Aquarius Platinum to Halt South Africa's Marikana Mine Due to Weak Price Outlook

Platinum is rarer than gold, but is becoming too cheap to mine, analysts and experts said.

Anglo American Platinum Ltd. (AGPPY, AMS.JO) and Aquarius Platinum Ltd. (AQP.LN)--among the world's largest mining companies of the precious white metal--said Monday they would halt production at their jointly owned Marikana platinum mine in South Africa due to low platinum prices. Futures are down 16% of their February highs, recently trading around $1,450 a troy ounce.

The move is likely to trigger wider production cuts across the industry, analysts say, as other platinum mining companies opt to shut down rather than sell platinum at a loss.

"Obviously they drew a line in the sand and said that's it, this operation has to go. And I think there are others that may follow," said Nikos Kavalis, commodity strategist with Royal Bank of Scotland.

The metal is scarcer and more expensive to extract than gold and traditionally trades at a higher price. But weak industrial demand for platinum and worries that the euro-zone debt crisis will sap global growth have pressured platinum below the price of gold, and below the cost of production for a growing segment of the industry.

The Marikana closure could signal a willingness on the part of Anglo Platinum, the world's largest platinum producer, to remove excess and inefficient capacity from the market, said analysts at Panmure Gordon & Co.

However, the production cutbacks--even if other mining companies follow suit--aren't expected to dent supplies for some time to come.

Platinum supply has outpaced demand in recent years as producers kept output steady, even as automotive production in the U.S. declined during the recession. Catalytic converters in vehicles are a key source of demand for the metal.

"Unless something happens to either supply or demand, the market looks to remain in a surplus over the next few years," said Mr. Kavalis.

Metals consultancy Thomson Reuters GFMS estimates that the platinum market will have a surplus of 735,000 ounces this year, while Johnson Matthey said the 2012 surplus will be similar to last year's--which was 430,000 ounces.

Anglo Platinum has already cut capital spending plans at its South African platinum mines, by about 1 billion rand ($13 million) both last year and the same for 2012. The company decided to prioritize less capital-intensive projects in the near term given volatility in the platinum markets and escalating costs.

And in May, Lonmin PLC (LMI.LN), the world's third largest primary platinum producer, warned there was a risk production plans in the industry could change, given "an unrelenting depressed pricing environment."

"We believe we may finally be close to witnessing industry-wide supply discipline and production cuts," said Dominic O'Kane, an analyst at Liberum Capital.

Write to Devon Maylie at devon.maylie@dowjones.com

Copyright ? 2012 Dow Jones Newswires

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