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GM bankruptcy lends relief to platinum

Posted on 2012-11-06, By A-Best Staff

By Leia Michele Toovey- Exclusive to Platinum Investing News

Platinum prices, already on the positive track, got a boost this week from the declining greenback and the announcement of GM’s Bankruptcy.  GM’s bankruptcy is by no means a positive for platinum, as the auto industry accounts for approximately half of global platinum demand; however, platinum’s price has been reflecting the impending bankruptcy for many weeks. Once the inevitable was announced, sentiment switched focus to other economic indicators.  

Platinum suffered major setbacks last year, as auto sales grinded to a halt.  However, as shrinking auto demand sent prices on a downward spiral, the market got an unexpected boost from bullish investors and jewellers.  In 2008, 47 per cent of platinum demand came from the auto sector, a 49 per cent decline in comparison to 2007.  Although jewellery and investment have lifted the metal, a full recovery is expected only when carmakers experience a turnaround. According to Johnson Matthey, platinum prices may rise as high as $1,350 an ounce in the next half year. A secondary reason for strength in platinum is general strength in precious metals led by gold. Gold is responding to weakness in the U. S. dollar relative to other major world currencies. Platinum, palladium and silver prices have been tagging along.

Company News

Norilsk Nickel announced that it has increased its platinum and palladium production estimates for 2009. The Russian miner, which is the world’s largest nickel and palladium producer, has decided to raise its platinum output forecast from 600,000 to 620,000 ounces to 615,000-640,000 ounces. As reported by nickel investing news, Norilsk’s profits have plunged as metals prices have collapsed. While the company announced increased palladium and platinum production, Norilsk now expects to produce between 285,000 and 300,000 tonnes of nickel this year – down from a previous estimate of 290,000 to 305,000 tonnes. The company also revealed that it is changing its copper output prediction slightly at the upper end, moving from 380,000-405,000 tonnes to 385,000 to 400,000 tonnes.

Canada’s Platinum Group Metals Ltd plans to raise C$35 million through an offering of units.  Proceeds from the sale will mainly be used to pay Anglo Platinum Ltd amounts due related to the restructuring of a joint venture; the total owed to Anglo Platinum presently stands at about C$28 million. Each unit would consist of one common share in the capital of Platinum Group and one-half of one common share purchase warranted. The company expects the offering to close on or about June 19.

Jubilee Platinum Plc said it would proceed to a feasibility study of the Tjate project in South Africa after a report indicated that the project could possibly contain a 4 million ounces of platinum-group metals and gold. “The company calculates an attributable value at prevailing market prices of $30 billion to the aforementioned possible metal, for which the viability of its recovery has yet to be established in future studies as the project develops,” Jubilee said on Thursday. Based on the resource data, the company believes an exploration target of some 368 million tonnes, before geological losses, is possible for the three farms of its 63 per cent-owned Tjate project.

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