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First U.S.-Listed Platinum ETNs to Launch on NYSE
By Jon A. Nones
08 May 2008 at 06:24 PM GMT-04:00
http://www.resourceinvestor.com/pebble.asp?relid=42638
SEATTLE (ResourceInvestor.com) -- U.S. investors large and small will soon have an alternative to investing in platinum futures, almost solely traded by large hedge funds and brokerage houses. Two exchange-traded notes, the E-TRACS UBS Long Platinum ETN [NYSE:PTM] and E-TRACS UBS Short Platinum ETN [NYSE:PTD], will launch tomorrow morning, April 9, in New York.
Exchange Traded Notes (ETNs) are not equities or index funds, but they do share several characteristics with those products. They are senior, unsecured, unsubordinated debt securities that are designed to track the total return of a specific market index, less investor fees, and provide investors with exposure to the total returns of various market indices.
The UBS Exchange Traded Access Securities (UBS E-TRACS) platinum ETNs will track multiple maturities of the platinum NYMEX contracts using the UBS Bloomberg CMCI Platinum Total Return Index.
The UBS Bloomberg CMCI Index is composed of a basket of 28 commodity futures with a series of up to 7 different investment maturities for each individual commodity using the calculation of constant maturity forwards.
After their initial offering on Friday, E-TRACS UBS ETNs can be bought and sold through a broker or financial advisor on a U.S. securities exchange, offering individual investors markets and strategies that may not be readily available. The platinum ETNs will be the first U.S.-listed products of their kind.
In Europe, ETF Securities launched three platinum funds offering short, long and double-long exposure. Those include a physical platinum fund, which is backed by the metal itself, and two exchange-traded note products, backed by futures contracts. Zurich Cantonal Bank also offers a physical platinum fund, traded on the SWX Swiss Exchange.
In November 2006, the market was flooded with rumours that a physical platinum-backed ETF was soon to hit the U.S. market, sending platinum prices up 20% in one month. Fingers were pointed at Barclays Global Investors (BGI), the firm that launched the world's first silver-backed ETF iShares Silver Trust [AMEX:SLV].
However, Barclays’ spokeswomen, Christine Hudacko told Resource Investor at the time that it would not come from them. She said BGI had not filed any regulatory documents relating to a publicly-traded platinum trust and “has no immediate plans to do so.”
Even just speculation of a U.S.-listed platinum-backed ETF faced heated opposition from the platinum end-use industry, mostly automotive companies, concerned that a platinum ETF would squeeze the market and send prices too high for industrial needs.
In a recent commentary, Tom Lydon, proprietor of ETFtrends.com, cited Kevin Rich, CEO of DB Commodity Services, to help to explain why it would be very difficult to launch a platinum-backed ETF in the U.S.
“[Platinum] is not liquid enough to support an ETF,” said Rich. “There are not enough players transacting it.”
Rich said the last thing anyone would want is for a fund to take money in but find that it couldn't buy the underlying asset. The Commodity Futures Trading Commission (CFTC) is careful to make sure that trading activity doesn't lead to a situation in which investors corner the market.
“When you bring in an ETF, you make sure the supply and demand of the commodity are still driving the market,” Rich says.
In April, GFMS said in its Platinum and Palladium Survey 2008 that the platinum deficit was about 397,000 ounces last year. In 2008, the company expects production to decline a further 100,000 ounces due to power shortages in South Africa, but demand in jewellery and autocatalysts to ease, possibly balancing the market.
The VM Group reported in its fourth issue of The White Book that the platinum market will remain in a deficit of 360,800 ounces in 2008, although down from 412,400 ounces in 2007, as mine supply continues to fall offsetting any drop in demand.
However, ETF demand in platinum is expected to set new records, with an additional 300,000 ounces of platinum in 2008, according to VM Group. Platinum ETFs attracted inflows of 194,000 ounces in 2007, after being launched in April.
So far this year, ETFs have bought up another 180,000 ounces. As of mid-April, ETF Securities physical fund held nearly 340,000 ounces, while Zurich Cantonal Bank’s platinum fund held about 43,250 ounces.
The E-TRACS UBS, on the other hand, will not have any immediate effect on the supply and demand fundamentals of platinum since they are based on futures contracts, which are usually rolled over or settled with cash.
Platinum futures soared 34% in the first quarter and reached a record $2,308.80 an ounce on March 4, largely due to a falling dollar and supply concerns in South Africa, which supplies about 2/3 of the world’s platinum, due to power shortages.
Most-active futures have risen 52% in the past year, up 33% in 2007 alone, and 8.5% in the past five sessions. The dollar dropped 8.3% on the index last year, contributing to the rise.
