Another Look at Platinum (Pt)

Discussion in 'Platinum' started by tozak, Jan 12, 2013.

  1. tozak

    tozak Well-Known Member Silver Stacker

    Joined:
    May 6, 2011
    Messages:
    1,987
    Likes Received:
    31
    Trophy Points:
    48
    Location:
    Australia
    Is it time to take another look at Platinum?

    With all the talk about a trillion dollar Platinum coin as a solution for the US debt crisis Platinum has gained a lot of media attention and as a result sales of the metal for investment purposes are on the rise. 2013 could be the year for Platinum and for reasons you may not have yet considered. In reality the Platinum coin debate will have almost no direct effect on the supply of Platinum, a single coin could be made from one ounce 31.103g or according to the rules it doesn't even have to be an ounce nor even pure Platinum so 1g of Platinum could suffice. However it's the media attention that is causing people to re-look at Platinum as an investment option and the market may not be ready for this. Lets take a close look at the metal.

    WHAT IS IT?

    Platinum's chemical symbol is Pt and atomic number is 78
    It has a melting point of 1,768 Degrees Centigrade (Gold = 1,063 Degrees Centigrade and Silver = 961.8 Degrees Centigrade)
    Density is 21,400kg/m3 (Gold = 19,320kg/m3 and Silver = 10,490kg/m3)

    So Platinum is both more dense than the other two precious metals and has a higher melting point

    Platinum is part of the PGM (Platinum Group Metals)

    The six PGMs are;

    ruthenium
    rhodium
    palladium
    osmium
    iridium
    platinum

    On a side note osmium is the rarest of the PGM and has a total annual production of only 80Kg per year and current spot price of only US$380 per ounce so you could buy the total annual production of osmium for only US$977,397.68. However you would have an element that had little to no practical use and is toxic when exposed to air.

    Sources;
    http://www.taxfreegold.co.uk/osmiumpricesusdollars.html
    http://minerals.usgs.gov/minerals/pubs/commodity/platinum/mcs-2012-plati.pdf

    ABUNDANCE?

    Silver is found in the earths crust at a rate of 0.075 ppm
    Gold is found in the earths crust at a rate of 0.004 ppm
    Platinum is found in the earths crust at a rate of 0.005 ppm

    ppm = (parts per million); Data sourced from http://en.wikipedia.org/wiki/Abundance_of_elements_in_Earth's_crust

    So Platinum is slightly more abundant than Gold, also the moon is believed to have high concentrations of Platinum as do many other planets and asteroids. However the question should be what do we have commercially available for above ground use?

    Mined production 2005

    Silver - 20,300 Metric Tons
    Gold - 2,450 Metric Tons
    Platinum - 218 Metric Tons

    Mined production 2006

    Silver - 19,500 Metric Tons
    Gold - 2,500 Metric Tons
    Platinum - 223 Metric Tons

    Mined production 2007

    Silver - 20,500 Metric Tons
    Gold - 2,500 Metric Tons
    Platinum - 230 Metric Tons

    Mined production 2008

    Silver - 20,900 Metric Tons
    Gold - 2,330 Metric Tons
    Platinum - 200 Metric Tons

    Mined production 2009

    Silver - 21,400 Metric Tons
    Gold - 2,350 Metric Tons
    Platinum - 178 Metric Tons

    Mined production 2010

    Silver - 22,200 Metric Tons
    Gold - 2,500 Metric Tons
    Platinum - 183 Metric Tons

    Mined production 2011

    Silver - 23,800 Metric Tons
    Gold - 2,700 Metric Tons
    Platinum - 192 Metric Tons

    Silver Data Sourced = http://minerals.usgs.gov/minerals/pubs/commodity/silver/
    Gold Data Sourced = http://minerals.usgs.gov/minerals/pubs/commodity/gold/
    Platinum Data Sourced = http://minerals.usgs.gov/minerals/pubs/commodity/platinum/

    As you can see from the figures both Silver and Gold show steadily increasing production levels however Platinum, despite it's spot price gains, have plateaued or even tapered off. Some of the more recent declines in production levels were as a result of the Union action in South Africa, South Africa is the world largest producer of Platinum (77% Worlds Supply) followed by Russia (13% World Supply) and to some extent it's also coming from North America.

    Source: http://en.wikipedia.org/wiki/Platinum#Production_and_trade

    VALUE?

