miningmx
TODAY In Columnists ›
Platinum rings

Pedal to the metal

Sasha Naryshkine | Fri, 22 May 2009 08:36
[miningmx.com] -- "US TO Issue Tougher Fuel Standards for Automobiles", reads a headline in the New York Times this week.

The story refers to the Obama administration's tougher stance on emissions control and fuel efficiency of motor vehicles.

By 2016, the US hopes its passenger and light truck fleet will be about 40% cleaner than it is at present. The new rules will mean that vehicles will have to average 35.5 miles per gallon, or 6.62 litres per 100km.

Diesel vehicles are much more efficient when measured over the short term. A 2-litre Volkswagen Jetta (diesel) gets about 41 miles per gallon - 5.73 litres of diesel per 100km worth of travel.

At the bottom of the pile is a 2009 Lamborghini Murcielago, which guzzles 18 litres of petrol for every 100km travelled on the open road.

Granted, the fine machine can travel at around 330 km/h and is available by request only for a cool $358 000. So if you can afford the car, you can fill it with jet fuel if it were possible.

There is no doubt, however, that global emissions control will become tighter as we worry about the impact on the environment and as weather patterns become fiercer.

The two local platinum majors, Anglo Platinum and Impala Platinum, are price makers and not price takers. The market is so tight - gold production is roughly 14 times the size of the platinum market. What happens if there is a platinum demand explosion over the next decade?

We are going to wish for the mid-tier and explorers to start producing more. Predictions are that the current number of 800 million cars on the road could swell to three billion by the year 2035.

When it comes to platinum's prospects, the big question is whether the combustion engine has a future.

Batteries vs fuel cells

What will the majority of future hybrids look like - batteries or fuel cells? You know the saying, the rocks did not run out when the Stone Age ended. I suspect the same will be true of oil.

So, there may be four times as many cars over the next two-and-a-half decades. Also four times as many catalytic converters, but I doubt they will all be combustion engines.

As an investor, you stand to benefit by being in one of the major platinum producers.

I choose Impala Platinum. There are fewer problems at the world's second-largest platinum producer.

Implats arguably has better assets than its competitors.

It took a crisis to prove that Implats is the most financially sound of the major platinum producers. It helps that its head Dave Brown was previously in charge of the company's finances.

AngloPlat has had some problems of its own, including a poor safety record under previous head Ralph Havenstein.

Anglo CEO Cynthia Carroll's approach was to bring out the long broom and sweep the cupboard clear - Havenstein was shown the door, or took it himself. Former AngloPlat CEO Barry Davison is hardly an ally and has been voicing his opinion as a shareholder.

Davison and analysts are pretty much on the same page when it comes to AngloPlat's prospects over the next 18 months.

Amandelbult and Rustenburg are experiencing some challenging times, contributing to their parent company's handsome dividend payments being scrapped for the time being.

Since Xstrata bailed on Lonmin and the board of the platinum producer decided it was a bad idea, the market decided that the value of Lonmin should be much lower.

It looks ugly at Lonmin. The firm is looking to raise $457m.

If you don't follow your rights, you may be sorry later. Investors are offered 900 pence now, versus the 3 300 pence offered by Xstrata last year. Those were the days my friend. I thought it was generous.

The proceeds of the rights issue will strengthen the firm's balance sheet in these uncertain times.

There is always a certain irony in raising money at the bottom of the market, because that is exactly when you need it.

Aquarius: well, a similar sort of story here.

The group has placed convertible bonds and had a rights issue to bolster its financial health and for an acquisition. The big plus for Aquarius is that despite teething problems, the acquisition, Ridge, is a proper mine.

Northam: here Tokyo Sexwale and Mvelaphanda are part of the problem, which is a nice one to have. The Booysendal asset is like the treasure chest that needs to be unlocked.

The unlocking part requires a big key that is going to cost a lot of money. The current flagship mine is the world's deepest platinum mine. That tells you simply it costs more to mine.

So, in summary:

* AngloPlat: no dividend payment for the time being;

* Aquarius and Lonmin: raising money through equity issuances, which will have a dilutive effect for those not participating; and

* Northam: no deal with Impala and the headache of what to do about Booysendal for Mvelaphanda Resources.

* So Impala it is for us.

Naryshkine is with asset management firm Vestact.

MORE FROM OUR COLUMNISTS

  • »Barrick chasing Randgold premium
  • »Decoding the Mining Summit
  • »Beware of resource stock overshoot
  • »Power sector needs a revamp
  • »Curious interest in silver, expropriation
  • »Anglo propping up group of six
  • »BEE imbroglio to inform charter debate
  • »Fear and worry, the calling cards of the gold lover
  • »Numsa's Nazi tactics
  • »Vulisango versus Simmers
  • »Impala warns of 'toughest time'
  • »Central Rand Gold to be avoided
  • »Are miners being shafted?
  • »Debt behind Anglo sale
  • »Christo Wiese goes for gold

    • USER COMMENTS () Click to View
    COMMENT
    SHARE
    E-MAIL
    PRINT
    Add Your Comment
    No bad language or hate speech please.

