- Low capitalisation: We are looking for stocks offering maximum capital gain.
- Advanced projects: We are looking at companies with a PGM project that has had a high level of exploration activity, so that its commercial potential is demonstrable. We also want them to reach production whilst prices are high or peaking.
- Metal ratio: We prefer PGM projects with a high palladium ratio because they are likely to be discounted.
- Location: We prefer projects located outside of South Africa because high PGM prices is likely to lift the currency, driving Rand revenues down as the currency rises against $US (as the PGM prices rise).
From previous research and current market analysis, I am already aware of some stocks:
- Goldstream Mining (GDM.ASX): Goldstream is a diversified explorer, however its company-making project is a nickel-cobalt-PGM project in Tanzania, in which its joint venture partner Lonmin is earning a 50% stake by spending through to feasibility. As a result GDM has retained a considerable amount of cash to undertake other exploration projects.
- North American Palladium (PDL.TSX): This company operates a PGM mine in the USA. See their website at http://www.napalladium.com.
- AIM Resources (AIM.ASX): AIM is an emerging PGM producer situated on South Africa's Bushveld Complex. The problem with this compant is that it will be penalised by a higher Rand and any labour issues.
- Aquarius Platinum (AQP.ASX): Aquarius was the first company to capitalise on rising PGM prices in 2000. It has since commissioned 3 mines as it moves towards PGM production of 600,000 oz per annum. It has acquired Zimplats, thus diversifying its PGM holdings outside of RSA. But it is still exposed considerably to a higher Rand.
- Andrew Sheldon www.sheldonthinks.com