If you have been keeping an eye on the palladium price recently, you know it has doubled since August 2018. A lot of investors are surprised why palladium price has risen so dramatically and whether this trend is likely to continue in the foreseeable future.
Palladium is mostly used to make automotive catalytic converters since this metal minimizes harmful tailpipe emissions. With more and more stringent regulations being passed to decrease harmful emissions from vehicles, coupled with a transition away from diesel vehicles due to “dieselgate”, greater demand for gas autocatalysts and loading in each autocatalyst has led to increased demand for palladium.
Additionally, the growth in automobile production in countries like China has caused rising demand for palladium.
The automobile demand in China has increased significantly since the 1990s.That long-term trend has contributed to substantial industrial demand for palladium around the world.
South African Miners Migrating Abroad to Find Palladium
The growing demand for palladium is also affecting the investment decisions of many leading giants in the mining industry. For instance, South Africa is well-known for its rich platinum deposits, but Impala Platinum Holdings Ltd. has decided to invest its windfall profits in palladium in North America, by buying North American Palladium instead.
This is Impala Holdings’ first acquisition outside South Africa and it comes 3 years after Sibanye Gold Ltd. purchased another palladium miner, Stillwater Mining Co. based in Montana.
Even AngloGold Ashanti Ltd. is selling its last remaining assets in South Africa to focus on more profitable palladium deposits in [DW1] South America, Australia, and West Africa.
In addition to mineral endowment, there are many other factors that influence an experienced investor while deciding where to put their money, not the least of which is jurisdiction.
That’s why even though Impala Holdings had investment options in South Africa, they chose diversification in Northern America. The process of building a new mine is comparatively complicated in South Africa which means the payback period is much longer than acquiring an existing mine in a superior jurisdiction.
An analyst at Cape Town based Kagiso Asset Management, Mandi Dungwa, also agrees. Dungwa said that companies that want exposure to a producing assets while reducing risk at the same time, prefer to invest in the mining jurisdictions such as Canada.
Palladium reached a record high of $1,770 recently, which has contributed to the valuation of Impala Holdings nearly tripling this year.
This article contains the author's opinions. These are not investment-related recommendations. Do not consider the article as any type of commercial solicitation or an investment product offer.
About the Company
Palladium One Mining Inc. is a Platinum Group Element (“PGE”) Nickel-Copper exploration and development Company. Its assets consist of the Läntinen Koillismaa PGE-Nickel-Copper Project, located in north-central Finland and the Tyko Nickel-Copper, PGE Property near Marathon, Ontario, Canada.
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