Govt stops lacerate platinum, supply ebb may boost price, palladium deficit forecast

South African platinum-group metals (PGMs) miners have flagged high government-enforced safety stoppages at South African PGM mines, which have lacerated production. Read on page 10 of this edition of Mining Weekly of Anglo American Platinum (Amplats) reporting a 128% increase in fourth-quarter safety stoppages and Lonmin a loss of 177 000 t of production, eight times more than the 21 000 t for the prior period.

The Department of Mineral Resources (DMR) imposes the stoppages under Section 54 of the Mines Health & Safety Act, which empowers the halting of mining operations across a broad operational front, well beyond the area of immediate safety concern. Both Amplats and Lonmin report that they are discussing more appropriate safety mechanisms with the DMR. London-based Fairfax notes, however, that the platinum supply ebb is positive for platinum prices.

The South African government’s 2007 move to introduce the safety stoppages was initially seen as necessary to focus the minds of miners on the seriousness of safety breaches. Some contend, now, however, that the stoppages themselves appear to create safety hazards of their own, particularly in deep-level mines.

The gold miners’ rule of thumb is that stopping a deep-level operation for a week takes a week to get the cooling back. Bloomberg quotes JP Morgan Cazenove as reporting that PGM production slumped 36% in October from September, and fell 27% from the corresponding month a year earlier. Meanwhile, palladium may be in short supply owing to an 80% drop in Russian stockpile sales to 150 000 oz. Read on page 11 of this edition of Mining Weekly of Barclays Capital estimating a 275 000 oz shortfall this year and Credit Suisse saying that palladium demand will exceed supply until at least 2015.

The median of 28 analyst estimates compiled by Bloomberg calculates that the price of palladium may climb to $882.50/oz this year, the highest since February 2001. Shares of OAO GMK Norilsk Nickel, the world’s biggest palladium producer, rose 17% in Moscow trading this year. Mining companies are reportedly struggling to expand output fast enough to compensate for the decline in sales from Russian reserves.

Barclays Capital expects South African production to decline for a second consecutive year as Russian output remains little changed from where it was four years ago. TDX-listed Solid Gold Resources’ claim in Canada is evoking interest. Read on page 15 of Solid Gold president Darryl Stretch telling Mining Weekly the company is claiming C$100-million – “it could go higher” – from the government of Ontario for damages it is sustaining as a result of not being able to carry out exploration work at its Lake Abitibi property.

Mining companies argue it is the government’s duty to consult with First Nations before awarding an exploration licence to a company. Canadian mining company Taseko Mines said in December the British Columbia Supreme Court suspended two of its work permits at the New Prosperity property in the province for a period of up to 90 days to allow time for the court to hear a judicial review brought by a First Nations community, which is also seeking to stop it from conducting exploration work at the controversial project, arguing they had not been adequately consulted. Solid Gold’s lawsuit announcement came on the same day that Prime Minister Stephen Harper met with a gathering of First Nations chiefs in Ottawa.