Within the basic materials sector, platinum group metals (or PGMs) hold a special place for their usefulness as catalysts. While silver and gold typically enjoy a more prominent position in the public eye, platinum is nonetheless one of the rarest and most valuable metals on Earth. Its usefulness in chemical and technological processes provides assurance that there will be continued demand for platinum and related metals into the future.
However, there are a limited number of avenues by which investors can directly take part in platinum investments. When looking at platinum group metal stocks, then, it's helpful to look to over-the-counter names, pure-play platinum outfits, and companies in industries as diverse as jewelry, computers, airplanes, and much more.
- Platinum got off to a strong start in 2019 following a decade-long bear market for the metal.
- There are very few publicly traded pure-play platinum outfits on U.S. exchanges.
- For investors willing to go to over-the-counter markets or to related industries, there has been ample opportunity for growth so far in 2019.
Platinum in Demand
Platinum has risen since the start of 2019. This follows an almost decade-long bear market for the precious metal that saw its price decline. While platinum typically trades at a premium as compared with gold, owing to the fact that it is more costly to extract platinum than most other precious metals, it has traded below gold since 2014 or so. Indeed, although platinum is a store of value, investors have been skeptical of the metal for many years. Already in 2019, though, platinum has seen success. The World Platinum Investment Council forecasted an increased demand in the metal for 2019 based on economic growth and automotive industry changes in particular.
Below is a look at the top performing pure-play platinum and platinum-related stocks from January 2019. Given the small list of publicly-traded platinum companies, this list does not take into account market cap, and, as a consequence, there is a large discrepancy among some of these names in terms of overall size.
Further, we've included companies which are traded in over-the-counter markets and those which are in industries relying heavily on platinum as well. The list here is presented in order of monthly performance based on the opening stock price as of January 2, 2019, and closing price as of January 31, 2019. The performance has been compared to the S&P GSCI Platinum Index average returns of 2.77% as a benchmark.
The World Platinum Investment Council (WPIC) announced in early 2019 that the global platinum market will see its largest surplus since at least 2013,
1. Anglo American Platinum Ltd. (OTCMKTS: AGPPF)
- Market Cap: $12.40 billion
- Performance: 24.52%
2. Lonmin Plc (OTCMKTS: LNMIY)
- Market Cap: $221.92 million
- Performance: 19.93%
3. Sibanye Gold Ltd (SBGL)
- Market Cap: $2.38 billion
- Performance: 18.28%
4. General Motors Co. (GM)
- Market Cap: $55.32 billion
- Performance: 18.18%
5. Glencore Plc (OTCMKTS: GLNCY)
- Market Cap: $52.42 billion
- Performance: 15.22%
Anglo American Platinum
Anglo American Platinum is the largest supplier of platinum in the world; the platinum produced by this company accounts for more than a third of all of the world's supply each year. This company is also unique among its competitors in that it focuses exclusively on PGMs. Anglo American is based in South Africa and conducts most of its business and mining operations in that area. Anglo American is traded on the African JSE exchange. For investors accessing this stock in over-the-counter markets, the sizable market cap provides some stability, although liquidity and information access can be challenging.
Part of Anglo American's stellar performance in January of 2019 may not have been due to platinum at all, in fact. Another of the platinum group metals that this company produces is palladium, which reached record high prices of more than $1,400 per ounce, climbing by more than 60% since last August. That combined with Anglo American's strong position in the global platinum market and considering increasing demand for the precious metal means that this company is well-positioned going forward.
London-based Lonmin focuses on the production of platinum group metals, with most of its core operations located in South Africa. In recent years, Lonmin has struggled with multiple issues related to its public relations and treatment of employees. Strikes in 2012 and 2014 brought international attention to Lonmin and resulted in the shooting deaths of Lonmin-affiliated employees by South African police.
In spite of these significant challenges, Lonmin ended 2018 with news that it had returned to profitability for the first time in years. The company delivered an operating profit of about $101 million for that period. At the same time, it is in negotiations with Sibanye for a buy-out which could significantly impact the PGM mining space into the future. This news, combined with the aforementioned strengthening of palladium relative to other precious metals, helped Lonmin to begin 2019 with strong financial success.
Sibanye is one of only two platinum stocks traded on popular U.S. exchanges at this time. This company focuses its efforts on both platinum and other precious metals, including silver and gold, although it has stated its aim to shift its focus toward platinum primarily in the years to come. The company remains South Africa's largest gold mining operation for the time being.
Sibanye began 2019 with an impressive record from the previous year, having posted impressive production figures for 2018. The company has also been on an acquisition spree, having bought up Stillwater in 2017 and now setting its sites on Lonmin shares as well. However, Sibanye faces an ongoing concern related to employee strikes, as South Africa's AMCU (Association of Mineworkers and Construction Union) has previously gone on strike.
A significant portion of PGM production goes into catalytic converters in combustion engines for automobiles. Now, companies like General Motors are also developing hydrogen fuel cell cars in greater numbers as well. This relatively recent technology also utilizes platinum and related metals to power the hydrogen reaction necessary to operate the vehicle. In fact, hydrogen fuel cells utilize more PGM material than their older peers. For this reason, a major automotive manufacturer like GM is actually a reasonable investment for someone looking to take part in the platinum game.
Midway through January, GM indicated that it produced stronger figures for the final months of 2018 than it had forecasted previously. With strong performances in both the U.S. and China in the fourth quarter, the company was able to end the year with an adjusted automotive free cash flow of more than $4 billion. This has carried forward into new optimism for a long-beleaguered company as 2019 continues.
Headquartered in Switzerland, Glencore is not strictly focused on PGMs. Rather, this company has a hand in the production and development of a wide range of commodities and in countries throughout the world. Glencore's offerings include grains, oil, zinc, copper, and more. All told, Glencore is among the world's largest natural resource companies.
Glencore had a famously difficult year in 2018, with its stock price falling by more than a third across the year. Certainly, some of these performance woes can be attributed to broader hesitation regarding the markets at large. However, the company has worked to strengthen its balance sheet, and it has shifted its focus toward rare metals which are utilized in the automotive industry. This is an area of business in which Glencore has been underrepresented in the past, and it could be promising for future performance.
The Bottom Line
It can be tricky for investors to find ways of betting on platinum companies, given that there not very many pure-play platinum companies on U.S. exchanges. However, for those that are willing and able to go trade in the OTC markets or to instead look to related industries, there is still opportunity for growth in 2019 and beyond.