Flood of buying pushes Montana PGM miner to near 3-year high

Stillwater Mining (NYSE:SWC) shot up on Wednesday, as investors look for alternative suppliers of PGMs amid predictions of a the largest market deficit for the precious metals in more than 30 years.

In early afternoon dealings the Billings, Montana-based company was changing hands for $17.24, up 3.3% on the New York Stock Exchange, after earlier in the day hitting a near-three year high of $17.22.

Some 2.6 million shares in the $2 billion counter were traded by 2:25EST, more than the usual daily average. Stillwater shares are up 40% since the start of the year.

Cash-flush Stillwater is the only platinum and palladium producer in the US and accounts for 6% of global palladium production and 2% of the world's platinum supply from its two producing mines.

Stillwater boasts more than 22 million ounces in PGM reserves, 80% of it palladium. Last week the company signed a 5-year sales agreement with refiner and autocatalyst manufacturer Johnson Matthey that also resulted in a $17-22 million cash injection.

A prolonged strike in South Africa, rising tensions between Russia and the West and the launch of two new physical palladium-backed ETFs have pushed the palladium price up nearly 16% this year.

Platinum is up close to 7%. Between them Russia and South Africa control 83% of world palladium and supplies 70% of its platinum.

Industry consultants Johnson Matthey Plc said yesterday platinum consumption will beat supply by 1.22 million ounces while the palladium shortfall will widen to 1.61 million ounces, from 371,000 ounces last year and the eighth year in a row of deficits.

Bloomberg reports that would constitute the largest market deficits ever, based on Johnson Matthey data going back to 1975 for platinum and 1980 for palladium:

“Supply-side issues are common to both platinum and palladium,” Peter Duncan, general manager, market research at Johnson Matthey, said yesterday. “We do expect auto demand to keep rising. In the medium term, this is mainly to do with emissions legislation in the case of platinum, and mainly growth in vehicle production in the case of palladium.”

Palladium futures trading on the Nymex in New York rose to $830 an ounce on Wednesday, the highest since March 2011 and up 16% since the start of the year.

Platinum continued to underperform its sister metal however and July delivery contracts are up $1,475 an ounce.