Palladium gains interest and an escape from inflation

By Leia Michele Toovey- Exclusive to Palladium Investing News

On January 5, palladium tumbled nearly 6 per cent as the strong dollar knocked down all the precious metals. The metal hit a daily low of $178.50 an ounce, but was quoted at $180.00. On January 12, the metal picked up some steam, and rebounded to $191 per ounce. 

U.S. commodity futures trading data showed investors were adding to their net long positions in palladium, and also gold, platinum, and silver. Both gold and palladium can expect to see relative gains in the first quarter of ’09 as an alternative asset against inflation.

Palladium supply was in surplus prior to the auto industry nosedive and the price looks as though it remains vulnerable with little upside potential on the fundamentals front.  The west’s largest primary palladium producer – the Russian owned U.S. miner, Stillwater - is struggling at the current palladium price and is already closing down sections of its Montana operations as uneconomic.  Unless there are, indeed, curtailments in the supply position, palladium’s short term does not look promising. 

Haywood securities have lowered its forecast for palladium done to $200 per ounce from the previous forecast of $400 per ounce.  The securities firm reasoned that the metal’s prices seem oversold, but until demand stabilizes, low prices will remain due to negative sentiment.  The firm believes more shutdowns and output curtailments are inevitable. Questions still remain when supply reductions will offset demand reductions.  In the long term they are bullish on the base metals, but in the near term they believe weakening demand from the auto industry and investors will stall price increases.

Company news

Marathon PGM Corporation (TSX:MAR)has received a positive Definitive Feasibility Study (DFS) of its 100 per cent owned Marathon PGM-Cu Project located 10 km north of Marathon, Ontario. The DFS included modeling of an optimized engineered open pit design that resulted in a proven and probable mineral reserve estimate of 79 million tonnes containing 465 million pounds of copper and 2.7 million ounces of PGMs (Platinum, Palladium, Rhodium) + gold. The DFS base case demonstrates that the Marathon Deposit will generate strong cash flow under appropriate metal price assumptions.  Marathon plans to continue exploration in the region with the intent of expanding their land position. The two largest areas for adding resources are located (i) immediately outside the Marathon designed pit and (ii) at the Geordie Lake Deposit, located 14 km west of Marathon. Large blocks of PGM-Cu extend well beyond the current Marathon designed pit. These blocks were not included in the reserves due to economic constraints, yet may represent future mining potential in later stages of mining.

Canada’s second largest bank by assets is planning to start trading in the precious metals’ gold, platinum and palladium in India.  Scotia bank will trade precious metal commodity derivatives through Indian Commodity Exchanges.  For the new business, the bank is planning to set up a new wholly owned company operating in India.

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