Investing In Platinum – The Universal Catalyst

Platinum’s Unique Properties

Some metals, like gold, derived their value from their historical role as currencies. Some are purely industrial metals with unique physical properties, like tungsten and titanium, which we covered in “Tungsten—The Secret High-Tech Metal” and “Investing In Titanium: Stronger than Steel and Denser than Aluminum.”

However, another category of metal derives its value from its chemical properties. The platinum metal group, which includes platinum as well as palladium, rhodium, ruthenium, osmium, and iridium, is unique for its ability to catalyze chemical reactions.

Catalysis is the ability of a compound to speed up or make possible chemical reactions that would otherwise be slow or impossible.

It is for this application that platinum and the other metals in the same group are mostly used. The large majority of consumption is driven by the automotive industry, which uses platinum, and sometimes palladium and rhodium, in catalytic converters in ICE (Internal Combustion Engine) vehicles to reduce pollution.

A small portion of these metals are also used for jewelry and investment purposes, but far less than gold and silver. And as we will see, it could be a crucial metal in high-tech and green energy applications, beyond the current ICE catalytic converters and chemistry uses.

Platinum is a very rare resource overall, with an abundance in the Earth’s crust of about a millionth of 1%. This makes the discovery of platinum ore very difficult, at least concentrated enough to be economically viable to mine.

Most of the production of platinum is done in South Africa, followed by Russia and Zimbabwe. Even then, this is a relatively small production, with South Africa producing only 140,000 kg in 2022 and Russia only 20,000 kg.

Source: Natural Ressource Canada

To compound this rarity, only a few deposits are actually known, with South Africa’s resources being essentially concentrated on the Bushveld Complex. This leads to outstanding efforts being made to find platinum, with for example the Zondereinde Mine at 1,100-2,300 meters (0.6-1.4 miles) below the surface, operated by Northam (NPH.JO).

Source: USGS

Platinum Price

Platinum, a mostly industrial metal, has historically been very sensitive to boom and bust periods. For example, it exploded in price from 2006-2008, before crashing, before rebounding. It also hit a multi-decade low in the bottom of the Covid-19 panic in 2020 at $740/kg.

Source: BullionVault

It has since rebounded to $1,000/kg, but it still lingers far from the previous higher prices of 2008 or 2010-2014, even without taking into account global inflation.

This gives platinum a lot of space to go up and little to go down, in the sense that any durably lower price would lead to mine closure.

As South Africa is by far the world’s largest platinum producer, specific circumstances in the country can affect the global platinum market.

For example, the country has suffered from chronic political and social instability, as well as decaying infrastructure (like an increasingly unstable electric grid) regularly threatening industrial and mining production.

Another potential factor is the fluctuation of the value of South Africa’s currency the Rand. A stronger Rand can weaken the miner competitivity (by increasing local costs measured in USD) and alternatively, a weaker Rand can boost the productivity of South African miners as they sell their products in USD.

In the same way, a weaker dollar usually removes some incentive from platinum mining. This can decrease supply, and in the process, lead to higher prices.

How Does Platinum Work

As catalytic converters are the main application of platinum, it is important to understand what they do.

How platinum atoms work in a catalytic converter is by absorbing oxygen (O2) molecules and breaking apart the oxygen-oxygen bound. It can then give this single oxygen atom to toxic carbon monoxide (CO), turning it into non-toxic CO2.

The same type of process is at play in turning nitrogen oxides and ethylene into harmless CO2, N2, and water.

Source: Quizlet

It is the universality of platinum catalytic activity that makes it unique. Most other forms of catalysts, like enzymes and organic catalysts (which won the 2021 Nobel Prize In Chemistry), tend to be very specialized.

Platinum instead, with the help of heat (provided by the ICE engine in the case of catalytic converters) breaks down many harmful molecules all at once.

The robustness of the reaction and the resistance of the metal to damage is also positive, as it allows the reaction to happen in most conditions, and not just idea lab-like settings. The catalysis driven by platinum is also remarkably efficient and high-yield, making it a favored option for many industrial chemical reactions requiring catalysis.

For example, it is widely used as a catalyst in the production of silicon rubber, to create hydrogenated vegetable oils, and in oil refining.

A few rarer use cases also use platinum for cancer treatments (platinum-based chemotherapy medications like cisplatin), to build strong permanent magnets (together with cobalt), and for electrodes used in laboratories.

