analyst prefers pla to bhp or rio

This is 2 months olf, only just come across it - but worth a read.

African Rainbows is PLA's JV partner in Kalplats btw.

Thu Aug 23, 2007 8:11am BST

LONDON (Reuters) - Strong demand for platinum from Europe and the United States will be boosted as Asia focuses on curbing carbon emissions and environment protection, Fidelity International said on Wednesday.

For Nick Price, manager of Fidelity's new EMEA fund, that expectation translates into a key holding in African Rainbow Minerals (ARIJ.J: Quote, Profile, Research) in South Africa, the world's largest platinum producing nation.

Platinum is widely used in car autocatalysts to cleanse exhaust fumes.

"Platinum demand growth has been driven by environmental legisation in Europe, the United States and Japan. Autocatalyst demand has increased very steadily since 1999 which is when the legislation really started kicking in," Price said.

"The important point is, it hasn't been driven by Asian demand yet ... The Asian demand story will come and will be very strong, given the air quality in many Asian cities."

Price noted the concern expressed earlier this month by Olympics chief Jacques Rogge about air pollution in Beijing, which will host the games next year.

"There have been statements by the mayor of Beijing that he would like to introduce autocatalysts in all cars in Beijing."

Demand for platinum for autocatalytic converters rose to 4.195 million ounces last year from 3.975 million ounces in 2005, according to UK-based refiner Johnson Matthey.

Industrial demand for plasma and liquid crystal display screens also rose to 1.87 million ounces from 1.69 in 2005.

Platinum prices hit a record high of $1,395 an ounce last November, despite expectations of a market surplus this year. Some expect demand from exchange-traded platinum funds to push prices even higher, above $1,400.

"The platinum price held up very well during the recent market action, I continue to be be very optimistic about the oulook for platinum," Price said.

He was referring to the crisis in the credit market, which has seen speculators sell off liquid assets to pay for losses in illiquid markets and investors balance their portfolios.

Platinum touched a 5-month low of $1,218 an ounce last week, but has since recovered to around $1,230.

African Rainbow Minerals, along with other mining stocks, has fallen as investors worry about damage to global economic growth from the drying up of liquidity in credit markets.

But Price still prefers it to London-listed diversified miners such as BHP Billiton (BLT.L: Quote, Profile, Research) and Rio Tinto (RIO.L: Quote, Profile, Research).

"They all talk about growing their volumes about 5 to 7 percent compound over a 5 year period ... They are struggling to deliver on their promises," he said. "African Rainbow is planning to double its production between 2006 and 2010."

The EMEA fund has 48 percent of its $9 million assets in South Africa, which holds around 80 percent of the world's platinum resources. It has allocated 27 percent to Russia, the second largest producer.


© Reuters 2006