LONDON (Reuters) - The bull trend in platinum prices will continue for years and investment in companies mining the metal will yield high returns, a fund manager said on Thursday.
“At a time when many other sectors are seeing their profit margins decreasing, platinum miners will keep their big margins,” Bernard Loriol, partner at Switzerland-based mutual fund Best Asset Class, told Reuters in an interview.
The sector may remain as one of the best performing mining stocks, as profit margins of platinum miners had gone up as high as 60 percent because of high metal prices, he said.
Platinum surged to a record high of $1,395 an ounce in November on talk of the launch of an exchange-traded fund (ETF) and positive fundamentals. It was at $1,300/1,305 by 1655 GMT on Thursday, down from $1,324/1,329 in New York on Wednesday.
The company mainly invests in commodities. It has about $800 million under management, of which its platinum fund, called the Bushveld Fund, accounts for a quarter, he said.
“There is no stockpile of platinum and probably the situation would continue for the next 10-to-15 years,” he said, adding that mining firms would face difficulty in meeting growing demand, especially in the autocatalyst sector.
Global platinum demand rose by 1.2 percent to 6.78 million ounces in 2006, mainly because of a 10.5 percent jump to 4.20 million ounces in consumption by the automobile sector.
The launch of platinum ETFs also was positive for the metal price, Loriol said.
“If you see the success of gold ETFs, one can imagine that platinum might have some success and offer investors a very Interesting possibility to invest into these metals.”
“It’s a fantastic instrument. The producers don’t like it because they can’t control it, but for investors, it’s a great instrument,” he said, referring to ETFs.
ETF Securities Ltd. launched a platinum fund along with other bullion products on the London Stock Exchange (LSE.L) on April 24 and listed them on the Deutsche Borse (DB1Gn.DE) and Euronext Amsterdam and Paris ENXT.PA in May. Zurich Cantonal Bank launched a platinum ETF in Switzerland last week.
Best Asset Class has mainly invested in mining companies operating in South Africa and prefers to put money into exploration companies, which are closer to start production.
“I firmly believe in the future of this country. There is no big geological risk and the production cost is very interesting there. We cannot produce at this cost in Canada, even in Australia,” he said.
The fund has invested in companies such as Eland Platinum ELDJ.J, Anglo American (AAL.L), Impala Platinum (IMPJ.J), Lonmin LMI.L, Anglogold Ashanti (ANGJ.J) , Gold Fields (GFIJ.J) and Harmony (HARJ.J).
“Eland Platinum’s location is very interesting and it has the potential of further development.”