Wesizwe Says Platinum to Extend Gains as Africa Supply Squeezed

Platinum prices, up 21 percent from their August low, will extend gains as production cuts squeeze supply and consumption climbs, according to South African miner Wesizwe Platinum Ltd. (WEZ)

“You’ve got challenging supply issues and a market that’s recovering in terms of demand,” Chief Operating Officer Paul Smith said in an interview. “The platinum sector as a whole is going to come off quite a low base quite aggressively.”

Strikes that began in August in South Africa, source of three-quarters of the world’s platinum, led to mine halts that drove up prices from a $1,383.75-an-ounce low. They’ve since fluctuated, rising this month on a plan by Anglo American Platinum Ltd. (AMS) to cut 400,000 ounces a year to curb costs.

Amplats’ plan, which would remove about 7 percent of global output and may result in as many as 14,000 job losses, was criticized as “less than helpful” by South Africa’s Finance Minister Pravin Gordhan.

“Certainly recent events haven’t done South Africa any good in terms of its labor issues,” Wesizwe’s Smith said Jan. 22. Smith, previously director of new business at Aquarius Platinum Ltd. (AQP), became COO of Johannesburg-based Wesizwe this month.

Wesizwe, 45 percent-held by China’s Jinchuan Group Ltd. (2362) and the China-Africa Development Fund, said Jan. 21 it got a $650 million loan from China Development Bank Corp. to develop its Bakubung mine in South Africa’s North West province.

Bakubung Project

The mine will produce about 350,000 ounces of platinum group metals a year for about 35 years, according to the company’s website.

“It’s a large, long-term production phase, close to five years of development, but also has a long mine life,” Smith said. “We will start ramping up production from 2018. The market is quite aware this is a long-term project.”

The loan gives Wesizwe the medium and longer-term funding it needs to develop Bakubung, he said. “The terms are very competitive, off Libor or Libor-based, and we’re very comfortable.”

Platinum dropped 0.2 percent to $1,679.15 an ounce in London at 1:43 p.m. local time. It’s up 9.4 percent this year.

To contact the reporter on this story: Paul Burkhardt in Johannesburg at pburkhardt@bloomberg.net

To contact the editor responsible for this story: John Viljoen at jviljoen@bloomberg.net

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