Doubt Lonmin​ Potential Shutdown To Have Major Impact On PGM Production & Prices– Capital Economics

By Paul Ploumis (ScrapMonster Author)
November 06, 2015 02:52:09 AM
Capital Economics continues to remain hopeful on PGM prices despite Lonmin's announcement of a potential shutdown in operations.Doubt Lonmin’s Potential Shutdown To Have Major Impact On PGM Production & Prices– Capital Economics
(Kitco News) - Earlier in the week, the world’s third largest platinum producer announced the potential of halting trading  if plants to raise capital are unsuccessful, but one UK-based research firm says it remains optimistic on PGM prices.

“While at face value any disruption to supply may be positive for Platinum Group Metals (PGMs) prices, we think it is unlikely that any production will actually be lost,” says Simona Gambarini, commodities economist for Capital Economics, commenting on recent news out of Lonmim.

To deal with lower metals prices and labour strikes in the region, Lonmin intends to raise $400 million with rights issues and refinance $370 million in debt as part of a restructuring plan, notes Gambarini, which shareholders are set to vote on November 19.

“However, Lonmin has made it clear that if shareholders reject the plans, the company might be forced to shut down.As such, about 15% of global platinum supply and 6% of global palladium supply could be at risk,” she explains.

According to Gambarini, Lonmin’s potential shutdown will not have a major impact on global PGM production and prices as its operations are likely to be bought by some other mining company.

“While it is going to take time for prices to reflect a tighter market, we remain confident in the medium-term outlook for PGM prices,” she says.

“As such, we expect the price of platinum to rally to $1,100 per ounce by end-2016, from $955 currently, and the price of palladium to reach $975, from around $606 today.”

Courtesy: Kitco News