Miners Unable to Reverse Platinum Rout Putting Lonmin on Brink By Andre Janse Van Vuuren and Eddie Van Der Walt - 6 nov. 2015 12:14:22 Lonmin Plc’s warning that it may be forced out of business shows just how dire the situation has become for some of the world’s biggest mining companies. At the heart of the problem are platinum prices at a seven-year low and ample amounts of stored metal. While producers have been cutting output, it hasn’t boosted prices because there’s so much available in vaults and from recycling. There’s enough stockpiled platinum to satisfy about a quarter of the total annual demand, according to estimates from the World Platinum Investment Council. “Producers don’t control the levers of supply anymore,” said Bernard Dahdah, a precious-metals analyst at Natixis SA in London. “Ten years ago, we didn’t have physically-backed ETFs, 10 years ago recycling was a small bit of total supply. Mine supply has become a much smaller portion.” Lonmin, the world’s third-biggest platinum producer, is now fighting for survival by cutting jobs and closing unprofitable mines as it burns through cash. While shareholders have already lost about 90 percent of their investment in Lonmin this year, the company said it may shut down if it can’t sell more equity. Companies in South Africa, the largest producer, need about 15,000 rand ($1,078) an ounce on average to dig metal and invest in sustaining future supply, according to Natixis. Platinum has dropped 21 percent this year to $954 even as annual supply lagged demand for the fifth time in six years. “Prices are not sustainable at these levels,” said Robin Bhar, an analyst at Societe Generale SA in London. Still, platinum probably won’t surge in the long term if Lonmin went out of business because its assets would be sold to another producer, he said. More Supply The metal has been hit along with copper to iron ore by the slowest growth in more than two decades in China. More purchases by carmakers haven’t been enough to compensate for increased supplies. The platinum council expects recycling will account for 26 percent of total supply this year, up from 16 percent a decade ago. After about eight years of accumulating metal through exchange-traded funds, investors are now dumping it. They’ve sold 254,679 ounces so far this year, data compiled by Bloomberg show. Holders have become more bearish on concern that demand will ease in the aftermath of the Volkswagen AG emissions scandal and that higher U.S. interest rates will cut the appeal of precious metals. Even when South African production was halted by a five-month mine strike last year, prices only rose as much as 11 percent because metal was sourced by stockpiles. Those inventories will be about five times larger than this year’s expected shortfall in mine production, according to the platinum council. “Clearly there are plenty of above ground stocks,” said Bart Melek, the head of commodity strategy at TD Securities in Toronto. “Someone is releasing these stocks because they don’t think it is worth holding on to.” We will get there,in time.things are quickly changing. Inca.