Peak Oil, Alternative Energy and Platinum Group Metals [View instapost]
TheTurk:
Conviction comes from doing your own due diligence study and collect the information by yourself. No one can convince yourself better than your own self.
We are only at the beginning of the palladium super bull market. I don't know how high it can go. But at least it should last till the supply/demand fundamental finally begin to tilt towards equilibrium. We are still a far way awy from that. I say maybe ten years out.
As for nickel. I think nickel market is bullish as the Chinese begin to decorate their homes. But I have not done as much research on the global nickel market trend. Unlike palladium, where the world has so few resources, nickel mines can be found in many places and if there is demand, the supply can catch up fast, given enough price insentives. So I like the palladium bull market much better than nickel, due to all the price inelasticity.
Peak Oil, Alternative Energy and Platinum Group Metals [View instapost]
The market was wrong. GM was wrong. Both GM and FORD was stupid. They sold palladium at $165 barely two years ago, now they have to pay $700 an ounce to buy the same palladium they sold to produce cars. Had they had an ounce of intelligence in their collective brains they would have bought palladium hands over fist when the price was at $165. Actually had more market players have an ounce of intelligence, they would all have bought physical palladium hands over fists, at $165 per ounce. Actually palladium price should NEVER have been dropped to that low level. Such a low price is just unsustainable. It was foolish to sell at that price, and very smart to buy when you saw that price.
I was pounding on the table to urge people to buy at the low, few people in the world would listen. Now I am vindicated every one else suddenly discovered palladium today. Where have they been two years ago?
So yes I was smarter than the market at the time, and still am today. As Mr. Wallen Buffett famously said, Mr. Market is stupid.
Gold Supply Potentially Gigantic: In and Above Ground Gold Reserves [View article]
$1400 gold, or even $2000 gold may not be profitable for mines of less than desirable ore grade, as gold is NOT the only thing whose price goes up. Price of energy, and hence everything, goes up about the same as gold price goes up, that means cost of gold production also goes up. It is the fiat currency itself that goes down.
I stand by my notion that as there is a huge stockpile of gold, supply is never a problem. So gold price is always arbitrated by the cost of the lowest cost gold production mines. Long term wise, historically that has been true. It was true when gold was $20. It is true today when gold is above $1400. It will continue to be true.
Think about another way. The most efficient gold producers will crash the less efficient gold producers in competition. So the value of the gold commodity is distated by the cost of the most efficient producer.
Think about it yet another way, if gold price is so high that the much less efficient gold producers with inferior ore grades are also profitable, then it makes economic sense for gold investors to sell gold and buy the most optimum gold producers instead. This will reduce gold demand and lower gold price to that commensurate with production cost of the efficient gold mines.
Such arbitration does NOT work for a commodity which does not have an above ground stockpile, and which requires production from not just the most efficient producers, but ALSO the less efficient producers, to meet the total demand of the world. In such case, there is no competition, all producers work at their full capacity to provide for the world, and the commodity price will arbitrate with the cost of the MOST costly producers, because it need to provide that price insentives to those marginal producers to keep them in business and keep the supply balanced with demand.
Precious metal palladium, happen to be one such metal. This is my most favorite investment, and my most favorite mining stock is SWC and PAL, the only primary palladium producers in the world.
This web site provides precious metal price quotes, for any one who does not know: www.kitco.com/market/
Just One Stock: Among White-Hot Commodities, Demand for the White Metals [View article]
There are so many fantastic bullish factors driving a palladium super bullish global market for the next 10 years. I could not find an investment more attractive than palladium, and the world's ONLY two primary palladium producers:
0.The annual mining supply of palladium is very thin, only roughly 6 million ounces. As investors jump on board any excessive ounces are quickly hoarded away by investors, sending industry users on a panic pursuit of any physical ounces of palladium they can lay their hands on, sending the price level to the moon.
1.Russian Government Palladium Stockpile sale, which has provided 1M to 2M extra ounces per year for the last 20 years, is NO MORE. All indications, and all metals analysts agree that the Russian Strategic Reserve palladium stockpile has been depleted. Even if they have a little bit left, which they probably do, it has dropped to a level that the Russians are not willing to sell any more. It's a Strategic Reserve, meant for war time emergency usage. This instantly brings the global palladium supply/demand into a very significant shortage.
2.Russia's Norilsk Nickel mine is beginning to see poorer ore grade. To maintain production of nickel, their main line product, they have already started to produce ores of higher nickel grade but contain much less palladium, platinum and copper. The ore grade effect is very significant. A few years ago Noril's annual palladium production runs as high as 3.5 million ounces a year. Now it's less than 2.6 million ounces a year. It can move down further in the next few years.