    Lets take the current spot price of the three Precious metals and see how much fiat we would have needed to purchase the worlds annual global output for 2011

    Silver (Spot US$30.44) x 23,800 Metric Tons or 765,170,000 ounces = US$23,291,774,800
    Gold (Spot US$1,662.70) x 2,700 Metric Tons or 86,805,000 ounces = US$144,330,673,500
    Platinum (Spot US$1,629.00) x 192 Metric Tons or 6,172,800 ounces = US$10,055,491,200

    So a Billionaire could buy the worlds Platinum production for just over US$10B, seems too cheap to be true

    USES?

    46% is used for vehicle emission control in autocatalysts
    31% is used for Jewelry
    23% Other*

    *fiberglass, medicines, chemicals, computers, lasers, petroleum products (gasoline), fiber-optic cables, crude oil refining, fertilizers, synthetic fibers, glass, paints, wires, plating, explosives, chemotherapy medicines, industrial refrigerators,spark plugs and more.......

    Source: http://www.ebullionguide.com/platinum-uses.aspx

    Lets look at Jewelery and Other, both are increasing annually. One of Platinum's more modern current uses is in Hard Disk Drives for your PC. It's something that is often over looked and also how in our technology age uses such as this continue to come and go and even expand. Year on year the consumption of Platinum in Hard Drives grows at a compounding rate however this could go up 10 fold or could go to zero in the coming years as technology continues to change. Jewelery however is growing at a very slow and steady pace.

    So 46% is used in catalytic convertors and of which if we changed technologies would mean we would be recycling all the old catalytic convertors during the change. We know that both China and India have an explosive amount of demand for new vehicles ready to kick off but how will this effect the Platinum price if they move to a Fuel Cell car instead of a more conventional combustion engine? Well what if I told you that the switch to Fuel Cells would see a deficit in Platinum? The current catalytic converter contains 3g of Platinum on average however a GM low-temperature Fuel Cell Stack consumes 30g of Platinum. Obviously the amount of Platinum required to run a Fuel Cell Stack would come down over time as efficiencies are fully recognised in the industry however you are either making more combustion engines or you are using it in Fuel Stacks, either way NEW demand for vehicles is still NEW demand for Platinum.

    Source: http://www.pikeresearch.com/blog/ar...orld-to-roll-out-a-global-fuel-cell-ldv-fleet

    MINING COST?

    Well anyone who knows me knows I look at all investments subjectively and I believe one of the best indicators of anything is production cost. Everything can be valued using Supply:Demand however if the supply cost is above the market value then you CAN NOT supply and the ratio will readjust until the suppliers can meet the market demand, the readjustment mechanism being the price. So lets take a couple of the largest Platinum produces in the World and look at their costs.

    Aquarius Platinum (Q1 - 2013)

    Kroondal = US$1,088 per ounce to mine
    Mimosa = US$831 per ounce to mine
    CTRP = US$1,170 per ounce to mine
    Platinum Mile = US$693 per ounce to mine

    Source: http://aquariusplatinum.com/announcements?year=2012&title=

    Anglo American Platinum (2011)

    R13,552 per ounce average = US$1,554 per ounce#
    #Subject to variation in the movement of the USD since 2011

    Source: http://angloplatinum.investoreports...ur-2011-performance/finance-directors-report/

    SILVER STACKER AWARENESS?

    So how up to speed are Silver Stackers with Platinum? Lets take the posts and divide it by the annual production of the precious metals

    Silver 85,277 posts / 23,800 tons = 3.58
    Gold 17,558 posts / 2,700 tons = 6.5
    Platinum 934 posts / 192 tons = 4.86

    So probably on par compared to the small annual production and we all knew Silver was the favorite amongst stackers, I think if you take anything away from this it's how truly small the Platinum market really is. If you thought the Silver market was small then Platinum truly is less in many respects.

    CONCLUSION?

    So is Platinum a good buy? Well it's food for thought. One thing to consider in Australia is GST, Platinum is the only PGM element that enjoys the GST-FREE status for high purity purchases and so investment in the metal is a fairly easy option. Do your research if you decide to purchase the metal as the premiums for buying Physical Platinum should not be much more than Gold if you are buying from a reputable place. As someone who invests almost solely in Silver I can say I have thought twice about the metal and now proudly own some Platinum as well. Time will tell if it's a wise investment and regardless if you decide to purchase Platinum yourself or not I hope you learned something about the metal anyway.
     
  2. STC

    STC Well-Known Member Silver Stacker

    Joined:
    Mar 16, 2011
    Messages:
    1,117
    Likes Received:
    108
    Trophy Points:
    63
    Location:
    Perth
    Great article tozak, platinum was really big & +2000/oz pre 08 smackdown when I had some jewellery made, it has had such prestige to be called the Metal of Kings, never tarnishes & is so strong my rings have hardly taken a scratch over the years. I've got more than a toe in & expect good results.
     

Share This Page