July platinum futures surged $73.30 to $2,042.30 per troy ounce on the New York Mercantile Exchange today after the dollar fell 0.4% against a basket of six major currencies.
The North American Minor Metals Market in the Age of Minor Metals
By Jack Lifton
08 May 2008 at 03:21 PM GMT-04:00
http://www.resourceinvestor.com/pebble.asp?relid=42629
DETRIOT (ResourceInvestor.com) -- We can wait no longer to publicly address the impending minor metals crisis in the North American market.
The term “minor metals” is an anachronism for those metals, for which prior to the Second World War, there were no significant industrial uses. The rapid advance of technology since 1939 has transformed our civilization irreversibly and made so thoroughly obsolete the original meaning of the term “minor metals” that I am confident that our time will one day soon be referred to as “The Age of Minor Metals.”
The significance of the current North American minor metals market is that it is on a path to global insignificance, and that, the cause of this is almost entirely political, not technological. Notwithstanding the facts that, since the end of the Second World War, in particular, the technologies for exploring, extracting and refining energy minerals and metal ores have improved exponentially both in production efficiency, allowing the economical recovery of lower and lower grade natural resources. And, in ever lessening environmental impact, the knee-jerk core of the American activist political community has declared all such activities evil per se and will not accept or even hear anything of the positive effect on drilling and mining of the very same scientific progress, which they claim to worship when it manifests itself as stem-cell research, lithium-ion battery systems development, carbon sequestration or global warming. All of which have now become, literally, the received doctrine of the church of environmentalism, revealed, even though not one of these technologies or theories has shown, or has been shown to have, any practical result.
The anti-mining bias of political environmental activism has now forced the North American minor metals market into a crisis of supply. The once largely, and practically, self sufficient American natural resources production industry has been decimated in the case of metals and reduced to less than half of its former production in the case of gas and oil.
Below is a graph prepared and published by the U.S. National Academies, the scientific and engineering research arm of the U.S. Congress, after it held several meetings of a group convened to study “Critical Metals for US Industry” in 2007. It is evidence of how close North America is to a minor metals supply crisis, because it measures the impact of either a restriction or a cutoff of supply of the identified critical metals on the ability of U.S. OEM industry to continue to function without them!
This graph was published in October, 2007. In January, 2008, the People’s Republic of China announced a reduction of up to half of its export of rare earth metals, of which the PRC now supplies 100% of the global demand.
The Minor Metals Age Impact of Restricted Supply on NA Industry
North American demand for minor metals, for use in domestic manufacturing, is slowly, but surely, declining, as the domestic supplies dwindle and vanish due to the lack of interest by mining companies in speculating on whether or not they will get operating permits in the face of activist environmental opposition in the U.S. or whether they will get financing in the face of political/environmental opposition as well as the growing credit crisis. End users of minor metals in North America have been steadily moving their actual manufacturing off shore, mainly to Asia, for more than a decade to take advantage not only of low labour costs but, increasingly importantly, of access to minor metals.
Chinese labour costs, the value of the Chinese renimbi versus the dollar and shipping rates have all been rising, and so the politicians and the economists at the very same American companies that sang the song of outsourcing are now singing of ‘insourcing’. Soon they say the low labour cost centres in American such as Michigan’s Saginaw Valley, the birthplace of both GM and the UAW, will see manufacturing operations return to take advantage of the low labour rates, the cheap dollar and the savings on shipping costs.
This is of course, salary and, believe it or not, bonus saving, stuff and nonsense. The failure of American industry and financial institutions to create and implement long term strategies to minimize the risk of both price and availability of minor metals means, in the simplest terms, that strategic manufacturing critically dependent on an ever growing list of minor metals will stay wherever there are supplies of such metals that are available.
This situation did not just now come about. Look at the chart below, courtesy of Great Western Minerals Group [TSX-V:GWG] and the United States Geological Survey.
As an example of what the above chart and the previous graph demonstrate note that in 1994 the U.S. was self sufficient in rare earth metals, and it produced 34% of the global demand for those minor metals. Today the U.S. produces no rare earth metals, but it uses either in domestic manufacturing or in outsourced manufacturing in China 16% of the world’s production of rare earth metals, 20,000 tonnes, all of which are supplied at the moment by Chinese domestic producers. So we have the situation today where, when the U.S. was totally self reliant for a critical mineral commodity, rare earth metals, in 1994, it is today 100% reliant on imports for supplies of that critical commodity and it is 100% reliant on just one exporter, the PRC, for those imports.
