Space shuttle technology is set to save Eskom and send the price of platinum soaring!
In 1930 Francis Thomas Bacon invented something called a hydrogen fuel cell.
Little did he know this fuel cell, that uses hydrogen and oxygen to generate electricity (and water as a by-product) would be used for space travel.
But in the 1960s hydrogen fuel cells that use platinum inside as a catalyst, enabled NASA to power its Apollo Spacecraft.
Now, this technology is set for a new challenge: Saving Eskom from doom and boosting South African platinum miners!
Let me explain…
How generating electricity will boost platinum demand
South Africa’s Minister of Trade and Industries, Rob Davies, announced on Tuesday 31 March that the country is targeting to produce 1,000MW of power from fuel cells by 2020.
If this happens it would mean an additional 5% demand for platinum from South Africa alone.
This follows after the Chamber of Mines recently installed a 100KW fuel cell (enough to power around 100 households) at its offices.
Next in line is Impala Platinum who will set up a 1.8MW fuel cell at its Springs refinery by mid-2015. Implats’ longer-term plan is to install capacity to generate ALL the electricity it needs from fuel cells at its refinery with a 22MW fuel cell.
These fuel cells are run off hydrogen and natural gas supplied by pipeline from Sasol.
While installing these fuel cells will be a major lifeline for Eskom to keep South Africa’s power grid online they’ll serve a second purpose…
You see, a 1,000 MW fuel cell would supply 2% of South Africa’s electricity. But it would increase platinum demand by around 5%.
And that’s during a time that platinum demand is already starting to outstrip supply…
All the platinum price needs is a little more demand and then it’ll soar!
According to the World Platinum Investment Council the platinum market has had three consecutive years of supply deficit.
Simply put – the world used more platinum in the past three years than it produced.
Even though the world is using more platinum than it’s producing; the platinum price hasn’t skyrocketed as you’d expect.
That’s because the industry has built up massive stockpiles over the years.
But that’s about to change since 2015 forecasts for platinum show there’ll be a further 235,000 ounces supply deficit this year. And this means that stockpiles are slowly but steadily being depleted.
Stockpile levels are now at about 4-6 months’ worth of production.
It sounds like a lot. But here’s the kicker – a single three month strike like the one we saw last year would be enough to decimate platinum stockpiles…
What’s more, a new demand source for platinum, like Fuel Cells, would cut through stockpiles even faster and send the platinum price sky high.
A single 1,000 MW fuel cell would increase platinum demand by around 5%
But if fuel cells like this starts being adopted for power generation in other countries as well – imagine how demand would soar…
And that’s not even mentioning fuel cells for cars.
If 1% of the world’s cars use hydrogen fuel cells platinum demand would jump 20%!
It’s still early days – but this technology could be a saving grace for struggling South African platinum producers.
Firstly it saves them from dependence on the unpredictable power supply Eskom has. And secondly it has the potential to create a major new source of platinum demand – sending the platinum price through the roof!
I personally don’t favour the largest platinum producers like Lonmin, Implats and Amplats. They’re too big, too inefficient, and too inflexible.
For my money I’m looking at Royal Bafokeng Platinum, Atlatsa, and Aquarius Platinum.
Here’s to unleashing real value
Editor, Red Hot Penny Shares