LONDON, July 25 (Reuters) – 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 of demand.
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 mining companies.
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.
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