North America, as the graph and chart above show, is in danger of a minor metal supply crisis anytime that the domestic demands for those minor metals, in the countries of their production, rise to a level matching the supply of the minor metal.
Now look at the following chart of the fundamentals of the rare earth metals from 2000 through 2012, Courtesy of GWG and Dudley Kingsnord, neither of which is responsible for the title I have put over the chart.
If the above chart (projection) is correct then Chinese domestic demand for rare earth metals will exceed its, and the global, supply in early 2012, just four years from now.
Unless North American businessmen wake up right now and make long term provisions in the form of full finance for minor metals production in North America then those North American industries that critically depend on rare earth metals will shut down for good beginning in 2012, and make today’s recession look like a minor correction.
Perhaps we should also mention the critical minor metals on the first graph above, the restriction or elimination of the supply of which will shut down the North American OEM automotive, aerospace, and electronic industries.
The philosopher, Ludwig Wittgenstein, famously said “Whereof we cannot speak thereof we must remain silent.” Our political elites have made this dictum cover the domestic production of minor metals. As the philosopher/comedienne, Joan Rivers, might counter, “Can we talk?” To which I will finally add: “Before it is too late!”
Are Minor Metals the True 21st Century Hard (Metal) Assets?
By Jack Lifton
24 Jan 2008 at 02:42 PM GMT-05:00
http://www.resourceinvestor.com/pebble.asp?relid=39820
DETROIT (ResourceInvestor.com) -- The rollercoaster ride of the U.S. and global stock markets this week has so far been remarkable, but it does not seem to be happening to our favourite asset class of commodity metals - in particular with the so-called precious, exchange-traded metals. The prices of gold and silver have not varied inversely in step with the large daily market swings as speculators had predicted that they certainly would, and, in fact, the prices of these “precious” metals have seemed to be following the market, or “fiat,” value of the U.S. dollar as simple stores of value rather than reflecting growth potential. Gold is starting to act as a “flight to quality” type of relatively low but sure return investment.
The same thing seems to be happening with copper and even more so with platinum, which, with the others, used to be called the “coinage metals.” Prior to the rise of the need to generate and distribute electricity, the largest use for copper was in coinage, where the relatively low intrinsic value of copper, as values for metals went, allowed it to be used for low denomination but high mintage coins.
Ironically, Imperial Russia in the 1830s, which had then discovered that it had access to large amounts of the newly “discovered” metals, platinum and palladium, actually coined platinum rubles for a time in an attempt to create a “fiat” ruble; i.e., the platinum ruble was to be a ruble because the Czar said it was. The attempt was a flop, and by the time almost a century later that Louis Tiffany popularized platinum settings for diamonds and began marketing platinum as a “precious metal,” the Czar’s government had lost its interest in the metal altogether.
Those investors who want a “store of value” should for the time being stick to gold, and they probably won’t lose any value in today’s hard currencies, and they will be tricked and soothed into believing that the price of gold is going up if they only look at its U.S. dollar price. Investors, however, who want to speculate in the rise of value of hard assets, I believe, need to change their thinking and to revise a definition.
For most of the last 26 centuries almost all of the world has followed the lead of the ancient Greek city states of the Aegean Sea region and made it a state monopoly to issue specified weights of certain metals: first gold and silver alloys; and then, as metallurgy improved, gold and silver individually; and then copper and copper alloys, as mediums of exchange with intrinsic value. Note that the money changers in the Temple courtyard whose tables were overthrown were not Wall Street bankers; they were men who claimed to know the true weight of Athenian silver “Owls” and would give you the equivalent in weights of silver, gold or copper metals, minus a fee of course, in the coins of Rome or Judea.
This system survived, more or less intact, until the early 20th century when the first industrial revolution swept out of Europe to America and slowly thereafter to the rest of the world. The significance of the rapid spread of the industrial revolution was that the need for money overwhelmed the supplies of gold and silver, so that fiat currency came into the ascendant. The world’s most prominent grouping, the British Empire, went off the gold standard after the disastrous disruption of the world economy called the Great War. The United States, the actual world’s richest individual nation, went exuberantly into its “Roaring Twenties” and then crashed into a massive deflation and also went off the gold standard.
All of these events were three generations ago, and today we all take it for granted that the central banks of the U.S. and Europe, as well as of Asia, exist solely to regulate money supplies. Gold bugs make me laugh when they talk about the supply of gold being affected by a European central bank selling a few hundred tonnes; they do not want to see that central banks are not creating money by selling gold. They are raising money in place of a non-monetary asset which may have appreciated or may be losing its value. The supply of gold is today the newly mined gold produced annually in the world. Since no one “needs” this gold either for industrial purposes or to back their currency, it is more and more impossible to speak of a demand for gold as any different from the demand for jewellery - which is elastic, to say the least.