3.The world's worst pollusion problem in Norilsk City forced Norilsk Nickel to spent $6.5B to purchase LionOre a few years ago so they can acquire LionOre's Activox Process technology, a process that extracts the nickel metal using chemicals, instead of burning the ores at extremely high temperature to melt the metal out. This chemical process greatly cuts the production cost, cuts off almost all sulphur dioxide pollution, and consumes much less energy. Nickel and copper can be extracted at much higher efficiency, almost 100%.
But the one catch is platinum and palladium, being chemically inert metals, will NOT be extracted by the chemical process, and will be left in the mining waste, after valuable nickel and copper is already produced.
That means Norilsk, supplier of 45%+ of the world's palladium, will become just a nickel and copper producer and produce almost NO palladium and platinum, and it can actually make MORE profit because the new chemical process costs way much less.
That will send a huge shock to the global palladium market sending the metal price to the moon, once words is heard that Norilsk Nickel is going to do it.
Norilsk Nickel MIGHT consider re-processing the mining waste, spending huge amount of energy to bake the platinum and palladium out of the waste, emitting all the sulphur dioxide doing so and causing even worse pollution in Norilsk. It MIGHT be worth while for they to accept such huge cost, if and only if palladium price reaches such a ridiculously high level that they can not resist the profit doing so, at the cost of energy and environment. Not going to happen until palladium reaches $10,000 per ounce.
4.South Africa has an ongoing electricity crisis which limits its production of platinum and palladium. The problem is not getting better, but gets much worse.
5.Booming India coal demand sucks away good quality coal from South Africa, leave only insufficient quantity and poor quality coal for ESKOM to provide South Africa's electricity needs. The more coal India bought away, the worse is South Africa's electricity crisis. EKOM must raise electricity price dramatically and must begin to pay good price to compete with India for the coal. Doing so drives lots of low efficiency South Africa PGM mining companies out of business, reducing the supply.
6.More importantly, scientists say that South Africa has already passed Peak Coal. They are not going to produce more coal, but LESS. Again this constrains the platinum and palladium production in that country.
7.I have hardly touched on the demand side yet. There are booming palladium demands: Booming global auto sales, more stringent environmental requirements requiring more PGM metals per catalytic converter, increased palladium demand in the electronics industry, development of fuel cell, and ultimately, a possible commercialization of Cold Fusion in the long term.
Sum everything up, I can not find a better investment than the physical palladium, the PALL fund, and mining stocks SWC and PAL. I continue to hold more than 95% of my 401K account in SWC and PAL. Call me crazy but when you see a fantastic investment there is no need to diversify to something else.
Gold Supply Potentially Gigantic: In and Above Ground Gold Reserves [View article]
The author could not be more wrong!
There is a huge stockpile of gold in the world, that means ONLY the most economically produceable gold ore grade will be produced.
The value of gold is alway associated with the cost of production. Gold was profitably produced at $20 an ounce when gasoline was sold for 5 cents per gallon. Today gold at $1400 might not even be profitable for certain mining companies.
The confining factor of ultimate total gold production, is NOT what's the available gold underground reserve is, but rather, how much fossil fuel is left on the earth. Production of precious metals is extremely energy intensive. To produce one ounce of platinum or palladium it costs roughly 1.0x10^10 joules of energy, or roughly 2780 kilowatthours of energy. That is only direct energy cost, indirect cost is 4 or 5 times as high.
Just One Stock: Among White-Hot Commodities, Demand for the White Metals [View article]
Dan:
There is any where between a million to a trillion tons of paladium stored either on the moon or on the planet Mars. I do not know the precise size and location of that palladium stockpile, it could actually be at any spot in our galaxy. But that does NOT make the global palladium supply "murky".
Russia might still have some ounces left in their stockpile, or might have exhausted. As long as no ounce of that stockpile enters the global supply, they simply sit there collecting dust and has no effect on the supply/demand. So there is nothing "murky". The fact is there has been no more Russian stockpile palladium shipment out of Russia and into Switzerland, since the last batch was shipped in the fall of 2008. No more.
Now back to the stockpile size. As I said, even if the Russians keep the exact figure of their palladium stockpile a state secret. Any reasonable researcher can pretty precisely estimate that stockpile size. It does not take a rocket scientist to figure it out. Because Russia's nickel production is public data, and palladium is produced as a by-product. The two can be correlated very reliably, given the ore grades.
I freely admit I do not know the precise figure. But I have a high confidence to point out that either the Russian Strategic Reserver palladium stockpile size is ZERO, which is unlikely, or it is reduced to a size that Russians are not willing to sell any more ounces.
