Platinum cracks US$2,000-per-oz barrier

A meteoric rise in platinum prices grabbed the mining sector’s attention during the week ended Feb. 16, the seventh trading week of 2008.

• Given new impetus by South Africa’s now-chronic power-supply shortfalls and dwindling stockpiles, spot platinum prices are now reaching all-time nominal highs, having blown through the psychological US$2,000-per-oz. level on Feb. 15 to fix in London at US$2,060 per oz., up US$531, or 35%, since New Year’s Eve.

How long will the energy crunch in South Africa last? Well, for an idea of the scale of the problem, the country’s state-owned power company Eskom has already told miners that electricity supply there would be kept at about 90% of usual requirements until 2012, when Eskom’s first new base-load power station comes on-line.

Economic platinum deposits are exceedingly rare, and South Africa — blessed as it is with the huge, platinum-rich Bushveld igneous complex — accounts for 80% of global supply of roughly 6.7 million oz., from just a handful of mines.

Analysts are now pencilling in platinum deficits for 2008 on the order of half a million ounces, compared with a mild surplus just two years ago.

Sister metal palladium joined the PGM party, and traded at US$475 per oz. at presstime — a near 7-year high.

• Heavy rains in Zambia resulted in three more days of widespread power shortages there, too, which, combined with China’s continued limited production from its snow-socked copper smelters, has helped goose the copper price. The red metal’s spot price tacked on an extra US40 per lb. in February and is now trading north of US$3.60 per lb.

The Zambian rains have also made open-pit mining more difficult, which, coupled with the power outages, could soon cause projections of Zambia’s metal output for 2008 to be revised downwards.

• Meanwhile, the World Gold Council released physical gold-demand numbers that showed a sharp drop in gold jewelry demand in the recent fourth quarter. Total fourth-quarter demand for gold sank 17% to 842 tonnes (27.1 million oz.) from 1,013 tonnes (32.6 million oz.) in the same period in 2006, though total full-year demand was up a healthy 4.3% to 3,547 tonnes (114 million oz.) from 3,400 tonnnes (109 million oz.) in 2006.

In another positive sign, fourth-quarter gold demand rose 7% in U.S. dollar terms, to US$21.3 billion from a year ago, helped by strong second-half investment flows into the gold sector.

Interestingly, just as GFMS recently reported that China had vaulted ahead of South Africa in 2007 to become the globe’s largest gold producer, the World Gold Council has determined that China has now moved ahead of the U.S. to become the second-largest volume-retail market for gold jewelry, behind only the undisputed king of bling, India.

• In Turkey, Eldorado Gold management and its investors are learning the nuances of the adjective “Byzantine,” as the company appeared to receive good news on Feb. 11 from the Turkish courts regarding its shuttered Kisladag gold mine near Izmir — though it’s not entirely sure.

The Turkish High Administrative Court could not reach a decision on an appeal of Kisladag’s environmental permit and is now returning the case to the lower courts. Since a temporary injunction that shut the mine in July 2007 has now expired automatically, Eldorado says the mine could be restarted soon. Before making that move, however, the company is seeking more clarity from Turkey’s Environment Ministry.

• In a sign of many more divestures by Rio Tinto to come this year, Hecla Mining struck a US$750-million deal to scoop up Rio Tinto’s 70.3% interest in the Greens Creek silver mine in Alaska, in which Hecla already has a non-operating 29.7% interest. The acquisition will double Hecla’s already substantial silver output to about 11 million oz. annually.

Rio Tinto aims to sell off another US$14 billion in assets, including US$9 billion this year, in order to pay down its whopping US$45-billion debt load, most of which was brought on with its US$39-billion acquisition of Alcan.

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