Many analysts are claiming that new platinum ETF and trust products such as Sprott’s physical products have begun to wreak havoc on an already beat up and battered South African platinum industry.  Just as the gold ETFs did in the gold run over the last decade, these new platinum products could rip billions of investment dollars out of the hands of South African miners (Anglo American Platinum, Lonmin and Aquarius all down double digits this year) and into the ETFs as investors are less interested in the ‘leverage thesis’ of commodity producers and instead choose direct investment in the bullion.  However, platinum producers can’t get off that easy for their stock’s price declines.  South African producers have been the epitome of underperformance due to wide-spread cost increases caused by civil unrest and labor disputes which have cost these companies billions in losses.  Some of the largest inflows of capital into these platinum ETFs are South African institutions themselves, which doesn’t bode well for an already out of favor sector.  Investec’s Marc Elliott claims: “…right now, with the distress that pretty much every single mining company is in, it’s certainly better to hold the commodity than the equity.”

Deadly civil unrest has plagued South African miners over the past year

Deadly civil unrest has plagued South African miners over the past year