After all, it is called National Strategic Reserver Stockpile. Stockpile which is means to be used during emergency times during wars. Would the USA be willing to sell its Strategic Petroleum reserve down to zero days of supply? Of course not. Russians kept that stockpile not for the charity of the world, but for its own strategic interest.
And who is to say China does not have strong interest to accumulate and built up a palladium reserver of its own, as China produces not an ounce of this metal, but needs it in critical sections of its industry?
Again if you are willing to do due diligence then read Alan Williamson's paper how he estimated the stockpile size in 2003:
To any one not willing to spend effort to do due diligence, even readily available public information is "murky". I encourage you to spend time study how Norilsk Nickel produces palladium as a nickel mining by-product:
Now back to potential palladium stockpile that may or may not exist, just think about gold. There is a giant stockpile of gold above ground big enough for a thousand years of usage even if we stop mining gold today. Does that fact constitute a threat to gold price? It never did and will never do.
Platinum: Profiting From the Metal That’s More Precious Than Gold [View article]
Alan Williamson's article in 2003 talking about the Russian palladium stockpile, is a must read classical paper for any one wanting to understand the global palladium market:
Just One Stock: Among White-Hot Commodities, Demand for the White Metals [View article]
I agree with the author's basic view that there is a big bull market in the palladium metal and in mining stocks SWC and PAL.
But I am unsatisfied with the author's view that "The Russian supply issue is murky." It might seem murky to any one who has not spend time to study the Russian palladium supply. But to some one like me who had done the due diligence study, there is nothing murky at all. It is a crystal clear picture that Russian palladium supply is constraint and there is a global palladium shortage:
1. Russians did not get their palladium stockpile from space aliens. They get it from the excessives in the past as a by-product of nickel mining at the Norilsk Nickel mine, the only nickel mine in the world with significant palladium by-product. Even if Russians never publicly disclose the size of their palladium stockpile, very good estimate can be made based on their history of nickel production and palladium export. By all counts, that stockpile has now been exhausted. This is a very good historical document any one interested in palladium should read, even though the author made completely wrong prediction on the price movement:
2. During the Soviet era, due to low palladium price, and inferiority in the mining process, the extraction ratio of palladium during nickel mining is much less efficient at the time, so the actual palladium stockpile is probably smaller than Alan Williamson's estimate.
3. During recent years, the Norilsk Nickel production figure shows a clear trend that as ore grade becomes poorer, there is less palladium to be extracted per ton of nickel production. Norilsk Nickel's goal is to keep nickel production stable because they do not want to over-produce nickel and crash the price of nickel, their main product. As a result, you can expect ever declining palladium production over the next few years, despite of higher palladium price.
4. The biggest shocking factor in the palladium supply, is that as of now Norilsk is the world's most polluted place. They want to solve the air pollution problem. They already purchased LionOres to acquire the chemically based Activox Process, which extracts nickel through chemical method, avoiding the emission of sulphur dioxide. It is also much cheaper in cost. But doing so will mean almost NONE of the by-product palladium will be extracted.
Just think about the shock to the global palladium market if Russia is not producing any more palladium, unless the price is high enough for the Russian to consider producing the chemical residue from nickel mining. Not going to happen until palladium reaches a very high level. Because once the nickel is removed, the mining residue contains very little economic value to be worthy any further processing, at current metal prices.
Peak Oil, Alternative Energy and Platinum Group Metals [View instapost]
OKMONEY:
I never hide in a shadow. I have been calling for palladium investment for almost three years. All the bullish facts I pointed out in the palladium market are FACTS. It's just that it took a little while, nearly three years, before people FINALLY begin to recognize those bullish facts. I have been vindicated. This is an ongoing palladium supply panic now, which is what is driving the price UP.
In hind sight, it was NOT that I got anything wrong. It was that the market got something totally wrong. The investors, the auto makers and the producer who sold palladium at $165 per ounce merely 2 years ago were CRAZY and were deadly wrong at the time. They should have been aggressively BUYING at $165, not selling. Now merely 2 years later they have to pay $700 an ounce to buy back what they sold at $165 an ounce. So you tell me whi had bee right and who had been wrong.
Had the market been rational. Had the market not been so stupid, palladium price should not have been allowed to drop to as low as $165 in the first place. It should have stayed aboue $400 and reach $1000 by now.
Now after I have been vindicated and everything I said has been confirmed to be true, including the depletion ot Russian palladium stockpile, you jump in to claim that palladium is a short play and you expect the price to drop soon.
Well then, be my guest. Go ahead and short palladium and short SWC. See how much money you can bear to lose.
To me, the palladium super bull is only just getting started. I think this bull market should last for at least ten years, before any potential supply can catch up to meet the demand.
