Investing in Palladium through Mining Companies - dummies

Investing in Palladium through Mining Companies

One of the better — albeit indirect — methods of getting exposure to the palladium markets is by investing in companies that mine the metal. Here are a couple of them:

  • Stillwater Mining Company (NYSE: SWC): Stillwater Mining, based in Montana, is the largest producer of palladium outside South Africa and Russia. Although it is involved in platinum and other PGM, its primary mining output is palladium. It produces approximately 500,000 Ounces of palladium a year, primarily through North American mines.

  • North American Palladium (AMEX: PAL): North American Palladium, headquartered in Toronto, has a significant presence in the Canadian palladium ore mining business. It is the largest producer of palladium in Canada, with production in 2005 totaling almost 200,000 Ounces.

Here are a couple of international palladium companies to consider:

  • Anglo Platinum Group (South Africa): Anglo Platinum Group is one of the largest producers of palladium in the world. The company produced over 2.5 Million Ounces of palladium in 2005 and is estimated to have reserves of over 200 Million Ounces (this includes other platinum group metals). With its operations located primarily in South Africa, Anglo Platinum Group is your gateway to South African palladium. Its shares are traded in the Johannesburg Stock Exchange (JSE), as well as the London Stock Exchange (LSE).

  • Norilsk Nickel (Russia): Norilsk Nickel is the largest producer of palladium in the world. It dominates the Russian palladium industry, which is the largest in the world. The company’s shares are available through the Moscow Inter-bank Currency Exchange (MICEX).

Palladium belongs to the Platinum Group Metals (PGM), and is a popular alternative to platinum in the automotive and jewelry industries. Palldium’s malleability and corrosion resistance make it the perfect metal for its largest use: the creation of pollution-reducing catalytic converters for vehicles.

In addition, because palladium is less expensive on a troy ounce basis than platinum, it is increasingly becoming the metal of choice for the manufacture of these devices. Palladium is also used in dentistry and electronics.

Russia and South Africa account for over 85 percent of total palladium production. Because palladium production is dominated by these two countries, any supply disruption from either country has a significant impact on palladium prices. Mining companies have tried to diversify their activities beyond Russia and South Africa.