Coin it on Man­dela

Finweek English Edition - - INVESTMENT - Hyundai ix35 Fuel Cell ve­hi­cle

The re­luc­tance of in­vestors to take long po­si­tions on plat­inum is based on the sup­po­si­tion that there is a sur­feit of above-ground stocks of the metal. Try­ing to un­der­stand just how much plat­inum metal sits in in­vestor hoards or min­ing com­pany in­ven­to­ries is some­thing of a dark art. GFMS Thom­son Reuters, a UK-based mar­ket con­sul­tancy, es­ti­mated in 2012 that plat­inum stocks were at 4.5m ounces.

The think­ing is that there’s been a draw­down on those stocks but the mar­ket is not suf­fi­ciently re­lieved. It also sup­poses 900 000 of plat­inum ounces held in Absa Cap­i­tal’s ex­change traded fund (ETF) is not ac­tu­ally an in­ven­tory. Derek En­gel­brecht, the out­go­ing mar­ket­ing di­rec­tor of Im­pala Plat­inum ( Im­plats), says that these ounces are un­likely to be liq­ui­dated, al­though the track record of ETFs shows the ounces can be counted as ‘hot money’; in other words, in­vestors will sell the metal – re­lease it into the mar­ket – when there’s a profit to re­alise.

In any event, the in­ven­to­ries of plat­inum which have been amassed over the years are damp­en­ing the ‘ fun­da­men­tal deficit’ in the plat­inum mar­ket. Plat­inum pro­duc­ers aren’t min­ing enough metal to meet mar­ket de­mand such as for au­to­cat­a­lysts.

That’s why En­gel­brecht is hop­ing that the South African Re­serve Bank (Sarb) will ac­cept his idea for a Man­dela plat­inum coin. “It’s early days yet but we hope to get a meet­ing with Gill Mar­cus, Sarb gover­nor, and ask if we’re bark­ing up the right tree,” says En­gel­brecht.

Apart from cre­at­ing a new mar­ket for plat­inum mined in SA, the coin would also be lo­cally man­u­fac­tured and there­fore be­come a ben­e­fi­ci­a­tion project. A small pre­mium could also be charged with the pro­ceeds go­ing to one of the Man­dela char­i­ties such as the Man­dela Chil­drens’ Fund, or the like.

A burn­ing irony for En­gel­brecht has been the fact that Im­plats, with the Plat­inum Guild, helped es­tab­lish the Plat­inum Ea­gle, a coin which is minted and sold in the US. “The coin is now in its fifth it­er­a­tion. Why on earth are we al­low­ing this to hap­pen in the US?” says En­gel­brecht.

Red tape abounds, how­ever. By way of ex­am­ple, own­ing un­wrought gold in SA such as a gold bar, is il­le­gal in terms of the coun­try’s Pre­cious Metals Act. Own­ing coins is per­mis­si­ble, hence the ex­is­tence of Kruger­rands but it’s a dif­fi­cult process.

Says En­gel­brecht: “I think that will be a lot of Govern­ment bu­reau­cracy but I will en­dure. I will be knock­ing on doors to try and get this off the ground.”

The other av­enue for al­ter­na­tive plat­inum de­mand is the metal’s use in the man­u­fac­ture of fuel cells. The poten- tial of plat­inum in car­bon-free en­gines has been talked about for the best of 20 years – with­out in­dus­trial scale pro­duc­tion ever tak­ing place. That may change.

Hyundai and Toy­ota are due to launch fuel-cell pow­ered cars in months, a fact to which Ivan­hoe Mines pres­i­dent Robert Fried­land re­ferred to late last year when he said they would be “driv­ing down Main Street in a city near you”.

A ma­jor de­vel­op­ment has been to lower the amount of plat­inum needed per en­gine, thus low­er­ing the cost to con­sumer. It’s now 50g per cell ver­sus 100g a decade ago. The fuel cell’s ma­jor ri­val, bat­tery tech­nol­ogy, is not as con­sumer friendly with its sig­nif­i­cant recharge times which auto man­u­fac­tur­ers say make it less at­trac­tive to driv­ers.

There’s also been an uptick in the use of sta­tion­ary fuel cells. More units are go­ing into Ja­pan fol­low­ing the nu­clear dis­as­ter at Fukushima Dai­ichi in 2011. “That could be the tip­ping point in driv­ing the tech­nol­ogy and ul­ti­mately get­ting it into ve­hi­cles,” says Ter­ence Good­lace, CEO of Im­plats.

Derek En­gel­brecht

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