Innovative Applications

Fuel Cells

Platinum’s potential future demand is often discussed in the context of fuel cells, as most currently used fuel cells use platinum in their proton exchange membrane (PEM). It is crucial to break apart the hydrogen fuel (H2) into positively charged H+ atoms and electrons in order to generate power with the fuel cell.

Source: Wikiversity

Platinum could also be used in other steps of a potential hydrogen economy, notably in the oxidation of ammonia. Platinum is used to produce hydrogen fuel by electrolysis, especially Polymer Electrolyte Membrane (PEM) electrolysis.

An Egg And Chicken Problem

This reliance on platinum for hydrogen production and utilization might actually be an issue. Platinum is so rare that it is expensive to produce, and therefore expensive to use. But so far the main roadblock to a widespread adoption of hydrogen as a green energy source has been its cost of production as well as fuel cell prices.

Both high costs are mostly driven by platinum (and other platinum metal groups metals) prices.

So as long as platinum prices are too high, hydrogen produced with platinum will be too. But then, the hydrogen economy stays a pipe dream, and there is no demand growth from hydrogen for platinum.

So overall, the hydrogen economy is never good news for platinum investors.

Either new sources of platinum are found, collapsing platinum prices and allowing for a hydrogen economy, or platinum prices stay high, and the hydrogen economy using platinum never takes off.

And this is ignoring the quick development of new technology producing hydrogen without platinum, like for example those we covered in “Hydrogen Production Advancements with Nickel Based Electrolysis” and “Generating Hydrogen by Splitting Water with Embedded Swarf”.

Batteries

EVs are constantly looking for higher energy density in order to reduce the total weight of the battery needed, which then reduces the vehicle consumption further.

Some companies, like Lion Battery, a subsidiary of Platinum Group Metals Ltd. (PLG +0.99%) are looking at platinum nanoparticles to boost batteries’ capacities.

The researchers working on this technology expect that “the price is expected to be partly offset by the battery’s greater efficiency”.

“We are discussing our innovation with commercial battery makers. The interest has been higher and sooner than we thought.

We have passed our first year technical milestone and we are approaching our second year target early. We are very pleased with the proof of concept. PGMs can play an important role in the next cutting-edge battery innovation.”

Michael Jones, CEO of Platinum Group

It is yet to be seen if this alternative chemistry will be commercially viable, with many vying for the top spot to replace lithium-ion technology, from solid-state to many others like LFP, sodium-ion, glass, graphene, lithium-sulfur, etc.

Semiconductors

Platinum is used for semiconductors in niche applications, although quickly growing. It is mostly done with a thin film a few atoms thick, reducing greatly the associated costs, even when the material is expensive.

Platinum is especially used in sensors (for example, glucose and blood pressure monitoring in a smartwatch), microelectromechanical systems (MEMS), and nanotechnologies.

Hybrid Cars

For a long time, a negative investment thesis on platinum was its quasi-obsolescence with the mass adoption of EVs and, with it, the obsolescence of catalytic converters.

However, it is becoming clear that the EV revolution might, in many places, be a bit slower than expected.

This is in large part not so much due to EV tech, which is progressing very quickly, but insufficient investments in the power grid and carbon-neutral energy generation (including nuclear). Poor networks of charging stations in many countries also increase range anxiety for potential EV users and make it difficult for drivers living in apartments without their own garages.

As a result, a growing trend is a transition phase seeing a mass adoption of hybrid vehicles before a full transition to EVs. Notably, the first half of 2024 saw a jump in hybrid sales by 44%!

“Hybrids remove what’s called “range anxiety. A lot of folks are saying instead, ‘Hey, the hybrid option works for me’. Or maybe I don’t have charging options at my home, and the hybrid offers that extended range.”

Charlie Howard – Auto Dealer Association marketing director

Hybrids Boosting Platinum Demand

This could be a game changer for platinum, as every additional million hybrid cars sold creates a demand for roughly 150,000 ounces of PGMs.

There are around 70 million cars sold every year. If a significant portion of the current ICE cars become hybrid instead of EV in the coming decade, this could increase demand for platinum by much more than the current production can react to.

Source: Our World In Data

Asteroid Mining

While platinum is extremely rare on Earth, it is actually surprisingly abundant in space. So mining it could be a key center of a future space-based economy.

