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PALLADIUM
CHECKMATE... The moves are coming together for the land of chess champions. The Russians have an iron grip on palladium in a masterpiece of strategic play. Perhaps there’s something of luck in this magic metal palladium, whose production is under the effective control of one group, Norlisk Nickel. Palladium is finding itself in great demand as a catalyst for motor exhaust pollution control, diesel emissions (which are carcinogenic) and even more consumer electronics in the form of a better than plasma replacement! Norilsk Nickel’s own mine deposits are unique in their size and are unusually rich in pgm. It is estimated that head grades at Norilsk-Talnakh mines average between 10 and 11 grams per tonne pgm – more than twice the typical grade of ore mined in South Africa – in addition to high base metal values of around 1.8 per cent nickel and over 3 per cent copper. The Norilsk-Talnakh ore bodies occur as large sheets or pods associated with a sequence of layered igneous intrusions. The deposits are considerably wider than the narrow, continuous reefs mined in South Africa, but are much more variable in grade and composition. Consequently, even within a single mine, pgm grades can vary widely. The Bold Opening Move.Let’s not forget how this game was opened. In 2000, The Tokyo Commodity Exchange, in cold blood, froze all Palladium contracts as the shorts couldn’t deliver and the Russians wouldn’t ( or couldn’t?) ship. The Nymex did the next best thing: it raised the margin for a single palladium contract to $168,750! The game backfired on the Russian Interests only temporarily, and ushered in the mid game. Mid GameAfter the massive Palladium Price spike, companies looked for alternatives, and supply expanded. The Ford Motor Company had to write off a billion dollar fall in the value of its palladium inventory! Stillwater Mining was brought to the brink by its expansion, saved by a white Knight in the form of Norilisk Nickel. In June 2003, Stillwater issued 45,463,222 new shares of its common stock to Norimet Limited, a wholly-owned subsidiary of Norilsk Nickel, representing approximately 51 percent of Stillwater’s shares. In consideration for the shares, Norimet paid Stillwater $100,000,540 in cash and approximately 877,000 ounces of palladium metal. No other miner would be brave enough to open new mines with Palladium as a primary product, let alone spend funds to persue the metal in the mean time. Russian PGNorilisk Nickel purchased 20% of Goldfields Limited in March 2004.Is there an underlying palladium play behind this? From Gold Fields: “Much progress has been achieved on the Arctic Platinum Partnership with Outokumpu. More than 50,000 metres were drilled on five prospects and numerous exploration targets. Two prospects ….exceeded expectations with a combined resource increase to 6.0 million ounces of platinum, palladium and gold, an improvement of over 100 per cent over last year's resource estimate.” What is so unusual in the world of massive mining houses, these transactions were paid for in cash in the case of Goldfields, and a mix of cash and palladium for the Stillwater shares - not the usual paper trades, share swaps and mergers. This demonstrates the financial powerhouse Norlisk has become, with no need to dilute its ownership control. Let the End Game Commence!Palladium prices are showing life and yet the commercial traders are net short 10 times their long positions. They believe the price will fall and have not capitulated. However palladium is not to be toyed with .It will soon be safer to play Russian Roulette.
Will there be another massive squeeze, or will the palladium bull move be stage managed for a long sustainable run? Palladium bullion, stocks and futures could all be in for some exciting action.
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