Platinum Surging on Shortage Makes This a Stock to Watch
Platinum Surging on Shortage MakesAfter a two-week rally, platinum is trading near $1,690 an ounce—surpassing the price of gold at $1,678 an ounce. Unlike gold, which is viewed as an economic hedge against inflation, platinum’s price increases on the heels of economic strength, since over half of all platinum is used for industrial purposes.
Platinum Surging on Shortage Make This a Stock to Watch After a twoweek rally, platinum is trading near $1,690 an ounce—surpassing the price of gold at $1,678 an ounce. Unlike gold, which is viewed as an economic hedge against inflation, platinum’s price increases on the heels of economic strength, since over half of all platinum is used for industrial purposes. Entering a new year, historically, platinum has a period of seasonal strength that runs from January 1 to May 31 and is influenced by demand from the automotive industry and jewelry sales. The auto industry accounts for roughly 46% of production, while jewelry accounts for about 31%. The traditional season for buying cars is from February to May, and platinum is an important component in catalytic converters, which control exhaust emissions. Demand for platinum jewelry has recovered to levels reached in 2009, and it is expected to remain strong in 2013. Platinum demand is expected to exceed supply by 400,000 ounces, while palladium demand will exceed supply by 915,000 ounces. (Source: Matthey, J., “Platinum 2012 Interim Review 13th November 2012,” Platinum Today November 13, 2012, last accessed January 16, 2013.) Furthermore, last year’s disruptions in production in South Africa, the world’s largest supplier of platinum, and an improving outlook in Europe and China could bolster platinum’s price in 2013. A full 93% of the world’s platinum group metals (PGM) supply comes from South Africa, Zimbabwe, and Russia; further disruption could translate into a sharp decline in platinum supplies. This opens the door for platinumrich and economically stable regions, such as Canada, to supply the growing demand. Prophecy Platinum Corp. (TSXV/NKL) is an industryrecognized, developmentstage mining company that acquires and develops mineral resources in stable, mining friendly jurisdictions, which include Canada, Argentina, and Uruguay. The mining company primarily explores for nickel, copper, and platinum group elements, such as ruthenium, rhodium, palladium, osmium, iridium, and platinum. While the mining company has a number of projects in different stages of development, its flagship interest is the Wellgreen property. Located in the Yukon, Canada, Wellgreen is ranked fifth in the top12 undeveloped PGM resources outside South Africa. A July 2012 preliminary economic assessment (PEA) suggested that Wellgreen contains seven million ounces in total of platinum, palladium, and gold; two billion pounds of nickel, and two billion pounds of copper. For the project, the mining company raised $10.0 million in 2011 and another $10.0 million in 2012. Furthermore, Prophecy Platinum hopes to provide a feasibility target (evaluation) in 2015–2016 with the opportunity for accelerated construction. (Source: “Corporate Presentation December 2012,” Prophecy Platinum Corp. web site, December 2012, last accessed January 16, 2013.) In late 2012, Prophecy Platinum appointed three seasoned mining executives to help advance the Wellgreen project. The mining company bolstered its management team with a new President, CFO, and COO. New President and CEO Greg Johnson is a geologist with over 25 years of experience. Johnson played a key role in the discovery and advancement of the 40millionounce Donlin gold deposit in Alaska. He was co founder at NovaGold Resources Inc. (NYSE/NG), and most recently, he was CEO of South American Silver Corp. (TSX/SAC). He has also been involved in raising over $650 million in project financing. (Source: “Prophecy Platinum Appoints Greg Johnson as President and Chief Executive Officer,” Prophecy Platinum Corp. web site, November 4, 2012, last accessed January 16, 2013.) Because Prophecy Platinum is still in the development stage, it is not yet generating revenue. For the three months ended September 30, 2012, the mining company reported a net loss of nearly $2.1 million, or $0.03 per share, compared to a net loss of $3.1 million, or $0.06 per share, in the same prioryear period. (Source: “Management’s Discussion and Analysis of Financial Condition and Results of Operations September 30, 2012,” Prophecy Platinum Corp. web site, September 30, 2012, last accessed January 16, 2013.) For the six months ended September 30, 2012, the mining company incurred a net loss of $3.1 million, or $0.05 per share, compared to a net loss of $3.8 million, or $0.07 per share, in the comparable prioryear period. On September 30, 2012, Prophecy Platinum had a cash balance of $4.4 million, total assets of $76.9 million, and no longterm debt. Chart courtesy of www.StockCharts.com Since late December, Prophecy Platinum’s share price has been bullish, climbing in step with the price of platinum. After realizing a sharp increase, Prophecy Platinum’s share price has found support at its 50day moving average (MA) with strong volume. Prophecy Platinum is a financially solid mining company with a number of strong developmentstage projects in Canada and Argentina, and five prospecting licenses in Uruguay. Since 2011, the company has raised $20.0 million to help fund the Wellgreen property, and in July, the company released encouraging PEA results. Even though Prophecy Platinum is a developmentstage mining company and is still a number of years away from production, the company has great potential. With ETFS Physical Platinum Shares (NYSEArca/PPLT) and ETFS Physical White Metals Basket Shares (NYSEArca/WITE) trading at premium prices, investors might want to consider financially solid developmentstage companies like Prophecy Platinum.