India's strong demand sucking coal away from South Africa made the PGM supply problem much worse.
Russian Norilsk Nickel mine moving away from pyro-metallurgy and moving toward the chemical based Activox Process, will dramatically cut palladium supply. This two combined will send palladium to crazy price level. Any one resisting that trend will be crushed mercilessly. Just mark my words.
Platinum: Profiting From the Metal That’s More Precious Than Gold [View article]
Kolyma:
Thanks for mentioning that Soros owns 10% of PLG. This is one stock I have been paying attention. But my most favorite palladium mining stocks are SWC and PAL, because they are mature and producing producers. PLG is an explorationary stage mining company.
I have been advocating for palladium investment on Seeking Alpha for almost three years now. It is beginning to bear fruit as people begin to pay attention to what's happening in the global palladium market. I am happ to see that the author, Mr. Martin Hutchingson, is beginning to pay attention, too.
Palladium is actually rarer than platinum. Historical price of these two metals are actually comparable. Only in the two most recent decade that due to annual Russian palladium stockpile sale, the palladium price is suppressed to the level of only a fraction of platinum price. The Russian stockpile sale is now ended as the stockpile is depleted while the demand is raising. We should see palladium preach price parity with platinum and then maybe exceed platinum price.
In any case, just think about how thin a market palladium and platinum is, in comparison with gold and silver, you have to agreet that investors has much more to gain investing in palladium, than in gold and silver, even though 99% of investors still focus their precious metal attention to gold, without realizing what's going on in palladium.
Supply and Demand Issues Likely to Boost Palladium ETF [View article]
Engine of hybrid cars frequently shut down and then re-start, thus work at lower normal working temperature, therefore du to the lower temperature they need extra PGM metal loading to be just as efficient.
The recycling factor provides a reliable floor price support, as when the price is too low, there will be no more incentive to recycle and the recycle supply will be cut off. The opposite is not true. The wear and tear of catalytic converter will not reduce just because of higher metal price.
More over, alleged single nano-technology of car makers like Mazda and Nissan could only render recycling meaningless and economically unworthy, and frequent catalytic replacement becomes necessary, so they end up boosting total demand, not reducing. That is the very reason MAZDA has been making a lot of noise of their new technology cutting PGM consumption, for years now, but they never actually put it out in the general market.
How to Profit From the Metal That's More Precious Than Gold [View article]
Here is a recently news story that if you analyze it carefully, is SUPER BULLISH for palladium price. I have been advocating palladium investment for a long while. But even I am totally SHOCKED when I first hear this news and I can not believe how great a story it is, to the palladium investors.
Simply put, if people begin to realize what this means, it will send the price of palladium to the MOON, literally.
It is a seemingly innocent news item how Norilsk Nickel is spending money to boost nickel production from the arctic area:
The arctic area is where the by-product palladium is produced. Note the discussion how the nickel ore grade is deteriorating. How they are struggling to boost production of nickel, amid lowering ore grade.
But particularly note the last section, New Technology:
======================... New Technology
“We’re considering switching from pyro-metallurgy to hydro-metallurgy based on Activox technology,” Muravyov said. Within a year, the company will test whether the technology, which Norilsk bought in 2007 as part of its $6.5 billion LionOre acquisition, will be suitable for Arctic ores. Activox uses chemicals to dissolve nickel from concentrate and then produce the pure metal.
“The cost of applying Activox in Norilsk still needs to be evaluated,” Muravyov said. Installing the technology at all of Norilsk Nickel’s facilities, at a cost of as much as $10 billion, would allow the company to “remove all ecological problems and cut electricity and gas consumption,” he said.
======================...
Now I finally understand why they acquired LionOres at such a high cost. They want the technology. This is a technology to extract base metals, nickel and copper, from the ores, using chemical method (called hydro-metallurgy), INSTEAD of simply melt the thing at extremely high temperature (called pyro-metallurgy).
Using the new technology, the cost is MUCH LOWER. The sulphur dioxide pollution, which turns Norilsk into the world's TOP TEN most polluted city, is not a problem any more. And nickel can be extracted almost 100%, much higher efficiency than the traditional pyro-metallurgy method. This is extremely attractive to Norilsk, because they are a mainly nickel and copper producer, with palladium and platinum constitute only an insignificant portion of the revenue.
The only catch is, platinum and palladium, being chemically inactive metals, will NOT be extracted by this Activox Process. Not at all. These two precious metals will remain in the wet residue of the ore, after nickel and copper is extracted. It means these metals will be dumped in a waste pile, and will NOT be produced.
That means 40% of the world's mining supply of palladium will be instantly GONE. This has got to send a chill over the market, sending the palladium price skyrocketing!!!!
