Many reasons to buy in platinum, firm says

Why invest in platinum? According to Johnson Matthey Ltd., a Canadian refiner and assayer of precious metals, there are plenty of reasons.

Platinum is the rarest and most precious of metals. Eight tons of ore are required to produce an ounce of the metal. Platinum is 10 times more rare than gold on the earth’s surface. And the annual free-world production of the metal — 95% of the world’s platinum is mined in only two countries — is between 80 and 90 tons, compared to 1,000 tons of gold and 10,000 tons of silver.

Platinum, it is estimated, is used in the manufacture of one out of five products, including in the jewelry industry. New products containing the metal are being developed for use in electronics, aircraft, pollution control systems such as electrochemical fuel cells, chemical process and petrochemical product catalysts, dental alloys and medicine. An increased demand for platinum catalytic converters for motor vehicles is foreseen; the U.S. auto industry currently accounts for 32% of total platinum fabrication demand.

“Much stronger than gold, one troy oz of platinum can be spun into a wire more than two miles long,” writes Johnson Matthey. “Platinum is all but impervious to acids; it doesn’t tarnish and will not melt except at extraordinary temperatures.

“Moreover, platinum is a catalyst, one of those rare elements capable of triggering a chemical reaction in another substance while remaining unchanged in the process. And since platinum doesn’t oxidize, it has been used by the National Bureau of Standards to make weights that will remain accurate forever.”

South Africa and the Soviet Union mine 95% of the world’s platinum, with Canada and Colombia producing most of the remainder.

“Recycled” platinum taken from catalytic converters in junked cars is another source of the metal. “The converters are removed by the wrecker and sent to a plant where the platinum is stripped off chemically,” writes the firm. “This process, which yields only a small amount of platinum per converter, promises to be an important resource for the future because of the sheer volume of converters available for recycling.”

Platinum, which sold for an average price of $426(US) per oz in 1983, dipped to $359 in 1984 and $293 in 1985 before rebounding to $467 last year. In mid-March of this year, the price was in the $520 range.