Let’s Profit From The Coming Supply Squeeze…
Dear Resource Hunter,
There’s an ominous cloud hovering over the platinum industry.
At any moment a supply disruption from South Africa’s mining district could throw the price of platinum through the roof.
Today I want to give you a few safe ways to play this impending situation. But as always, there’s a little legwork we need to go over. So let’s start the hunt…
South Africa’s mining sector is in a continued state of trouble.
Thousands of low-paid mine workers, lugging picks, shovels, drills and explosives deep into the platinum mines.
To be sure danger abounds in the mines and there’s a constant battle for wage hikes.
Labor disputes are often, and can quickly escalate into a deadly situation – the August 10th, Lonmin mine tragedy is our most recent example.
Byron King sums up the situation: “Labor strife will doubtless affect the perception of South Africa as a reliable future supplier of commodities — certainly of platinum. Indeed, the price of platinum has jumped to a three-month high on the threat that South Africa, as supplier of 80% of the world’s platinum, could face long-term, unplanned disruptions in output.”
Your guess is as good as mine when a supply disruption may occur. But to be sure, you’ll want to be on the right side of this trade, starting today.
Two Safe Ways To Play Platinum’s Rise
The first way to play this situation is to grab a stake in the platinum ETF, ETFS Physical Platinum Shares (PPLT: NYSE.) The investment goal of this ETF is simple, and spelled out on the company’s website: “PPLT is intended to provide investors with a return equivalent to movements in the platinum spot price less fees.”
Much like the SPDR Gold ETF (GLD) this platinum ETF trades at approximately 1/10th the price of platinum. So with today’s platinum prices around $1,500, shares of this platinum ETF are trading just shy of $150.
Looking ahead, this is a simple and effective way to play the price movement of platinum. For example, since the Lonmin mine tragedy the price of platinum is up nearly 10% — and shares of this easily-traded ETF have followed that exact move.
With prices near multi-year lows (even after the mine strike) now’s a time to think about buying into platinum’s upside. After all, we’re only one big labor dispute away from a super-spike in the price of platinum.
The second way to get safe exposure to platinum production – without having to worry about South African mine disruptions is right here in North America.
The biggest North American platinum group metals (PGM) producer is Stillwater Mining Company (SWC: NYSE.)
Stillwater produces platinum, palladium and related metals. Of its 500,000-ounce yearly production, 90,000 is refined platinum.
That’s a far cry from South Africa’s major producer Impala, which producer over 1.8 million ounces last year alone. But, if you’re looking for a safe way to play the metal, in case of a South African supply disruption, this is the one to look at.
With investors scurrying to find production outside of South Africa miners like Stillwater are starting to see some added premium hit their share price. For instance Stillwater is up 20% in the last month.
Whether you play a miner like Stillwater or the price of platinum through the PPLT, you’ll have plenty of upside potential when platinum makes its next breakout move.
Keep your boots muddy,
Matt Insley
Source: Daily Resource Hunter