Of course, if palladium price is high enough, Norilsk MAY consider secondary pyro-metallurgy processing of the residue ore to extract platinum and palladium. But the cost will be very expensive, because there is no longer any nickel and copper in the residue ore. There is only platinum and palladium, at extremely low concentration. And once you start to cook the residue ores to extract the precious metals, the SO2 pollution problem comes back again, dedeating using Activox Process to reduce pollution in the first place.
My initial estimate is palladium price will need to reach $5000 and more, for Norilsk to justify secondary processing of such residue ores to extract the palladium. That's where palladium price wil go to once this Activox Process is widely adopted by Norilsk.
To leverage on this opportunity, buy physcial palladium, or the PALL fund, or the two mining stocks SWC and PAL.
Peak Oil, Alternative Energy and Platinum Group Metals [View instapost]
Conviction comes from doing your own due diligence study and collect the information by yourself. No one can convince yourself better than your own self.
We are only at the beginning of the palladium super bull market. I don't know how high it can go. But at least it should last till the supply/demand fundamental finally begin to tilt towards equilibrium. We are still a far way awy from that. I say maybe ten years out.
As for nickel. I think nickel market is bullish as the Chinese begin to decorate their homes. But I have not done as much research on the global nickel market trend. Unlike palladium, where the world has so few resources, nickel mines can be found in many places and if there is demand, the supply can catch up fast, given enough price insentives. So I like the palladium bull market much better than nickel, due to all the price inelasticity.
Peak Oil, Alternative Energy and Platinum Group Metals [View instapost]
I was pounding on the table to urge people to buy at the low, few people in the world would listen. Now I am vindicated every one else suddenly discovered palladium today. Where have they been two years ago?
So yes I was smarter than the market at the time, and still am today. As Mr. Wallen Buffett famously said, Mr. Market is stupid.
Warnings to Precious Metal ETF Investors - Buyer Beware! [View instapost]
seekingalpha.com/insta...
In short, do you trust their so called Inspectorate International audit report, after you read the article?
Gold Supply Potentially Gigantic: In and Above Ground Gold Reserves [View article]
I stand by my notion that as there is a huge stockpile of gold, supply is never a problem. So gold price is always arbitrated by the cost of the lowest cost gold production mines. Long term wise, historically that has been true. It was true when gold was $20. It is true today when gold is above $1400. It will continue to be true.
Think about another way. The most efficient gold producers will crash the less efficient gold producers in competition. So the value of the gold commodity is distated by the cost of the most efficient producer.
Think about it yet another way, if gold price is so high that the much less efficient gold producers with inferior ore grades are also profitable, then it makes economic sense for gold investors to sell gold and buy the most optimum gold producers instead. This will reduce gold demand and lower gold price to that commensurate with production cost of the efficient gold mines.
Such arbitration does NOT work for a commodity which does not have an above ground stockpile, and which requires production from not just the most efficient producers, but ALSO the less efficient producers, to meet the total demand of the world. In such case, there is no competition, all producers work at their full capacity to provide for the world, and the commodity price will arbitrate with the cost of the MOST costly producers, because it need to provide that price insentives to those marginal producers to keep them in business and keep the supply balanced with demand.
Precious metal palladium, happen to be one such metal. This is my most favorite investment, and my most favorite mining stock is SWC and PAL, the only primary palladium producers in the world.
This web site provides precious metal price quotes, for any one who does not know:
www.kitco.com/market/
Just One Stock: Among White-Hot Commodities, Demand for the White Metals [View article]
0.The annual mining supply of palladium is very thin, only roughly 6 million ounces. As investors jump on board any excessive ounces are quickly hoarded away by investors, sending industry users on a panic pursuit of any physical ounces of palladium they can lay their hands on, sending the price level to the moon.
1.Russian Government Palladium Stockpile sale, which has provided 1M to 2M extra ounces per year for the last 20 years, is NO MORE. All indications, and all metals analysts agree that the Russian Strategic Reserve palladium stockpile has been depleted. Even if they have a little bit left, which they probably do, it has dropped to a level that the Russians are not willing to sell any more. It's a Strategic Reserve, meant for war time emergency usage. This instantly brings the global palladium supply/demand into a very significant shortage.
2.Russia's Norilsk Nickel mine is beginning to see poorer ore grade. To maintain production of nickel, their main line product, they have already started to produce ores of higher nickel grade but contain much less palladium, platinum and copper. The ore grade effect is very significant. A few years ago Noril's annual palladium production runs as high as 3.5 million ounces a year. Now it's less than 2.6 million ounces a year. It can move down further in the next few years.