While on Earth, we are digging as deep as 2-4 km for gold or platinum, just one asteroid, 16 Psyche, might be a 200km chunk of metal waiting to be mined for a value (at current prices) of $10-700 quintillion. Of course, such a value would not hold, and the price of gold and platinum would crash.

Overall, it is possible that in the very long term, platinum will become a very cheap and abundant metal, thanks to technological progress making asteroid mining a routine task.

It would then follow the trajectory of aluminum, which was, at first, a rare and exotic commodity, but today, it is a very common metal used on millions of tons scale. But as asteroid mining technology is likely decades ahead in the future before it becomes mature, this should not be much of a concern for today’s investors.

Investing In Platinum

Platinum is known as both an industrial and a precious metal. For a while expected to experience a decline in demand from catalytic converter demand fading away, it might have received a lifeline with the recent popularity of hybrid in the energy transition process.

It is actually possible to directly buy platinum for investment in physical metal form, with most precious metal bullion sellers offering coins and metal bars of platinum. Platinum jewelry is also a possibility.

Physical platinum stockpile can also be accessed through the abrdn Physical Platinum Shares ETF (PPLT) and the GraniteShares Platinum Trust (PLTM).

You can invest in platinum-related companies through many brokers, and you can find here, on securities.io, our recommendations for the best brokers in the USA, Canada, Australia, and the UK, as well as many other countries.

If you are not interested in picking specific platinum-related companies, you can also look into ETFs like VanEck Rare Earth and Strategic Metals ETF (REMX) which will provide a more diversified exposure to capitalize on the mining industry.

Maybe as an indication of how out of favor (undervalued?) platinum metal has become, the iPath Series B Bloomberg Platinum Subindex Total Return ETN (PGM) was delisted in June 2023.

Or you can read our dedicated articles about “Tungsten – The Secret High-Tech Metal“, “Investing In Titanium: Stronger than Steel and Denser than Aluminum”, and “Chinese Restrictions on Antimony Exports Highlight The Strategic Importance of this Metalloid”, which present similar opportunities and conditions with often ignored important strategic industrial metals.

Platinum Companies

1. Sibanye Stillwater

By far the largest platinum-focused company, Sibanye Stillwater, is a leader in its industry.

South Africa produces 80% of the world’s platinum, and Sibanye Stillwater is responsible for a quarter of that production (Anglo-American is a much larger, diversified miner with a focus on copper and iron).

Source: Mining Technology

It is also a producer of platinum metal groups, such as palladium, rhodium, and ruthenium.

It is currently diversifying to enter the gold and battery metal markets, notably for a lithium mining project in Finland.

Source: Sibanye Stillwater

In September 2024, Sibanye Stillwater announced that it would restructure its Montana’s Stillwater mine, cutting this mine’s output by 45% to reduce costs. The mine, which contains more palladium than platinum, has suffered from persistent low prices of palladium.

This led to a massive $435M impairment charge, causing the company to register a loss in H1 2024.

It is also worth noticing that current prices are barely enough to cover production costs for most platinum-rich regions, making it a bottom plateau for the industry before mine closure.

Source: Sibanye Stillwater

2. Platinum Group Metals Ltd

PLG is a junior platinum miner that has not yet produced the metal. Its future mine is located just north of the world’s largest deposit of platinum, the Bushveld Complex, where Anglo-American produces the bulk of South African platinum.

Source: PGM

The site was discovered in 2011 only and has seen $89M invested in testing its feasibility as a future platinum mine.

The deposit is relatively close to the surface, at “only” 140 meters depth. It contains metals from the platinum metal group (PGN) as well as gold, nickel, and copper.

Source: PGM

Based on these reserves and the geology, the mine life is expected to be around 54 years, with an average cash cost of $658/ounce of production, representing a $6.5B in cash flow over the life of the mine and putting it firmly in the lowest production cost category among global PGM producers.

Despite the promising profile, as a junior miner, PGM needs to find funds to actually build the mine, a process often riled with over-costs and delays.

PGM has raised $9.1M in 2022-2024 and expects to have to raise another $11.9M for pre-construction early infrastructure like Social & labor plans, community, power, water, roads, fencing, and accommodations.

The construction process is expected to take 5 years, and the ramp-up to full production 2 years. Payback time for the initial investment after the first production is expected to take 5.8 years.

Source: PGM

(Readers should know that junior miners are inherently riskier and potentially more lucrative than large established miners. So investors will need to monitor carefully the situation and be aware of the associated risks).