World's 3 Largest Platinum Producers

by: Markus Aarnio

The world's annual supply of platinum (NYSE:PPLT) is only about 130 tons - which is equivalent to only 6% (by weight) of the total western world's annual mine production of gold (NYSEARCA:GLD) - and less than one percent of silver's (NYSEARCA:SLV) yearly mine production. Another amazing platinum trivia is the fact that more than twice as much steel is poured in the U.S. in only one day than the total world's platinum production in one year. Despite these facts, platinum is currently priced $100/ounce cheaper than gold.

In this article I will take a closer look at world's three largest platinum producers.

1. Anglo American Platinum Limited (OTCPK:AGPPY) is the world's leading primary producer of platinum group metals [PGMs] and accounts for about 40% of the world's newly mined platinum. The company is listed on the JSE Limited and has its headquarters in Johannesburg, South Africa.


The company reported the first six months financial results on July 23 with the following highlights:

Revenue $2.37 billion
Net loss $54.9 million
Cash $162.0 million
Platinum production 1.18 million ounces

The company's total mineral resources are 857.8 million troy ounces of which 180.8 million troy ounces are in ore reserves.


Anglo American Platinum believes that global platinum supply is likely to exceed demand in the short term. There is, however, potential for further reduced supply from South Africa, possibly coupled with improved sentiment and increased investment demand, which could move the market into balance. The current depressed price has reduced operating margins and consequently capital investment in sustaining current and increasing future production has reduced significantly. While the market may be in surplus in the short term, the company believes that global demand growth will not be matched by supply growth with material deficits likely in the medium to long term. Anglo American Platinum, with its superior asset base in terms of extent and reef type, is well positioned to adjust project prioritization and scheduling to match future demand.

Despite the current short-term challenges, Anglo American Platinum believes that the longer-term supply demand outlook for the platinum business remains attractive. Although platinum demand growth typically follows global GDP, it is enhanced by demand for additional metal required to meet tightening vehicle emissions legislation and demand for metal used in variety of new applications. Long-term matching of supply to demand is aided by the short-term response of price elastic jewellery demand, which reduces the extent to which short-term supply needs to respond to short-term changes in demand.

The company's production target for 2012 is between 2.4 and 2.5 million platinum ounces.

My analysis

The stock is currently trading at its 52-week lows. I like the stock as a long-term investment.

2. Impala Platinum Holdings Limited (OTCQX:IMPUY) is in the business of mining, refining and marketing of platinum group metals [PGMs], as well as nickel, copper and cobalt.

In the 2012 financial year, Implala produced 1.45Moz of platinum (approximately 25% of global supply) and 3.02Moz of PGMs. The group employs approximately 63,000 people (including contractors) across its operations and is one of the most efficient and lowest cost primary platinum producers in the world.


The company reported the full fiscal year 2012, which ended June 30, financial results on August 23 with the following highlights:

Revenue $3.37 billion
Net income $524.9 million
Net cash -$295.0 million
Platinum production 1.45Moz

The company's estimated total attributable mineral resources are 230 million platinum ounces.


The challenges facing the South African PGM industry are many and varied, and range from inflationary pressures, lack of skills, inter-union rivalry as well as socio-political issues. These challenges will result in output from South Africa struggling to regain the PGM production levels witnessed in 2006/7. Consequently, a lower supply base, coupled with increases in demand for the company's products, could see the markets move into deficits in the foreseeable future and help to restore pricing levels required for further capital investments into the sector.

My analysis

The stock has a $24 price target from the Point and Figure chart. I believe the price target could be hit during the next 12-24 months.

3. Lonmin (OTC:LNMIF) is one of the world's largest primary producers of Platinum Group Metals [PGMs]. These metals are essential for many industrial applications, especially catalytic converters for internal combustion engine emissions, as well as their widespread use in jewellery. Lonmin's operations are situated in the Bushveld Complex in South Africa, where nearly 80% of global PGM resources are found.

The company creates value for shareholders through mining, refining and marketing PGMs and has a vertically integrated operational structure - from mine to market. Lonmin's mining operations extract ore from which the Process Division produces refined PGMs for delivery to customers. Underpinning the operations is the Shared Services function which provides high quality levels of support and infrastructure across the operations.

The company is the third-largest primary producer of platinum in the world.


The company reported the first six months fiscal year 2012 results with the following highlights:

Revenue $751 million
Net loss $20 million
Cash $157 million

The company's total measured, indicated & inferred platinum resources are 98.1Moz.


The production of platinum ounces as salable metal in concentrate is forecast to be around 680,000 ounces for the 2013 financial year (ending September 30, 2013). For the 2012 financial year platinum sales were over 700,000 ounces.

Over the longer term, the company also believes that improved PGM pricing should be supported by underlying positive demand dynamics. Automotive demand is expected to be driven by a combination of increasingly stringent emissions legislation, the ongoing extension of this regime to non-road applications and a positive outlook for vehicle sales in U.S. and Chinese markets. Although Chinese growth expectations have recently been downgraded, consumer expenditure in China is still expected to increase.

My analysis

The stock is currently trading at its 52-week lows. I like the stock as a long-term investment.

Disclosure: I am long GLD, SLV. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.