SOUTH African platinum group metal (PGM) shares would continue to appreciate but there were signs that metal prices were high enough to incentivise new supply.
That’s the view of Investec Asset Management’s John Biccard who, in an interview with the Financial Mail, said that incentive pricing – in which new supply was encouraged by high dollar metal prices – was the first sign that bull market would end.
“I think they’re (platinum shares) going to keep going … because of all the bad years before and for all the reasons we said we liked it: electric cars are not going to hurt combustion engines for a long time, supply takes many years to come on,” said Biccard.
“But 15 months ago, the price of PGMs was the furthest below the 90th percentile of the cost curve.
“In other words, most [PGM] companies in the world were losing money. Now, PGMs are the furthest above the 90th percentile, and that’s the first warning sign because that is, in the end, what kills the commodity run: because it’s now profitable to build another platinum mine. [It’s] the first warning bell,” he said.
PGM shares have been on the march again this year. Impala Platinum, which has gained 330% on a 12-month basis, recorded a new five-year high in January whilst Northam Platinum hit an all-time high and has gained 210% over the last year.
