." Palladium imports were down 14% year-on-year in April but modestly firmer month-on-month at just below 60,000 ounces, the highest since January. "Although not stronger y/y, the trend remains supportive for underlying palladium demand, and given the ongoing implementation of tighter (auto-emissions) legislation, demand should continue to improve as the year evolves," Barclays says. Meanwhile, silver imports fell 28% year-on-year to 172 metric tons while exports were up 21.5% year-on-year to around 85,700, leaving the country a net importer of the metal, Barclays notes.

[serge gnabry] 21/5/2013 19:13

nope just taking the opportunity to accumulate at these low levels.

[jibba jabber] 21/5/2013 19:01

Has everyone lost the faith? slow stochastics about to cross at the bottom.

[aberystwyth] 15/5/2013 11:12

Deutsche Bank Kiss of Death by the looks of things

[salpara111] 14/5/2013 09:49

1.Broker targets are meaningless
2. The violence/strike season is just getting under way in S.Africa....have a look at LMI today.

[mechanical trader] 14/5/2013 08:00

Broker update.....


14 May Aquarius Platinum... AQP Deutsche Bank Buy 45.50 45.50 70.00 70.00 Reiterates

SP TARGET 70p.

[mrminister] 13/5/2013 12:14

yes a bias to the selling side today ......why peeps selling from here is beyond me as only a handful of points from the lows with all the good news lately.

found this on kitco today ........

Johnston Matthey released their annual report on the "State of the Union" for the PGM group. As we have stated for some time now, the PGM's offered a viable alternative in the metals group. I will not re-hash the numbers here, Kitco News reported the figures early Monday. Suffice it to say both platinum and palladium are expected to be in deficit in 2013, with rhodium's surplus all but gone in 2012.

We suggested a short gold/long platinum trade about 4 weeks ago when platinum traded at a $30 discount to gold. The trade remains viable, with platinum currently at a $50 premium.

The PGM 's offer the following for consideration. The caveat being that the global economies do not collapse into a significant recession. If inflation begins to become an issue, the financial crisis becomes headline news or geopolitical events emerge, the metals group as a whole will benefit, albeit gold and silver will outperform the PGM's. In the context of slowly improving economies, where value is perceived not in the precious metals but in equities, the PGM's should continue to outperform. Demand for the group, with increasing demand for autos, especially in China, will continue to lift demand into an already deficit supply picture. South Africa with its chronic electricity issues and labor strife cannot be counted on for consistent production. The Russians from my experience are notorious for not meeting supply contracts. Add to this the potential for an OPEC style cartel and making a fundamental case to be long the PGM's over the next five years is not difficult.

[aberystwyth] 13/5/2013 12:06

Well - today's graph says it all - onwards and downwards by the looks of it

[pimpi] 10/5/2013 09:37

New investors presentation

[mrminister] 09/5/2013 11:57

peeps happy to buy @ 48 now .........

[jas0701] 09/5/2013 11:28

With so much selling and it's been absorbed at 47.75p without dropping the share price.
I think there is a big buy order being filled.
MM's want your shares.
It seems as this share is ready to take off soon.

[gucci] 09/5/2013 10:51

TIDMAQP

Schedule 11 - Notification of interests of Directors and Connected Persons

1 Name of Company:

Aquarius Platinum Limited

2 Name of director:

Jean Nel

3 Please state whether notification indicates that it is in respect of holding
of the director named in 2 above or holding of that person's spouse or children
under the age of 18 or in respect of a non-beneficial interest:

Indirect Beneficial interest of Mr Jean Nel

4 Name of registered holder(s) and, if more then one holder, the number of
shares held by each of them (if notified):

Micana (Pty) Limited

5 Please state whether notification relates to a person (s) connected with the
director named in 2 above and identify the connected person (s)

Notification is with respect to a company in which Mr Nel is a director and has
a 0.15% equity interest.

6 Please state the nature of the transaction. For PEP Transactions please
indicate whether general/single co PRP and if discretionary/non discretionary:

Purchase of shares

7 Number of shares/amount of stock acquired:

85,470

8 Percentage of issued class:

0.02%

9 Number of shares/amount of stock disposed:

N/A

10 Percentage of issued class:

N/A

11 Class of security:

Common Shares

12 Price per Share:

ZAR5.87 per share

13 Date of transaction:

2 May 2013

14 Date company informed:

2 May 2013

15 Total holding following this notification:

609,970

16 Total percentage holding of issued class following this notification:

0.12%

[garth] 09/5/2013 06:08

And back above 1500..... Should support continued rise...

G.

[garth] 08/5/2013 15:25

Platinum back on the rise....