Tags: Metal | Rare | Space | platinum

This Metal is So Rare, We’ll Go to Space to Get It (Hint: It’s Not Gold)

By    |   Tuesday, 15 May 2012 08:30 AM

Film director James Cameron recently announced a bold initiative that sounds like something out of one of his films.

But it’s no joke or Hollywood marketing campaign. The fact is, he’s serious when he talks about using robotic technology to mine asteroids.

Cameron’s rationale is simple. Near-earth asteroids are rich in a metal that’s 20 times rarer than gold. Currently, this rare metal is found in high concentrations in countries like South Africa, Russia, and Zimbabwe.

Indeed, it may even be safe to say that this metal is extra-terrestrial. Scientists believe that much of earth’s supply of this metal has come from previous meteor crashes.

The metal is platinum. It is the least reactive metal, with huge resistance to corrosion. Indeed, compared to another precious metal, gold, platinum is much more useful to a growing modern economy.

At the moment, you can buy an ounce of platinum for about $120 less than an ounce of gold. That discount has been in place since the start of the year. Precious metals have been listless while the market has surged to pre-financial crisis highs, suggesting that this discount may continue for a while.

Historically, platinum has traded nearly twice the price of gold. Unlike gold, however, it is not a form of currency. It is primarily mined to be used up, and in increasingly high-tech ways.

One third of platinum mined every year goes into catalytic converters for automobiles. The rest goes into such diverse uses as dental apparatuses, cancer treatment drugs, and computer equipment.

Platinum is rarer than gold, and has more industrial uses. But there’s one more thing to consider. At these prices, there’s no profit in mining for new supplies of platinum. Right now, it costs more per ounce to dig the stuff up and refine it than what it’s going for.

Rather than continue to provide a product when it’s unprofitable, mines will simply shut down if these low prices persist. That’s why I suspect that the gap between platinum and gold will narrow, and platinum will soon trade higher than gold once again.

Investors can buy one-ounce platinum coins from their local coin dealers. While many major mining companies also end up producing some platinum, the current low prices will put downward pressure on the producers.

The mining companies are a better bet if you’re bullish in gold. If you’re looking for a bit more upside on a more obscure asset, pick up a few ounces of platinum. Over time, platinum may do substantially better, especially if we have to go to space to find more.

Going to space, even with unmanned robotic vehicles, will prove expensive. But considering how rare platinum is, and our rapidly improving technology, it seems a matter of when, not if, we go to space for more this useful, alien metal.

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Tuesday, 15 May 2012 08:30 AM
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