In addition to its use for jewelry or as a physical investment asset, platinum has a variety of industrial uses. The main demand driver for platinum comes from automobile manufacturers that use platinum, along with the other primary platinum group metal, palladium, in catalytic converters.
Platinum Prices and Investing
The price of platinum has continued to decline in 2015, along with other precious metals prices, in the aftermath of the 2014 mining strikes in Africa. There has also been a decrease in demand for platinum jewelry in China, one of the principal jewelry markets for the metal. Nonetheless, consensus forecasts for the price of platinum in 2016 range mainly between $1,100 and $1,200 per ounce. A turn to the upside in platinum prices should generally boost platinum stock prices. As of late December 2015, the spot price of platinum is around $880 per ounce, having bounced off a November low near $820 per ounce.
The following are five of the most promising platinum mining companies for investors to consider adding to their portfolios in 2016. Investors may wish for stocks of mining companies that operate outside the troubled and volatile region of Africa. However, with Africa still accounting for the overwhelming bulk of platinum production, it is difficult for investors to completely ignore the companies that own the principal mining operations located there.
1) Anglo American Platinum Ltd. ADR
Anglo American Platinum Ltd. is the largest producer of platinum worldwide, accounting for nearly 40% of the total global platinum production. Through a number of subsidiaries, the company mines over 2 million ounces of platinum annually, along with over 1 million ounces of palladium. Anglo American has 15 mining properties it either owns outright or in which it has a strategic joint venture partnership interest. Its principal mining operations are located in South Africa, where the company is headquartered. It also has mining operations in Russia and North America. In addition to its mining operations, Anglo American also derives revenue from metal recycling and open market trading operations.
Facing the steady decline of platinum prices during 2015, Anglo American has focused on reducing overhead costs and improving profit margins. To that end, the company has sold off a number of less-profitable properties and shed itself of nearly 1,000 employees. Anglo American's three-year average revenue growth of 2.9% outperforms the industry average that stands at a -5.3%. As of late December 2015, the company's stock is trading around $2 per share, with a 52-week range from $1.77 to $5.72 per share. Anglo American has a market capitalization of $3.2 billion.
2) Stillwater Mining Company
Founded in 1992 in Billings, Montana, Stillwater Mining Company (NYSE: SWC) is the only U.S.-based mining company specializing in the production of platinum group metals (PGMs), and it is the largest producer of platinum anywhere outside of South Africa or Russia. Its principal mining operations are the Stillwater mine near Nye, Montana, and the East Boulder mine in Sweet Grass County. Both operations are part of what is known as the J-M Reef, an extensive region containing significant deposits of platinum and palladium. Stillwater has additional mining operations in the PGM-copper deposit area of Ontario, Canada, and in the San Juan province of Argentina. The company also mines for copper, gold and nickel. Stillwater has an additional revenue stream provided by a recycling operation that recovers platinum and palladium from autocatalysts.
With a market cap value of $1.1 billion, Stillwater has a three-year average revenue growth rate of 1.4%. The company is in relatively solid financial condition with a total debt of only $255 million and an operating cash flow of $131 million. However, Stillwater is net unprofitable for the year of 2015, although only slightly, with a net profit margin of -0.22%. Like Anglo American, Stillwater has focused on reducing overhead costs and concentrating on its mining operations with the best profit margins. Stillwater stock is trading around $8.80 per share as of December 2015, up slightly from its 2015 low of $8.16 per share.
3) Ivanhoe Mines Ltd.
Ivanhoe Mines Ltd. is a small-cap mining company, with a market capitalization of approximately $340 million. Headquartered in Vancouver, Canada, Ivanhoe has interests in mining properties located in South Africa, the Democratic Republic of the Congo and in Australia. The company's principal mining project, still in development, is the sizable Platreef mining project in South Africa. If promising feasibility studies conducted in 2015 and the company's projections prove to be accurate, the Platreef project could be among the single largest platinum-producing mines by 2019. Ivanhoe also mines for copper, gold, lead and zinc.
The company's stock price is near its 2015 low of 43 cents per share, trading at 44 cents per share in late December 2015. The 2015 high for Ivanhoe was $1.60 per share. Ivanhoe has an attractive price-to-book (P/B) ratio of 0.9 and a low debt-to-equity (D/E) ratio of 0.1, with a total debt around $25 million.
4) Platinum Group Metals Ltd.
Platinum Group Metals Ltd. (AMEX: PLG) is jointly headquartered in Vancouver, Canada and Johannesburg, South Africa. The company is a small mining firm with a market cap of approximately $115 million, still in the exploration and development phase, with a focus on platinum group metals. It has drawn investor attention partly because of a strong management group with more than 20 years of proven success in mining operations and partly because of the substantial mining rights it holds in the important Bushveld Complex in South Africa, the principal area for platinum production. The company's major project is the Western Bushveld project, a joint venture with Anglo American Platinum in which Platinum Group Metals holds a 74% interest.
The consensus analyst price target for Platinum Group is 60 cents per share, which equals a 400% increase from its December 2015 share price of 15 cents per share. The company has an attractively low P/B ratio of just 0.3, which is well below the industry average of 0.9, and virtually zero debt.
5) PolyMet Mining Corporation
PolyMet Mining Corporation (AMEX: PLM) is headquartered in Toronto, Canada, and is in the process of developing platinum mining operations in the valuable NorthMet Deposit in Minnesota. PolyMet also owns the nearby Cliff's-Erie processing plant, which should substantially reduce production costs. The company received an additional $6 million in debenture funding from Glencore Mining in October 2015.
PolyMet's stock price stands at 83 cents per share in late December 2015, with a 52-week trading range of 55 cents to $1.37 per share. Consensus analyst price targets for the stock are around $2.25 per share. PolyMet's market cap value is $230 million.