Commodity Summary

Market

• Platinum Group Elements ("PGEs") are multi-purpose industrial metals integral to the production of 20% of all consumer goods and both platinum and palladium are used in jewellery and minted in coins.
• As environmental metals they are used in catalytic converters, fuel cells, electronics and as industrial catalysts. The catalytic properties of platinum and palladium hold the key to fuel cells. Fuel cells produce no gaseous emissions thereby reducing both air pollution and the threat of global warming.
• As a strategic metal, platinum is critical to petroleum refining, petrochemicals and production of fertilizers.

Demand

• Growth in demand for platinum since World War II has averaged 5% per annum.

	Figure 1a
	Source: Johnson Matthey
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	Figure 2a
	Source: Johnson Matthey
	Click To Enlarge

• Palladium showed similar demand growth until 1992 when the automotive catalyst offtake doubled the overall demand in a six year period. However, demand for palladium declined by over 50% in 2001 and 2002 in response to very high prices. It is anticipated that higher levels of demand will be restored due to lower prices and unsatisfactory substitution by other commodities by late-2005.
• Growth in demand for the PGEs is anticipated to average at least 5% per annum over the next 3 to 5 years based on historical growth records.

Supply

• There are no known major stockpiles of platinum in the world.
• The Russian stockpile of palladium supplied 25 to 40% of the world's palladium from 1992 to mid-2001. In mid-2001, shipments from the Russian stockpile ceased due to the drop in demand. When demand returns to 1999-2000 levels, it is broadly suspected that this supply will diminish within two years. Platinum and palladium are substitutable for each other to some extent. The palladium primary production shortfall currently represents a structural deficiency of 10% for the entire PGE market. (opinion James R. Trusler)
• Russia through its Noril'sk-Talnakh facility is the leading producer of palladium as a co-product of its nickel mining. Palladium production capacity in the existing operations has been declining in recent years although efforts are being made to reverse this trend presently. South Africa is a close second in palladium production and a leader in all other PGE production from reef-type deposits in the very large Bushveld layered mafic intrusion. Historical production capacity increases in South Africa have been limited to 3 to 5% per year and will increasingly be sourced at greater depths.
• Other sources of PGEs represent less than 10% of the world's supply and include, Stillwater's JM "reef" at the Stillwater layered intrusion, Montana, North American Palladium's "Roby Zone" layered complex at Lac des Iles, Ontario and by-product PGEs from nickel mining of contact deposits associated with the large mafic lopolith at Sudbury, Ontario. Recycling of autocatalyst PGE is of minor significance at this time but may increase in the future.

Outlook

• Global PGE consumption exceeds 14 million ounces per annum with 1.5 to 4.0 million ounces of the supply in 9 of the last 12 years being derived from stockpiles. In the opinion of Platinex Inc. management, near term depletion of the palladium stockpile would seriously reduce the world supply of PGEs for several years.
• An opportunity exists for many small PGE deposits and/or for one or two mega deposits to satisfy the structural deficit.