A World Stage

PRODUCTION UPTICK. Anglo Platinum, based in Johannesburg, South Africa, announced a 6-percent increase in platinum production in the first six months of the 2006 calendar year to 1.34 million ounces, as compared to the 1.27 million ounces produced in the same period of 2005. The company’s management maintains its forecast of 2.7 million to 2.8 million ounces of platinum for the full 2006 fiscal year (compared to 2.45 million ounces in 2005) and projects a 5 percent annual growth in PGMs (platinum group metals) going forward, with a near-term target of 2.8 million to 2.9 million ounces in 2007.

Anglo Platinum’s refined output of metal for the first half of the year benefited from improved production levels and the processing of the build-up in its stores of untreated concentrates following the closure of its Polokwane smelter in the Limpopo province of South Africa during the fourth quarter of 2005, which resulted from a steam explosion at the plant.

Anglo Platinum says that production increased at its Rustenburg section, which now includes a ramp-up operation, and at its Amandelbult section, with gains of 4 percent and 7 percent, respectively, despite a decline in ore grades from a higher percentage of UG2 platinum mining. These two mines account for 56 percent of platinum output and 71 percent of gross profits on metal sales for Amplats. Significantly higher contributions of platinum were also noted from Anglo Platinum’s Bafokeng-Rasimone mine, up by 24 percent, mainly in light of the increased processing of surface stockpiles, and from Kroondal (up 164 percent), which is expanding to full production.

By 2009, Amplats could be producing in excess of 3 million ounces of platinum and some 1.6 million ounces of palladium, a consequence of continued mine development of its steady state operations and of the added metal flowing from the Potgietersrust North Project and the Marikana and Mototolo joint ventures.

In the nine months ending June 2006, Lonmin reported an 8.8 percent increase in platinum concentrates to 751,800 ounces, up from 690,900 ounces in the comparable period of last year. Palladium production showed greater growth for the period, rising 16.5 percent to 348,00 ounces, resulting from an increasing contribution from the Limpopo mine.

Sales for the June period were hampered by the temporary shutdown of London-based Lonmin’s largest furnace at the Marikana, South Africa, mine because of a water leak. For added future flexibility, management has decided to re-commission an older furnace at its Marikana mine that should be operational by January 2007. For its fiscal year ending September, Lonmin should attain its production target of 1 million ounces of platinum in concentrate, with planned sales of 950,000 to 960,000 ounces.

Total PGM production in concentrate (including a small amount of gold) at Northam Platinum, based in Johannesburg, South Africa, surpassed earlier guidance for a record 362,800 ounces, with nearly 225,000 ounces of platinum, for a 14 percent gain on 2005 output. Higher mill throughput and consistent grade levels resulted in the improved performance for the year. It is important to note, however, that last year’s production at Northam had been negatively affected by an underground fire in the first half of fiscal 2005. Management has cautioned that production levels for fiscal 2007 may be slightly lower because miners could continue to encounter difficult ground conditions.

AUTO SALES STABLE. Demand for platinum in the automotive sector has risen dramatically in recent years, reporting an estimated 14 percent compound growth rate from 2000 through 2005, far outstripping an approximate 4 percent expansion in new mine supplies. Physical offtake to satisfy autocat manufacturing requirements now accounts for more than 50 percent of new platinum and palladium supplies annually, and some 90 percent of available rhodium, as the PGM market has become increasingly defined by the demand profile of automotive catalyst consumption.

U.S. auto sales plummeted by 17 percent in July as higher interest rates and rising gas prices affected the market. Toyota surpassed DaimlerChrysler and Ford for the first time as U.S. manufacturers posted substantial declines in sales. Despite the continuation of rebate and incentive programs, sales at GM (down 22.5 percent), Ford (down 34.3 percent) and DaimlerChrysler (down 34.1 percent) were down significantly. North American vehicle production rose a modest 1.9 percent in the first half of 2006, while sales for the first seven months fell by 5 percent, with SUV sales being most affected. As a consequence, each of Detroit’s Big Three announced production cuts for the third quarter.

Despite the recent decline in U.S. auto sales, worldwide vehicle sales have remained firm in recent years, maintaining a 1- to 2-percent growth rate per annum. During the past five years, U.S. sales have averaged more than 17 million vehicles annually, with a corresponding 14.5 million vehicles reported sold by European car makers during this period. U.S. sales totaled 16.9 million units in calendar-year 2005, up marginally on 2004 sales, while European car registrations grew at a modest 0.1 percent last year to 14.51 million. Japanese auto sales for the 10-month period through October 2005 were slightly better, up by 1.3 percent from the comparable period of 2004. It is anticipated that the steady, even double-digit growth in auto sales reported by many developing nations, such as China and India, and in Latin America, will continue to more than offset the nominal growth projected for the U.S. and European markets in the near- to intermediate-term.

Commercial demand for platinum and rhodium required for expanding glass manufacturing, particularly in the Far East, also continues to grow. A recent statement from Corning, which holds some 55 percent of the world LCD market, projected a 50 percent to 60 percent increase in LCD demand in 2005, with sales continuing to rise at a 40 percent pace through 2007. LCD flat-screens are now estimated to account for about 10 percent of televisions, but are expected to expand to 20 percent to 25 percent of this market by 2007. Rhodium and platinum are required in the production of glass for LCD and other TV and computer screen products. Moreover, the increase in the manufacture of fiberglass, particularly in China and in other Asian countries, has also supported a firming in platinum and rhodium off take.

World supplies of platinum are projected to increase by 6 percent in 2006 to approximately 6.7 million ounces, including from an additional 75,000-ounce rise in platinum obtained as recycled metal.