SWITCH from ZIM to AQP, Poss Spec Buy PPD

• We attended the Paydirt Platinum Conference on 14-15 July 2003 in Perth, and about a week before that, a South African lunch with the SA Minister of Mines and SA High Commissioner which elaborated on some of the BEE aspects and changes. We have subdivided this one-off comment into 3 areas, namely, the outlook for commodities such as platinum, palladium and nickel; our observations on presentations by AQP, AXM, CSM, LIM, IGO, PLA, PPD and ZIM; and the SA lunch.
• The outlook for platinum and palladium is mainly based on an excellent presentation by Johnson Matthey (JM) who advertised their new website (www.platinum.matthey.com) which contains a lot more newsy items etc than it previously used to. The outlook for nickel is based on a mix of the presentations but mainly on CSM’s view of chrome demand in China based on their stainless steel outlook.
• The presentation by JM focused on what had caused the price fluctuations so far this year (to June 2003), namely Chinese jewellery demand stopping at US$700/oz, funds liquidating their long positions, SARS occurring at the second annual seasonal demand time (there are 3 per year : Chinese New Year, May and October). Then Chinese jewellery demand came back, plus the weakness in the US$ and Bush’s comments about fuel cells prompted the funds to return and drive the price back up to about US$650/oz. Platinum to December 2003 and beyond : (Appears to be in short supply, could rise further).
• Platinum supply is short. The 50% increases in the total production from South Africa and Zimbabwe by 2007 are needed to achieve a balance between supply and demand, any hiccup and there is a shortage. If demand wants to rise further faster, then it can’t, there is simply not enough.
• The platinum market has been helped (to remain in balance) by Russian and Swiss sales. However, the Russian selling is believed to have effectively gone. Russian sales were down from 1.3moz in 2001 to 980,000oz in 2002, and the 2002 sales were inflated by repaying a platinum based bank loan. So current sales are believed to be just Norilsk and Far Eastern Russian production. The platinum deficit increased from 370,000oz in 2001 to 570,000oz in 2002. It has been kept in check by the Swiss reducing their stock levels by 1.5moz over the past few years, to result in a major shortage of above-ground stocks of platinum. JM was leaving their forecast of US$590/oz to US$690/oz to the end of 2003, the inference being.