* NewPlat ETF pulls in 543,000 oz of platinum in 3 months
* Investors favouring fund over squeezed mining stocks
* Analysts see positive longer-term outlook for platinum
By Jan Harvey
LONDON, July 25 South Africa's platinum sector,
already under pressure from rising costs, labour unrest and
falling metal prices, is now facing a rival for investment flows
-- a major new physical platinum fund with unprecedented levels
The New Gold Platinum exchange-traded fund
(NewPlat) has pulled in more than half a million ounces of metal
since its launch three months ago, worth 7.6 billion rand ($780
million) at today's prices.
The fund's holdings currently total more than 543,000
ounces, a level it took the world's largest platinum-backed ETF,
New York-based ETFS Physical Platinum -- which holds
611,847 ounces of metal -- more than two years to achieve.
A great deal of investment in NewPlat, analysts say, has
come from funds in South Africa choosing to seek exposure to
platinum prices directly through the physical metal, effectively
delivering a vote of no-confidence in South Africa's beleaguered
While shares in South African platinum producers are felt to
be unattractive given the industry's problems, investors have
taken account of threats to supply from the mines, and detected
tentative first signs of better times ahead for the European
motor industry, which uses a lot of platinum in exhaust systems.
"Investors want exposure to the sector, but they are a bit
skittish about equities at the moment," Ian Woodley, a portfolio
manager at Old Mutual Equities in Cape Town, said. "With an ETF
holding, investors don't have to worry about people going on
strike in the morning. It's no surprise they've done so well."
Shares in South Africa's platinum miners have slid due to
rising costs, falling metal prices and a wave of violent
industrial unrest which resulted in dozens of deaths last year.
Shares in Anglo American Platinum, Lonmin
and Aquarius have all posted double-digit percentage
losses this year, making physical platinum, up 8.8 percent in
rand terms, more attractive in comparison.
"For our institutional investors, to have another way of
investing in platinum apart from platinum miners was something
that they needed," Vladimir Nedeljkovic, head of investments at
Absa Capital, which operates the NewPlat ETF, said.
As South African funds can only invest a maximum of 35
percent of the their total assets abroad, existing
platinum-backed ETFs, in London, Switzerland and the United
States, have been largely closed off to them.
"One can't dispute that the equities have massively
underperformed, and that trend is continuing," Justin Froneman,
an analyst at SBG Securities in Johannesburg, said. "You've seen
a continued outward push from the equities into alternative
investments, and the platinum ETF is providing a very real
Investors are drawn to ETFs because they give easy exposure
to raw materials without having to take delivery of them.
Worsening labour problems have led mining companies to cut
back on investment in new mines, and even to mothball existing
capacity. Amplats said in May that it would cut 6,000 South
African mining jobs as it tried to restore profits, cutting
250,000 ounces of production this year.
According to a statement released on Monday, the company
continued to burn cash in the first six months of 2013, with its
Rustenburg mine northwest of Johannesburg losing 1 billion rand.
Amplats said it had suspended dividend payments as it continued
to face loss-making mines and climbing costs.
Ironically, the pain being felt by the South African
platinum miners is one of the issues that has made the platinum
ETF, which issues securities backed by stocks of physical metal,
such an attractive bet.
Although prices have suffered this year from a slump in
bellwether precious metal gold and still-weak demand from
European carmakers, threats to supply from the South Africa --
source of three of every four ounces of platinum -- have lent
There are some tentative signs of life in the European auto
sector, a major consumer of platinum. Catalyst maker Johnson
Matthey said stronger sales of truck catalysts,
particularly in Europe ahead of new environmental regulations,
sparked a rise in first-quarter profit.
Once the abundant above-ground stocks of platinum that have
cushioned prices from the full impact of the new ETF are
exhausted, the supply threat to the market is likely to be felt
It is at this point that the miners are likely to become
more attractive again.
"Everyone seems to agree that platinum prices can't remain
at these sorts of levels," Investec analyst Marc Elliott said.
"It comes down to how much inventory is available to meet demand
requirements. That could take a while to work off, but when it
does, the platinum price will react strongly, and thereafter the
miners will react."
"There will be a crossover point where you will get better
leverage owning the equities than you would owning the
commodity," he said. "But 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."