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Platinum Group Metals (PLG on AMEX; PTM on TSX) - an update

 In the year since I had last met PLG, the price of platinum has doubled. As a result, senior platinum producers are swinging from loss to profit. In the interim, PLG has updated the feasibility study on its 8M oz. flagship deposit, and is very near securing title transfers which position the company for sale, joint venture, or capital-raising for production.

Per PLG's Kris Begic, his is one of only two remaining independent platinum juniors with large-scale, near-surface deposits in the compact Western Bushveld region of S. Africa -- home to 70% of the world's platinum. The 4 Bushveld senior platinum producers work aging, deep and therefore high-cost reserves. An acquiring senior could process PLG's ore in their existing facilities, thus increasing their profitability. (Begic pegs the global platinum market at 6M oz., meaning that PLG's deposit equates to roughly one year of global production.)

Since last year, PLG has secured exploration deals with a Japanese company, and held discussions with other Asian interests. Thus, PLG has developed sale, JV, and hedging options beyond the 4 producers established in the Bushveld. Among possible outcomes is a sale of the flagship deposit, while taking back a net smelter royalty, and retaining the exploration properties.

This could position PLG to become the first platinum royalty company. Given platinum by-product in Ontario and Russia (as well as Magma Metals' recent Ontario discovery) the time may be right for a platinum royalty play.

Another consideration is PLG's status as the only pure-play platinum company listed in the US and thus easily accessible to US retail investors (avg AMEX volume 400K shares). Also, power problems could well return to S. Africa, once again causing platinum prices to spike.

For all these reasons, I believe the company now bears very close watching.

FD: I have a "chihuahua" position
DYODD



Disclosure: I hold a small position