South Africa: Platinum Defies Forecasts to Slip Lower With Gold

PLATINUM tracked gold lower to record a 6% fall last week to $1933/oz, despite various forecasts of a bigger platinum deficit this year than last year because of disruptions to South African production.

Weaker platinum and gold prices reflected a strengthening dollar on expectations that the US Federal Reserve would stop cutting US interest rates after positive first-quarter earnings reports from US companies and positive labour market data.


Traders said there were signs that global market confidence was returning after fears of a financial meltdown with the US subprime mortgage crisis.

Global risk aversion encourages investors to flee to safe-haven assets such as precious metals. But the prices of platinum and palladium are also determined by demand and supply, and operating difficulties in SA, which accounts for 75% of global production, have caused price volatility this year.

Independent researchers GFMS said in its report on the platinum market last week that global production of platinum last year was 6,5-million ounces. Of this, SA accounted for 5,07-million ounces, a drop of 370000oz on 2006 production. GFMS said Anglo Platinum, Lonmin and Northam had the biggest falls in production.

Anglo American CEO Cynthia Carroll said last week subsidiary Angloplat's production could fall 150000oz this year because of SA's power crisis. Last year Angloplat took the drastic step of halting production on a rolling basis at its flagship Rustenburg operations to retrain workers in safety after a series of fatalities.

A spike in fatalities last year at all South African mines, but especially deep-level gold and platinum, caused temporary stoppages.

Last week, Lonmin, the world's third-biggest platinum producer, said March quarter platinum production was 17% down on the December quarter's, and cut its full-year production forecast to 775000oz from 860000oz. The group warned that it might not meet the revised target if there was a deterioration in electricity supply or more safety-related stoppages.

Aquarius Platinum reported platinum production fell 19% in the March quarter because of power supply and industrial relations issues as well as a switch to owner-operated mining at its Everest mine. It expected a fourth-quarter improvement and for the full year production would be similar to last year's, at 520000oz-530000oz.