Send this article to a friend
Print this page

> JSE:IMPALA PLATINUM HOLDINGS LIMITED:
17200c 0%
If you want to share this article, simply sign into one of these sites and select your network. It’s that easy Click here to find out more about how to use this button

Platinum stocks offering value
Marc Ashton
Posted: Thu, 18 Sep 2008

[miningmx.com] -- PLATINUM heavyweights Impala Platinum and Anglo Platinum have seen very different price action since the global stock market crisis hit on Monday, but analysts believe that they are potentially oversold and may now be offering value.

“We have avoided the resources bubble and we now feel that value is emerging in that universe,” said Patrice Rassou a portfolio manager at Sanlam Investment Managers.

Since close of trade on Friday, the two platinum counters have had mixed fortunes as global stock markets have tumbled.

Impala Platinum lost 14% to hit a low of R170.53 before recovering to R179 on Friday while Anglo Platinum gained 3.5%.

On Friday, Impala Platinum announced that they had entered into discussions with Mvelaphanda Resources and Northam Platinum around the formation of a South African platinum “champion”.

“Impala Platinum is currently involved in merger discussion with Mvelaphanda Resources but we don’t know the terms of the discussions so it is hard to comment on value,” said Rassou.

“Platinum shares have been sold down aggressively as global growth concerns emerged and we saw fund liquidations, we think it is overdone as prices are below marginal costs of new projects and in the case of Impala, the Zimbabwe settlement is a big positive.”

Zimbabwe has undergone a years of intense political and economic upheaval, with inflation running at millions of percent, the highest in the world. Rival factions in Zimbabwe this week signed a power sharing agreement that is expected to boost investment there. Both Impala Platinum and Anglo Platinum have projects there that will benefit from a return to political and economic stability, particularly Impala, which has a large exposure to the country.

Impala CEO David Brown has described the Zimbabwe resources as “blue sky potential” for the company.

Furious price action

The share price of Impala Platinum, in particular, saw some sharp moves on Thursday. The share opened at R177 and then moved in a range from R169 to a high of R190.50, a swing of nearly 12.5%.

Click Here to subscribe to our daily newsletter
Sasha Naryshkine a dealer at stock broker Vestact said: "It was futures closeout today and you will see that, both stocks have since come back and even down. This is the favourite long – short trade of hedge funds, depending on which one you think has marginal outperformance."

Futures close outs involves large institutional shareholders exiting or rolling over futures contracts that are due to expire. As a result, large volumes of shares will be traded at agreed prices.

Naryshkine believes that demand for platinum will remain strong, but much of this will depend on the motor vehicle sector. “I see that Goldman Sachs downgraded European motor vehicle production. That suggests lower platinum usage. But, you can comfortably say that platinum has great industrial usages and if you are of the opinion that the world needs to be cleaner and will become tighter with regards to future legislation, then buy the stocks.”

Precious metals prices moved up sharply yesterday with gold adding around 80 dollars and silver and platinum seeing smaller gains.

Stockbroker Imara SP Reid sent out a note on Thursday to clients saying that resource shares in general could expect a short term reversal of their current downward trend, as local industrial and financial stocks remain out of favour.

They believe that this will be driven by an increase in demand for commodities from China who will be taking advantage of prices for raw materials which have come off in recent months.

At 3pm on Thursday, Impala Platinum was trading up 2.7% at R181.99 and Anglo Platinum traded up 3.2% at R863.89.

** Ashton holds shares in Impala Platinum.