Swiss pension funds buy into junior platinum explorers fund

Platinum juniors, considered undervalued compared with platinum majors and gold explorers, are the subject of Swiss pension fund investment.

JOHANNESBURG - 

Swiss pension funds have bought 20% of the Best Asset Class (BAC) Platinum Fund, marketed as the world's only platinum fund, as junior platinum stocks are undervalued and demand for the green metal is set to grow.

Best Asset Class (BAC) fund manager Bernard Loriol said today that Swiss Pension Funds now had a 20% asset holding in the Bushveld platinum fund invested in junior platinum companies in the South African Bushveld complex compared to a zero holding three months ago.

He said pension funds were likely to increase holdings in the fund when it established a 3 year track record towards the end of the year. Sophisticated Swiss pension funds that had already invested in the fund sought the returns commodities offered and were disappointed with the performance of some indexes, according to Loriol.

Investors in the Bushveld Fund were indirectly investing in China that currently consumes 27% of the world's platinum production and in the green metal that will counter climate change with the manufacture of autocatalysts. China is forecast to increase its consumption of world platinum production to 35% by 2011. 

He said he anticipated investment to flow to platinum companies for at least the next three to five years as a result of development in China and growth in alternative energy sources such as fuel cell energy.

"Platinum explorers are undervalued compared to gold explorers as underground platinum ounces trade up to $25 per ounce compared to gold ounces underground at $87 per ounce, while the PGM basket price is about double the price of gold."

He confirmed that pension funds could turn away from investing in gold to platinum, if the undervaluation of platinum explorers persisted and the platinum story remained great.

The net asset value of the fund was 226m CHF (US$185m) at the end of April compared to 96.47m CHF ($79.1m) at the beginning of March. Its top five holdings are in Eland Platinum (17.8%), African Platinum (10.5%), Anooraq Resources (8.1%), Wesizwe Platinum (7%) and Ridge Mining (6.9%).

The fund manager strongly believes current PGM prices will be sustained as a result of "China, climate change, and emerging investment demand" and says the current price cycle cannot be compared with historical price movements.

The Bushveld Fund achieved a performance of 65.72% last year, compared to 22.50% in 2005, and has realised returns of 29,33% in the first quarter and 67,15% in the year to date.

Andre Ludin of the Novartis Pension Fund in Switzerland said liquidity could be an issue if one made a large investment in the Bushveld Fund, but the "small" platinum companies offered good value as only 6 to 10% of their reserves were included in their net asset values (NAVs).

This compared to the NAVs of major platinum producers, which accounted for about 80% of company reserves. 

"The small companies will finally perform better," Ludin said.

He said investors had a choice between investing in Exchange Traded Funds or the platinum metal, big companies such as Anglo Platinum and Lonmin that are expensive for newcomers and small companies or the Bushveld fund that spreads the risk over a number of juniors and are currently undervalued.

He said the company has invested in platinum as it believes it is an investment in the future. Demand will come from autocatalysts, energy battery sales and issues such as pollution in China that will have to be addressed.

SUBSCRIBE to Mineweb.com's free daily newsletter now.

SHARE THIS ARTICLE

Print story      Email story      Subscribe to free newsletter
OTHER PAGES:  PLATINUM GROUP METALS MINING FINANCE / INVESTMENT EUROPE AND MIDDLE EAST AFRICA

Back