JOHANNESBURG (miningweekly.com) – The strength of the South African rand kept the rand basket price for platinum group metals virtually unchanged in a 12-month period in which the dollar basket price rose 16%, platinum miner Implats said on Thursday.

The dollar basket price was up 16% for the year, but those gains were "unceremoniously eroded" by the strength of the rand, leaving the rand basket essentially unchanged, Implats marketing executive Derek Engelbrecht told Mining Weekly Online in a video interview.

After posting a 22% fall in full-year profit to June 30, the company forecast a "cooler breeze" in the second half of the calendar year.

"The rand basket price is still lower than it was before the Eskom power crisis," Engelbrecht said.

The rand's strength stems from the currency becoming a substantial "carry" currency.

Dollars, euro and yen that are raised abroad at very low interest rates - often below a single percentage point - easily earn 6% when converted into rands and placed in South African financial institutions.

Foreigners are pouring funds into South African bonds or chasing simple interest rates, and for as long as this persists, the rand basket price for platinum group metals is likely to be held down.

"For the moment, the carry trade is phenomenal," Engelbrecht told Mining Weekly Online.

‘COOLER BREEZE'

Enegelbrecht's forecast of a "cooler" second-half "breeze" for platinum is based on the expectation of a slowing down of the growth of vehicle production; with belt-tightening in Europe and unemployment in the US, it is left to Asia to continue to drive demand.

As gasoline vehicles are palladium catalysed and as most of the growth in vehicle sales is in gasoline models in Asia, Implats expects the palladium price to range between $450/oz and $550/oz.

With the era of Russian destocking of palladium believed to be over, the expectation is that palladium is going to move into a growing deficit.

With the rhodium surplus expected to continue for another year or two, the market is expected to come back thereafter.

The supply of platinum group metals in general is expected to be constrained because of project delays during the global economic meltdown.

"We will see supply shortages in platinum and palladium going forward," Engelbrecht said. He is forecasting a platinum price of between $1 500/oz and $1 600/oz for the upcoming period.

Implats' headline earnings per share fell to 786c a share compared with 1 001c a share in the previous year, and revenue dipped by 3% to R25,4-billion.