Platinum loses luster amid takeover bid

Henry

Australian mining giant BHP has yet to decide today (Wednesday) whether it will raise its rejected multibillion-dollar bid for Anglo American, walk away or launch a hostile takeover.

The deadline for the giant takeover expires in a few hours.

BHP has until 18:00 (South African time) to decide.

Meanwhile, the price of platinum is rising due to limited supplies. The metal has fallen out of favor as Anglo American tries to dispose of assets and fend off a major takeover bid from BHP.

Platinum is used in the manufacture of catalytic converters for petrol engines. However, it has been predicted for some time that the demand for platinum will decrease as there is a switch to greener, electric vehicles.

This gloomy outlook has caused prices to tumble by a third between 2021 and last month.

Experts say that despite this downward trend over a long period, platinum prices have started to climb again in the past few weeks due to “the prospect of a rising supply deficit this year and next year”, according to Ole Hansen, an analyst from Saxo Bank.

“A lot of mining companies have lamented that it (platinum) is a depressed picture, but the outlook is better,” says Dan Coatsworth, analyst at AJ Bell.

Demand is expected to exceed supply by 476,000 ounces this year, according to a recent forecast from the World Platinum Investment Council (WPIC). This makes it the second consecutive annual shortage of platinum.

Supplies are limited due to declining output at key producers in South Africa and Russia, and this situation is expected to continue.

Kathleen Brooks, research director of XTB, says Anglo must now convince its investors that it can have its own growth strategy that provides value for its shareholders.

“This essentially means doing what BHP would have done: Abandoning platinum and diamonds in favor of the more profitable copper assets.”

Brooks says copper is a smarter option these days. The price of a ton of copper has risen by around 27% since the beginning of the year.

The industrial metal is widely regarded as essential to the development of the latest artificial intelligence (AI) technology.

“The focus on copper currently makes sense for global mining companies,” said Brooks.

“Copper is vital to electricity generation, and the world needs a large amount of new electricity infrastructure to meet the AI ​​boom that is coming. Copper is an essential ingredient for the AI ​​future and Anglo can make a lot of profit.

“In addition, copper is also essential to the future of renewable energy,” adds Brooks.