3.The world's worst pollusion problem in Norilsk City forced Norilsk Nickel to spent $6.5B to purchase LionOre a few years ago so they can acquire LionOre's Activox Process technology, a process that extracts the nickel metal using chemicals, instead of burning the ores at extremely high temperature to melt the metal out. This chemical process greatly cuts the production cost, cuts off almost all sulphur dioxide pollution, and consumes much less energy. Nickel and copper can be extracted at much higher efficiency, almost 100%.
But the one catch is platinum and palladium, being chemically inert metals, will NOT be extracted by the chemical process, and will be left in the mining waste, after valuable nickel and copper is already produced.
That means Norilsk, supplier of 45%+ of the world's palladium, will become just a nickel and copper producer and produce almost NO palladium and platinum, and it can actually make MORE profit because the new chemical process costs way much less.
That will send a huge shock to the global palladium market sending the metal price to the moon, once words is heard that Norilsk Nickel is going to do it.
Norilsk Nickel MIGHT consider re-processing the mining waste, spending huge amount of energy to bake the platinum and palladium out of the waste, emitting all the sulphur dioxide doing so and causing even worse pollution in Norilsk. It MIGHT be worth while for they to accept such huge cost, if and only if palladium price reaches such a ridiculously high level that they can not resist the profit doing so, at the cost of energy and environment. Not going to happen until palladium reaches $10,000 per ounce.
4.South Africa has an ongoing electricity crisis which limits its production of platinum and palladium. The problem is not getting better, but gets much worse.
5.Booming India coal demand sucks away good quality coal from South Africa, leave only insufficient quantity and poor quality coal for ESKOM to provide South Africa's electricity needs. The more coal India bought away, the worse is South Africa's electricity crisis. EKOM must raise electricity price dramatically and must begin to pay good price to compete with India for the coal. Doing so drives lots of low efficiency South Africa PGM mining companies out of business, reducing the supply.
6.More importantly, scientists say that South Africa has already passed Peak Coal. They are not going to produce more coal, but LESS. Again this constrains the platinum and palladium production in that country.
7.I have hardly touched on the demand side yet. There are booming palladium demands: Booming global auto sales, more stringent environmental requirements requiring more PGM metals per catalytic converter, increased palladium demand in the electronics industry, development of fuel cell, and ultimately, a possible commercialization of Cold Fusion in the long term.
Sum everything up, I can not find a better investment than the physical palladium, the PALL fund, and mining stocks SWC and PAL. I continue to hold more than 95% of my 401K account in SWC and PAL. Call me crazy but when you see a fantastic investment there is no need to diversify to something else.
Gold Supply Potentially Gigantic: In and Above Ground Gold Reserves [View article]
There is a huge stockpile of gold in the world, that means ONLY the most economically produceable gold ore grade will be produced.
The value of gold is alway associated with the cost of production. Gold was profitably produced at $20 an ounce when gasoline was sold for 5 cents per gallon. Today gold at $1400 might not even be profitable for certain mining companies.
The confining factor of ultimate total gold production, is NOT what's the available gold underground reserve is, but rather, how much fossil fuel is left on the earth. Production of precious metals is extremely energy intensive. To produce one ounce of platinum or palladium it costs roughly 1.0x10^10 joules of energy, or roughly 2780 kilowatthours of energy. That is only direct energy cost, indirect cost is 4 or 5 times as high.
Just One Stock: Among White-Hot Commodities, Demand for the White Metals [View article]
There is any where between a million to a trillion tons of paladium stored either on the moon or on the planet Mars. I do not know the precise size and location of that palladium stockpile, it could actually be at any spot in our galaxy. But that does NOT make the global palladium supply "murky".
Russia might still have some ounces left in their stockpile, or might have exhausted. As long as no ounce of that stockpile enters the global supply, they simply sit there collecting dust and has no effect on the supply/demand. So there is nothing "murky". The fact is there has been no more Russian stockpile palladium shipment out of Russia and into Switzerland, since the last batch was shipped in the fall of 2008. No more.
Now back to the stockpile size. As I said, even if the Russians keep the exact figure of their palladium stockpile a state secret. Any reasonable researcher can pretty precisely estimate that stockpile size. It does not take a rocket scientist to figure it out. Because Russia's nickel production is public data, and palladium is produced as a by-product. The two can be correlated very reliably, given the ore grades.
I freely admit I do not know the precise figure. But I have a high confidence to point out that either the Russian Strategic Reserver palladium stockpile size is ZERO, which is unlikely, or it is reduced to a size that Russians are not willing to sell any more ounces.
After all, it is called National Strategic Reserver Stockpile. Stockpile which is means to be used during emergency times during wars. Would the USA be willing to sell its Strategic Petroleum reserve down to zero days of supply? Of course not. Russians kept that stockpile not for the charity of the world, but for its own strategic interest.