Please now glance at the chart below, from the Wall Street Journal, 6 January 2008 edition:
Let me re-iterate that although they were for a very long time items of intrinsic value which had been monetized so that not accepting them in exchange for goods in the market place was a crime, in the 21st century, however, gold and silver, or, at least, gold have become stores of value while a new paradigm has entered the hard assets arena: A hard metal asset is now one which has a strategic or critical value to industry. Most of the world’s new “hard” currencies, such as the Canadian dollar, the Australian dollar and the Chinese Yuan, are in fact resource-based, and the difference in acceptance between them and the non-resource based American dollar is becoming more favourable to the resource based currencies daily. That is one of the things that the chart above tells us.
The differences - strategic or critical or both - for metals are an important distinction, which investors must note, so here are some working definitions:
A strategic metal is one that gives an item manufactured from it the most value for the least cost; it may be substituted with a cheaper metal only when the total economic cost of the substitution is less. For example, during World War II, when a huge amount of electrical wiring was needed for the Hanford Washington Facility being built to separate fissionable material for weapons, the Manhattan Project was confronted with a crisis; copper, as brass, was critical to the war effort; small arms ammunition as well as some larger calibre types, could only be produced efficiently in the volumes needed from brass. Therefore the Manhattan Project requisitioned thousands of tonnes of silver, a better electrical conductor when pure than copper, but useless in building ammunition (pace: The Lone Ranger), and proving useless in wartime. The silver was returned to the treasury after the war as Hanford was rewired with a small portion of the huge immediate post-war beating of swords into ploughshares, cars, refrigerators, radios, household plumbing and electric wire for all those new appliances and homes and cars. Note that when the dollar fell to the point that the cost of the silver in a coin exceeded the stated denomination of the coin, silver vanished forever from American circulating coinage for which its value would need to fixed against that of the dollar (1964).
A critical metal is simply one without which an industrial process cannot today function, and which is or can be made available in sufficient quantity so that it can be used commercially, and for which no economical substitute today exists. For example, rhodium is critical to the reduction of acid forming nitrogen oxides to harmless nitrogen in automotive emission control catalytic converters. Another example is indium. In the form of indium tin oxide, it is the best and it is universally used to make the transparent conductive film which allows flat screen LCDs to function. The National Academies, in two reports discussed by me on this website last October (found here and here), named the critical metals for American industry and America’s 21st century military. These reports, plus some critical commentary, some of it by me on Resource Investor, make required reading for serious long-term investors in metals and minerals.
“The times, they are a changin’,” Bob Dylan sang, and he was and is right, not only about civil rights but also about economics.
The precious metals of our time are not those of the past - no matter how long and glorious a past it may have been. The precious metals of our time are the so-called minor metals that are strategic and critical to our industrial civilization and our standard of living.
Iron is not a precious metal or a critical metal, but it is a strategic metal. Its rising price in the 21st century is due to the fact that existing supply cannot keep up with growing demand. There is plenty of economically accessible iron ore, but a factor not normally considered has come into play: time. The free market advocates think in leisurely terms of demand driving the growth of new supply. They fail to account for the fact that if the demand occurs in a short time, then some existing users or uses must give way to the highest bidder for the fixed amounts available in the short term. Mines, at least in the capitalist world, are not developed to sit idle as inventory management devices; this is far too expensive a proposition for a free market economy.
The strategic nature of iron will become apparent to all as more and more of the supplies to make its most common alloy, steel, are diverted to Asia; the price of iron (steel)-dependent durable goods in America will continue to rise as a result of Asian demand and not of American demand; this is a first for America. But since there is no cheaper material from which to build the structure of cars and other durable items, there is no way out of the price increases.
The key critical metals for investors to follow are those minor metals, which are only produced as by-products and for which the uses are dissipative. This last word means that once the metal is used, it is not economical to recover it by recycling.
As an aside I need to point out is that a great many businesses have come and gone in the last 50 years based on recycling first military, then industrial, and finally consumer electronics. All of these businesses were predicated on recovering gold, silver, platinum and palladium widely used at the beginning of the industrial electronics era to ensure constant conductivity and provide resistance to corrosion. These stores of precious metals materials have now been exhausted and promoters who tell you of using low-cost Chinese labour to hand sort electronic components either for extracting gold or for re-use are mostly just trying to steal your money. I well remember the gleam of the gold over plating on Soviet-era missile electronics being scrapped at a facility in France; that gleam was overshadowed only by the gleam in the eyes of the managers of the facility as they watched the unaccounted for gold bars stream out in the night to a destination on a lake in the Swiss Alps; those days are gone. I’m telling you this story to illustrate that even gold once had an industrial use and, therefore, value, which has gone away. It is too expensive and too easily substituted by cheaper materials or dramatically reduced in use volume by new technologies to have any remaining industrial value that could drive its price.
