Ten Bagger: Platinum is showing green shoots – is it time to get in early?

News.com.au

a day ago

Welcome to Ten-Bagger, where Lowell Resources Fund chief investment officer John Forwood gives us his take on a sector of the ASX resources market full of value.
This month, John looks at the turnaround in platinum and palladium prices.
Running at massive deficits hasn't been enough to keep platinum and palladium prices from scraping along deep into the cost curve over the past two years, a massive reversal of fortune from the early days of Russia's invasion of Ukraine, when concerns about Russia's control of the palladium market sent prices soaring.
But a number of analysts and fund managers have kept tabs on the commodities known as platinum group metals – principally platinum, palladium and rhodium – in recent months.
With prices well below the cost base of most miners in South Africa – the world's top producer by a wide margin – it's seemed logical that something would have to give.
The metals have dual uses. They are, like gold and silver, precious metals purchased for investments and crafted into jewellery. But their key demand driver is from the catalytic converters that reduce emissions from internal combustion engine and hybrid motor vehicles.
Carmakers have been able to rely on stockpiles as prices have tumbled. But supply-demand metrics are turning increasingly in favour of miners. The World Platinum Investment Council said in May that supply this year will fall 4% to ~7Moz, delivering a platinum deficit of 966,000oz, a number that's expanded by 115,000oz from forecasts just three months.
Supply will drop to a five-year low, leading to a third straight year of deficits.
Now, the worm could well be turning for the price.
"The platinum price has jumped up by around at least 15% in the last month or so," Lowell Resources Fund (ASX:LRT) CIO John Forwood said.
"It's gone from the mid-900 US dollars an ounce mark to ~US$1224/oz."
Market moves
Now at its highest point in four years, platinum prices have surged to a more than 30% YTD gain.
Palladium has followed, up 19% to US$1087.50/oz.
That's a far cry from the US$3400/oz seen post Russia's invasion.
On current trends, Forwood says some reports have above ground stockpiles of platinum depleting in as little as two years.
"We are seeing sort of a deceleration, if you like, in the move away from ICE vehicles," Forwood said.
" 2025 has been the year of the hybrid. The demand from auto-cats for PGMs has been stronger than expected. But also, I think there's been a lot of investment demand for platinum and that's what's really pushed the price in the last month or two."
Green shoots for the precious metals have investor eyes turning to the next stocks on the production front.
"We're definitely seeing some good market moves in the price, and that's translated massively into Southern Palladium's share price, which got down to around some 20 cents, and now it's at 50 odd cents," Forwood told Stockhead.
Southern Palladium (ASX:SPD) listed in 2022 to raise capital for its Bengwenyama mine in South Africa, one of a handful of undeveloped platinum reef operations in South Africa, where it holds a 70% stake alongside local Black Economic Empowerment partners.
A PFS last year posted an ore reserve of 6.29Moz at 6.17g/t 6E PGMs.
It proposed a 29-year mine life delivering 400,000ozpa of PGM, with life of mine all in sustaining costs of US$800/oz, generating a 50% margin at just US$1200/oz Pt, US$1100/oz Pd and US$6200/oz Rh.
SPD announced a trading halt on Tuesday to raise fresh cash, unsurprising after a 120% one-month gain.
Fresh blood
It's little secret the platinum sector is crying out for some fresh blood, with historic operations facing cost escalation and declining grade.
Deficits are projected until the end of the WPIC's forecast period in 2029. Forwood said South Africa's mining industry, the engine room for the platinum market, was a 'sunset industry'. A historic mining Mecca, it's become increasingly difficult to operate there as public infrastructure fails.
A number of producers in the PGM industry are lossmaking, but are only motivated to stay open by their social licence and government pressure.
"A number the PGM shafts on the Bushveld in South Africa are actually well and truly uneconomic at the moment and arguably being kept open for non-economic reasons to maintain employment," Forwood said.
"So at some point, unless there's a dramatic shift in the price, those shafts are going to have to close or you're going to see a very big change in price and that's probably more likely because that will address the supply-demand deficit."
SPD has had a large impending capital bill weighing on its share price, a potential US$452m in peak funding according to its PFS. But Forwood said it had been working on alternative solutions including funding arrangements and staged development.
His other PGM pick is Talon Metals. Listed on the TSX, Talon holds the Tamarack JV in Minnesota with non other than mining giant Rio Tinto (ASX:RIO).
The project hosts an indicated resource of 8.6Mt at 1.73% nickel and 0.92% copper and inferred resource of 8.5Mt at 0.83% Ni and 0.55% Cu.
Assays from a revisited historic drill hole have lifted the lid on the deposit's growth potential, coming in at 34.9m grading a ludicrous 28.88% NiEq or 57.76% CuEq.
That included 8.65g/t palladium, 16.31g/t platinum, 9.18g/t gold and 42.92g/t silver. Bonkers.
"You wouldn't believe it, the grades are enormous. That's not just a PGM project, but the PGM grades on their own are more than economic," Forwood said.
"When you add the nickel, copper, cobalt, gold, silver to it, it's just a stunning result.
"Lowell's been a shareholder in that company for a number of years now. I'm very pleased to see some of these results coming back."
Other PGM stocks on the ASX include Future Metals (ASX:FME), the owner of the Panton project in WA, up 90% off a low base, Julimar project owner Chalice Mining (ASX:CHN), which is up around 26% YTD, and Implats' Zimbabwean subsidiary Zimplats Holdings (ASX:ZIM), the sole operating miner on the ASX, up 22% YTD.