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(Kitco News) - Platinum prices remain at a discount to gold, even as the supply constraints from labor strife in South Africa remains a concern for miners, and these supply issues might support prices for some time, said Mickey Fulp, geologist and owner of the Mercenary Geologist newsletter.

Platinum-producer Lonmin recently agreed to a new wage contract with striking workers at its Marikana mine, but friction between an upstart mining union and the established mining union has led to clashes at several platinum mines in South Africa. Metals analysts said labor unrest will likely be an issue for a while.

Given these strikes in South Africa and the potential impact on supply, “I still think the price of platinum is lagging behind a bit. So I expect continued strength in platinum prices,” Fulp said. He spoke to Kitco News Friday on the sidelines of the Hard Assets Conference.

The strike caused platinum prices to gain about $300 an ounce from the beginning of the strike to its conclusion. That premium has come down somewhat, but platinum prices remain elevated.

At 12:26 p.m. EDT, October platinum prices at the New York Mercantile Exchange were trading at $1,635 an ounce while December Comex gold was trading at $1,772 an ounce. At that spread, platinum is trading at 0.92% of gold’s prices. Historically platinum has traded at a premium.

“It got down to about 0.88 this summer – that was a screaming buy signal for platinum, but (now) it’s getting up to a more normal ratio,” Fulp said.

Fulp said he’s bullish on platinum, but that doesn’t mean he’s going to buy any right now. “I’m not going to buy any platinum at $1,700 an ounce, but I’m not saying it won’t go up to $1,800 or above. I like buying it when it’s really beat up. But I’m pretty bullish on platinum,” he said.

Palladium is likely to “tag along” on platinum’s rally, he said.  “The thing about palladium, though, is we have significant North American supplies; we don’t have platinum (supplies). While more automakers are making better catalytic converters to use palladium, the big vehicles (makers) are dependent on platinum," he said.


Fulp said he’s taking a contrarian view on uranium and uranium miners. After the Fukushima nuclear power plant in Japan shuttered because of damage caused by a tsunami in March 2011, nuclear power has gotten a black eye. Germany said it would phase out its nuclear power plants and Japan said it would, too.

“Uranium is still beat up, but we’re starting to see some of the good (companies) move…. I’ve been buying some uranium companies through the summer,” Fulp said, with an eye that the industry will have a stronger, longer-term future. 

Despite Japan’s decision to move from nuclear, Fulp said other countries including China, India, the United Arab Emirates, South Korea, Russia and the U.S. are still building nuclear plant infrastructure.

After a difficult year for junior miners, Fulp said some “smart money” is starting to invest in junior miners with private placement funds.

“The gold stocks are very beaten up and there are some good juniors…. A month ago, you couldn’t do a private placement. Now the smart money is moving major amounts of capital,” he said.

He said when he looks at companies to buy, he looks for “tight share structure, people with a history of success and good projects … I like (companies with) advanced exploration in geopolitically stable parts of the world.”


Fulp said he spent about three weeks visiting potential mining projects in northern Europe and travelled through six countries. While there he conducted a little experiment with the U.S. dollar, he said. “I’m proud of the fact...  that I travelled throughout Europe and never exchanged a U.S. dollar for a euro,” he said.

Fulp said he used U.S. dollars and a credit card for his visit. “They’d take dollars and I’d get euros back. I’d spend the euros. I’m proud to say that the U.S. dollar is still the world’s reserve currency and will remain so for the rest of my life, too,” Fulp said.

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By Debbie Carlson of Kitco News dcarlson@kitco.com

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