Unfortunately for teenagers, the minor metals, which are now critical to the production of electronic devices, are used mostly in such small quantities per device that recovering the metals through recycling is at best prohibitively expensive and more likely simply impossible economically and technologically.
This means that many minor metals are literally used up in production. When you look at which of those are also produced only as by-products you get a list of truly precious metals.
Here is a brief list, in alphabetical order, of genuinely precious metals, which are used up in manufacturing small electronic devices. Note that only selenium and tellurium production approach 100 tonnes per year; the rest top out at 50 tonnes. The total global production of the six metals listed below is around one-eighth of the total production of gold annually:
Gallium, a by-product of aluminium mining;
Germanium, a by-product of zinc mining;
Indium, a by-product of zinc mining;
Ruthenium, a by-product of platinum mining;
Selenium, a by-product of copper, and to a lesser extent of gold and platinum mining; and
Tellurium, a by-product of copper, and to a lesser extent of gold and platinum mining.
Look on the website http://www.MinorMetals.com, published by http://www.TheBullionDesk.com, and look at the prices of these above “minor metals” over the last five years.
Imagine that you had bought these metals in 2002 and had physical possession of them, or, better, had them held for you and safeguarded as to purity in a bonded warehouse. Also imagine, please, always, that there is a willing buyer for these materials at the prices quoted on the sites such as the one named above, you would then be far better off today financially than if you had bought gold in the same circumstances. If you are an industrial-end user, imagine how your balance sheet could look if you had had a long range strategy which allowed you to hedge your future needs with off-take agreements with the primary producers. Which then are the precious metals, and which then are the hard assets of our time?
I will continue this analysis of the new hard assets in the future with: structural minor metals, such as molybdenum, tungsten, chromium, manganese, magnesium, titanium and vanadium, and power minor metals, such as the rare earths, cobalt, lithium, zirconium, hafnium, uranium, and what I think is the first new minor metal hard asset that the true value of which has only been recognized in the 21st century, thorium.
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Pacific North West Capital Corp. is an exploration company focused on platinum group and base metal projects in North America.
It is currently exploring four principal projects: River Valley PGM Project in Sudbury, Ontario; Goodnews Bay Platinum Project, Alaska,West Timmins Nickel Project, Timmins Ontario along with a PGM Strategic Alliance in the province of Quebec.
Platinum Group Metals Division
PFN is currently exploring the following PGM projects: River Valley PGM Project in Sudbury, Ontario (50/50 JV with Anglo Platinum, PFN is the project operator); Goodnews Bay Platinum Project, Alaska, (Option/JV with Stillwater, PFN is the project operator) Reconnaissance PGM Joint Ventures, Alaska, (Option/JV with Stillwater, PFN is the operator), PGM Strategic Alliance with Soquem in the province of Quebec; 50/50 Joint venture- Union Bay Platinum project, Alaska (looking for JV partner). PFN is currently in the most aggressive acquisition phase of its history and management is currently negotiating and acquiring several new PGM projects throughout North America.
Nickel Division
PFN is currently exploring the following Nickel projects: West Timmins Nickel Project, Timmins Ontario (optioned from Xstrata Nickel, PFN is the operator, drill program in progress). PFN is currently in the most aggressive acquisition phase of its history and management is currently negotiating and acquiring several new Nickel projects throughout North America.
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COMPANY WEB PAGE
http://www.pfncapital.com/s/Home.asp
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DUE DILIGENCE LINKS
SPECIAL SITUATIONS REPORT FOR PACIFIC NORTH WEST CAPITAL CORP.
By Brian Fagan, April 2007
http://www.pfncapital.com/i/pdf/BFagan_Stocks&Speculations_Apr2007.pdf
Palladium: An Investable Metal That Defies Physics
November 25, 2007
http://seekingalpha.com/article/55173-palladium-an-investable-metal-that-defies-physics
"Make Sure You Have Some Platinum Stocks in that Gold Portfolio" by Kenneth J. Gerbino.
http://www.gold-eagle.com/editorials_05/gerbino072805.html
"GOING PLATINUM" by Elliott H. Gue
Editor, The Energy Letter, December 7, 2006
http://www.financialsense.com/editorials/gue/2006/1207.html
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