And who is to say China does not have strong interest to accumulate and built up a palladium reserver of its own, as China produces not an ounce of this metal, but needs it in critical sections of its industry?
Again if you are willing to do due diligence then read Alan Williamson's paper how he estimated the stockpile size in 2003:
www.lbma.org.uk/assets...
To any one not willing to spend effort to do due diligence, even readily available public information is "murky". I encourage you to spend time study how Norilsk Nickel produces palladium as a nickel mining by-product:
www.nornik.ru/en
Now back to potential palladium stockpile that may or may not exist, just think about gold. There is a giant stockpile of gold above ground big enough for a thousand years of usage even if we stop mining gold today. Does that fact constitute a threat to gold price? It never did and will never do.
Platinum: Profiting From the Metal That’s More Precious Than Gold [View article]
www.lbma.org.uk/assets...
This Russian stockpile is by now all but depleted.
Just One Stock: Among White-Hot Commodities, Demand for the White Metals [View article]
But I am unsatisfied with the author's view that "The Russian supply issue is murky." It might seem murky to any one who has not spend time to study the Russian palladium supply. But to some one like me who had done the due diligence study, there is nothing murky at all. It is a crystal clear picture that Russian palladium supply is constraint and there is a global palladium shortage:
www.miningweekly.com/a...
1. Russians did not get their palladium stockpile from space aliens. They get it from the excessives in the past as a by-product of nickel mining at the Norilsk Nickel mine, the only nickel mine in the world with significant palladium by-product. Even if Russians never publicly disclose the size of their palladium stockpile, very good estimate can be made based on their history of nickel production and palladium export. By all counts, that stockpile has now been exhausted. This is a very good historical document any one interested in palladium should read, even though the author made completely wrong prediction on the price movement:
www.lbma.org.uk/assets...
2. During the Soviet era, due to low palladium price, and inferiority in the mining process, the extraction ratio of palladium during nickel mining is much less efficient at the time, so the actual palladium stockpile is probably smaller than Alan Williamson's estimate.
3. During recent years, the Norilsk Nickel production figure shows a clear trend that as ore grade becomes poorer, there is less palladium to be extracted per ton of nickel production. Norilsk Nickel's goal is to keep nickel production stable because they do not want to over-produce nickel and crash the price of nickel, their main product. As a result, you can expect ever declining palladium production over the next few years, despite of higher palladium price.
4. The biggest shocking factor in the palladium supply, is that as of now Norilsk is the world's most polluted place. They want to solve the air pollution problem. They already purchased LionOres to acquire the chemically based Activox Process, which extracts nickel through chemical method, avoiding the emission of sulphur dioxide. It is also much cheaper in cost. But doing so will mean almost NONE of the by-product palladium will be extracted.
Just think about the shock to the global palladium market if Russia is not producing any more palladium, unless the price is high enough for the Russian to consider producing the chemical residue from nickel mining. Not going to happen until palladium reaches a very high level. Because once the nickel is removed, the mining residue contains very little economic value to be worthy any further processing, at current metal prices.
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Never trust any paper ETFs. The discussion here should be a must read for every investor:
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I never hide in a shadow. I have been calling for palladium investment for almost three years. All the bullish facts I pointed out in the palladium market are FACTS. It's just that it took a little while, nearly three years, before people FINALLY begin to recognize those bullish facts. I have been vindicated. This is an ongoing palladium supply panic now, which is what is driving the price UP.
In hind sight, it was NOT that I got anything wrong. It was that the market got something totally wrong. The investors, the auto makers and the producer who sold palladium at $165 per ounce merely 2 years ago were CRAZY and were deadly wrong at the time. They should have been aggressively BUYING at $165, not selling. Now merely 2 years later they have to pay $700 an ounce to buy back what they sold at $165 an ounce. So you tell me whi had bee right and who had been wrong.
Had the market been rational. Had the market not been so stupid, palladium price should not have been allowed to drop to as low as $165 in the first place. It should have stayed aboue $400 and reach $1000 by now.
Now after I have been vindicated and everything I said has been confirmed to be true, including the depletion ot Russian palladium stockpile, you jump in to claim that palladium is a short play and you expect the price to drop soon.
Well then, be my guest. Go ahead and short palladium and short SWC. See how much money you can bear to lose.
To me, the palladium super bull is only just getting started. I think this bull market should last for at least ten years, before any potential supply can catch up to meet the demand.
India's strong demand sucking coal away from South Africa made the PGM supply problem much worse.
