john lewis positive platinum outlook

http://money.ninemsn.com.au/article.aspx?id=613292


Platinum shortfall expected to increase
The global shortage of platinum is not being reflected by the low price of the precious metal, says explorer and budding miner Platinum Australia Ltd.

The platinum price has dropped more than 30 per cent over the past four months, from its record $US2,301.50 per ounce in March to its current level of about $US1,470 per ounce.

Prices for platinum and other precious metals fell Monday night to the lowest level in more than seven months as the US dollar improved against the pound and euro.

Platinum Australia managing director John Lewins said the platinum market was in deficit last year by 500,000 ounces (oz) but there was demand of seven million oz.

Mr Lewins said he predicted there would be a larger shortfall this year.

Platinum producers Impala Platinum Ltd, Aquarius Platinum Ltd and Xstrata's takeover target Lonmin plc all expected lower production this year, Mr Lewins said.

Power supply problems in the world's richest platinum-producing nation, South Africa, was making it costly to mine the precious metal, constricting already tight supply, he said.

Significantly increased demand was expected from China in coming years and its industrial consumption of platinum lagged behind other nations, Mr Lewins said.

Platinum was a key, non-substitutable ingredient in catalytic converters, which were used as part of a car's emissions control system, and more cars were taking to China's roads, he said.

Mr Lewin said the platinum market was in deficit but its price had been driven downwards largely by the poor economic sentiment in the US and weaker vehicle sales.

"Latterly, weakness in Europe is being seen too and that relates to the autocatalyst issue."

He said a catalytic converter in a diesel car comprised as much as 75 per cent platinum - a much higher proportion than in petrol cars, where palladium could be used as a platinum substitute.

Diesel vehicle sales were expected to rise thanks to their 30 to 40 per cent better fuel efficiency, he said.

"Last calendar year in China, the production of vehicles went up by 26 per cent - the fastest growing vehicle manufacturers in the world - but they are producing virtually no diesel light vehicles at the moment.

"This is projected to grow.

"They have introduced a clean air act in Beijing and Shanghai and are just about to introduce it to the rest of China this month, which means more catalytic converters.

"It's a strong potential market for diesel vehicles, which therefore means platinum."

Platinum Australia expects to bring its low-cost, high-grade, open pit Smokey Hills mine in South Africa into production this month.

The company aims to ramp up to become a 250,000 oz a year producer, with the addition of its Kalplats project that is also in South Africa.

"We plan to move into the mid-tier," Mr Lewins said. "Our cash costs are low at $US300 per ounce."

He said Xstrata had picked a perfect time to launch its $10 billion bid for Lonmin, which was underperforming and had lost staff.

"I think 44 per cent is a good premium ... and they will get it close to where