industry consolidation

I admit I have not been following the PGM sector for very long, but I tend to think that the opportunities for industry consolidation in the medium term do seem to stack up.

http://www.fm.co.za/Article.aspx?id=159549 : Quote :
“Investors are struggling to value assets in general and in the PGM sector costs are rising and margins are being squeezed,” Farmer says. “Until that dynamic changes positively, our share prices will be soft. The timing of the market’s move from oversupply to deficit is what investors are trying to predict.”

What's currently unfolding is that the near term outlook for the 'demand' side of the PGM sector is clouded by 'global growth fears' coming out of europe. (However, this ignores the rising strength of Asia - and Chinese demand). However, the more obvious 'supply' side PGM sector headwinds, including;

1. Sovereign Risk - Zim and SA

http://www.newzimbabwe.com/business-6533-Zimplats%20submits%20revised%20ownership%20plan/business.aspx

2. Disruptions to production - Labour Unions and Local Communities

3. Margins under pressure - Rising Costs/Exchange Rates and Rising Taxes (Zim has just announced a doubling of Taxes on Friday 26/11/2012)

http://www.newzimbabwe.com/business-6585-Zim%20doubles%20platinum%20mining%20royalties/business.aspx#news

http://www.bullionstreet.com/news/zimbabwe-gold-royalty-now-stands-at-7platinum-at-10/467

Six months ago it was pointed out to me that Platinum is trading at a deep-discount to Gold, but Platinum is rarer and has far more industrial uses.

http://uk.news.yahoo.com/low-valuations-platinum-firms-attractive-bac-105103638.html : Quote :
"long-term prospects for platinum prices remained positive as the world would need more of the metal in future for its unique chemical and physical properties. and "Not only for the car industry in order to reduce emissions, the metal will be in demand from jewellery manufacturers."

--
Implications for PLA

PLA has been hit particularly hard, caught by labour disruptions, cost blow-outs and mine output delays over the past few years and more so recently. In short, the situation management have overseen is shareholder wealth destruction through capital risings and non-delivery of guidance outcomes. A dilution of shareholdings, resulting in a high level of shares available on the market/over-hang of shares further dampening the share price. All of which produces opportunity for a would be suitor pr private equity predator.

PLA's share price is currently at rock bottom. There is value here. The current situation in global markets AND/OR a 'predator(s)' will determine the outcome of the current rights issue. Either way I think the cash from the 21/11/2012 share placement should be enough for management to keep the company running for long enough for a sustained recovery of the PGM sector and prices OR realization of the project asset(s).

The Panton project in-particular offers a would be suitor 'diversification' away from the majority of the current market risks and in particular in outside of Zim and SA.

Looking for some further guidance at the AGM tomorrow. Here's hoping for some 'long over due' good 'news' that will mark a new dawn for PLA.

Gus