Russian Norilsk Nickel mine moving away from pyro-metallurgy and moving toward the chemical based Activox Process, will dramatically cut palladium supply. This two combined will send palladium to crazy price level. Any one resisting that trend will be crushed mercilessly. Just mark my words.
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Thanks for mentioning that Soros owns 10% of PLG. This is one stock I have been paying attention. But my most favorite palladium mining stocks are SWC and PAL, because they are mature and producing producers. PLG is an explorationary stage mining company.
I have been advocating for palladium investment on Seeking Alpha for almost three years now. It is beginning to bear fruit as people begin to pay attention to what's happening in the global palladium market. I am happ to see that the author, Mr. Martin Hutchingson, is beginning to pay attention, too.
Palladium is actually rarer than platinum. Historical price of these two metals are actually comparable. Only in the two most recent decade that due to annual Russian palladium stockpile sale, the palladium price is suppressed to the level of only a fraction of platinum price. The Russian stockpile sale is now ended as the stockpile is depleted while the demand is raising. We should see palladium preach price parity with platinum and then maybe exceed platinum price.
In any case, just think about how thin a market palladium and platinum is, in comparison with gold and silver, you have to agreet that investors has much more to gain investing in palladium, than in gold and silver, even though 99% of investors still focus their precious metal attention to gold, without realizing what's going on in palladium.
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The recycling factor provides a reliable floor price support, as when the price is too low, there will be no more incentive to recycle and the recycle supply will be cut off. The opposite is not true. The wear and tear of catalytic converter will not reduce just because of higher metal price.
More over, alleged single nano-technology of car makers like Mazda and Nissan could only render recycling meaningless and economically unworthy, and frequent catalytic replacement becomes necessary, so they end up boosting total demand, not reducing. That is the very reason MAZDA has been making a lot of noise of their new technology cutting PGM consumption, for years now, but they never actually put it out in the general market.
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Simply put, if people begin to realize what this means, it will send the price of palladium to the MOON, literally.
It is a seemingly innocent news item how Norilsk Nickel is spending money to boost nickel production from the arctic area:
www.bloomberg.com/news...
The arctic area is where the by-product palladium is produced. Note the discussion how the nickel ore grade is deteriorating. How they are struggling to boost production of nickel, amid lowering ore grade.
But particularly note the last section, New Technology:
======================...
New Technology
“We’re considering switching from pyro-metallurgy to hydro-metallurgy based on Activox technology,” Muravyov said. Within a year, the company will test whether the technology, which Norilsk bought in 2007 as part of its $6.5 billion LionOre acquisition, will be suitable for Arctic ores. Activox uses chemicals to dissolve nickel from concentrate and then produce the pure metal.
“The cost of applying Activox in Norilsk still needs to be evaluated,” Muravyov said. Installing the technology at all of Norilsk Nickel’s facilities, at a cost of as much as $10 billion, would allow the company to “remove all ecological problems and cut electricity and gas consumption,” he said.
======================...
Now I finally understand why they acquired LionOres at such a high cost. They want the technology. This is a technology to extract base metals, nickel and copper, from the ores, using chemical method (called hydro-metallurgy), INSTEAD of simply melt the thing at extremely high temperature (called pyro-metallurgy).
Using the new technology, the cost is MUCH LOWER. The sulphur dioxide pollution, which turns Norilsk into the world's TOP TEN most polluted city, is not a problem any more. And nickel can be extracted almost 100%, much higher efficiency than the traditional pyro-metallurgy method. This is extremely attractive to Norilsk, because they are a mainly nickel and copper producer, with palladium and platinum constitute only an insignificant portion of the revenue.
The only catch is, platinum and palladium, being chemically inactive metals, will NOT be extracted by this Activox Process. Not at all. These two precious metals will remain in the wet residue of the ore, after nickel and copper is extracted. It means these metals will be dumped in a waste pile, and will NOT be produced.
That means 40% of the world's mining supply of palladium will be instantly GONE. This has got to send a chill over the market, sending the palladium price skyrocketing!!!!
Of course, if palladium price is high enough, Norilsk MAY consider secondary pyro-metallurgy processing of the residue ore to extract platinum and palladium. But the cost will be very expensive, because there is no longer any nickel and copper in the residue ore. There is only platinum and palladium, at extremely low concentration. And once you start to cook the residue ores to extract the precious metals, the SO2 pollution problem comes back again, dedeating using Activox Process to reduce pollution in the first place.
My initial estimate is palladium price will need to reach $5000 and more, for Norilsk to justify secondary processing of such residue ores to extract the palladium. That's where palladium price wil go to once this Activox Process is widely adopted by Norilsk.
To leverage on this opportunity, buy physcial palladium, or the PALL fund, or the two mining stocks SWC and PAL.
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minerals.usgs.gov/mine...