    facebook de.li.cious Digg
    columnists

    Columnists

    MORE FROM OUR COLUMNISTS
  • › Barrick chasing Randgold premium | David McKay
  • › Decoding the Mining Summit | David McKay
  • › Beware of resource stock overshoot | Vic de Klerk
  • › Power sector needs a revamp | Jan de Lange
  • › Curious interest in silver, expropriation | David McKay
  • › Anglo propping up group of six | David McKay
  • › BEE imbroglio to inform charter debate | David McKay
  • › Fear and worry, the calling cards of the gold lover | Richard Quest
  • › Numsa's Nazi tactics | Jan de Lange
  • › Vulisango versus Simmers | Brendan Ryan
    • Most Read
    Commented
    Editor's Choice
    1. »Kumba halts cheap iron ore to ArcelorMittal SA
      by Allan Seccombe | 26 Feb 2010 13:12
    2. »Barrick chasing Randgold premium
      by David McKay | 28 Feb 2010 10:59
    3. »First Uranium soars on tailings news
      by Allan Seccombe | 26 Feb 2010 10:24
    4. »Petra sells diamond for $35.3m
      by Reuters | 26 Feb 2010 12:18
    5. »Barrick chasing Randgold premium
      by David McKay | 28 Feb 2010 10:59
    1. » Kumba halts cheap iron ore to ArcelorMittal SA
      by Kumba halts cheap iron ore to ArcelorMittal SA | 26 Feb 2010 13:12
    2. » Exxaro wants BEE equity changes
      by Exxaro wants BEE equity changes | 25 Feb 2010 16:39
    3. » Aurora defends gold mine plans
      by Aurora defends gold mine plans | 22 Feb 2010 18:07
    4. » Gold Fields lowers gold outlook, again
      by Gold Fields lowers gold outlook, again | 23 Feb 2010 13:38
    5. » Bateman exodus continues
      by Bateman exodus continues | 17 Feb 2010 17:02
    6. » Xstrata pays dividend, upbeat on markets
      by Xstrata pays dividend, upbeat on markets | 08 Feb 2010 10:58
    7. » AngloPlat turns the corner
      by AngloPlat turns the corner | 08 Feb 2010 17:07
    8. » Copper prices destined for record high
      by Copper prices destined for record high | 01 Feb 2010 14:29
    9. » Good prospects for gold
      by Good prospects for gold | 01 Feb 2010 19:30
    10. » Bernard Swanepoel's first platinum play
      by Bernard Swanepoel's first platinum play | 29 Jan 2010 16:43
    11. » Anglo Coal gets out of Venezuela
      by Anglo Coal gets out of Venezuela | 29 Jan 2010 10:37
    12. » Three new coal listings for the JSE
      by Three new coal listings for the JSE | 28 Jan 2010 11:09
    13. » Harmony streamlines ops, targets growth
      by Harmony streamlines ops, targets growth | 26 Jan 2010 09:59
    14. » Simmers settles board battle
      by Simmers settles board battle | 22 Jan 2010 11:43
    15. » Decision time looms at AngloPlat
      by Decision time looms at AngloPlat | 22 Jan 2010 08:40
    16. » Eddie du Rand quits Bateman
      by Eddie du Rand quits Bateman | 15 Jan 2010 13:21
    17. » Aurora buys DRDGOLD's ERPM plant
      by Aurora buys DRDGOLD's ERPM plant | 17 Jan 2010 10:42
    18. » Kazakh firm eyes Mvela
      by Kazakh firm eyes Mvela | 04 Jan 2010 13:41
    19. » Namakwa gets new Lesotho mine
      by Namakwa gets new Lesotho mine | 05 Jan 2010 15:28
    20. » Gold latest in decade of bubbles
      by Gold latest in decade of bubbles | 04 Jan 2010 10:40
    21. » BEE imbroglio to inform charter debate
      by BEE imbroglio to inform charter debate | 18 Dec 2009 08:00
    22. » Solomon regains Wesizwe control
      by Solomon regains Wesizwe control | 17 Dec 2009 15:12
    23. » Aurora says it is financially sound
      by Aurora says it is financially sound | 03 Dec 2009 17:26
    24. » Wesizwe is being "hijacked"
      by Wesizwe is being "hijacked" | 03 Dec 2009 02:00
    25. » DRDGOLD sells Blyvoor to Aurora
      by DRDGOLD sells Blyvoor to Aurora | 02 Dec 2009 15:18
    26. » Exxaro cuts mineral sands for coal
      by Exxaro cuts mineral sands for coal | 01 Dec 2009 17:44
    27. » Bakubung calls for its Wesizwe directors to quit
      by Bakubung calls for its Wesizwe directors to quit | 26 Nov 2009 11:36
    28. » Wesizwe Platinum wracked by coup allegations
      by Wesizwe Platinum wracked by coup allegations | 25 Nov 2009 11:51
    29. » Global gold hedge heads below 10moz
      by Global gold hedge heads below 10moz | 17 Nov 2009 13:34
    30. » Platinum deficit forecast for 2010
      by Platinum deficit forecast for 2010 | 17 Nov 2009 15:03
    31. » Uranium One cuts production target
      by Uranium One cuts production target | 16 Nov 2009 10:12
    32. » Is silver's salvation upon us?
      by Is silver's salvation upon us? | 13 Nov 2009 15:23
    33. » Maroga definitely out - Eskom board
      by Maroga definitely out - Eskom board | 12 Nov 2009 12:56
    34. » Ferrochrome users landed with SA energy costs
      by Ferrochrome users landed with SA energy costs | 12 Nov 2009 12:52
    35. » Eskom: Principle vs power
      by Eskom: Principle vs power | 10 Nov 2009 12:10
    special reports
    News Alert! Subscribe to our Free News Alert
    podcastsPodcasts
    Big opinions by big guys.     RSSRSS Feeds
    News delivered really simply.
    jobsJobs
    Current listings.     eventsEvents
    Current listings.
    jseJSE Listed stocks
    Real time resources data.
    special reportsFREE News Alert!
    Subscribe to our News Alert