Three days before the Xstrata (London:XTA) bid deadline, and Lonmin (London:LMI) has rolled over into the corporate equivalent of the fetal position.

Lonmin CEO Brad Mills bowed out of his position today by “mutual consent” according to the company, which Mills led for the last four and a half years through safety stoppages, labor strikes and power outages in its South African platinum mines.

Whether culpable or not, Mills has been blamed for a 29% decrease in output at Lonmin’s mines, and the market is expecting even worse numbers coming from the miner soon. It’s fiscal year ends tomorrow, and things are looking grim.

The former CEO said Xstrata’s $9.1 billion bid for his company undervalued Lonmin, but the market would beg to differ. Currently, LMI shares are running around 21 pounds ($38.00) about a third less than the all-cash offer of 33 pounds ($59.51) per share.The market is certainly betting against the buyout, but it would be the best thing to happen to Lonmin. The company can’t seem to get production up without help. It’s watched the price of platinum fall 52% since March, and it’s liabilities are mounting against any possible profits.

Lonmin’s new CEO, Ian Farmer, is a chartered accountant who joined the company in 1986 and worked as a director and chief strategic officer before taking the CEO position. Doesn’t he already sound like a good subsidiary president for Xstrata?

But the real question now is not whether Lonmin will accept the offer, but whether Xstrata will make the offer at all. Will Xstrata walk away or rescue Lonmin from oblivion? We’ll have to wait and see.

Source: Will Xstrata (XTA) fill vacuum left by Lonmin (LMI) CEO?

Nickel pushed almost back to the $9 mark in early New York trading, but tumbled along with copper, closing at its intraday low of $8.6485/lb., down 11½ cents. Zinc moved up and, tho it hit the morning selloff, managed to end in the black at $0.8055/lb., up more than a penny. Aluminum was up and down sharply a couple of times, to little effect as it added just a tenth of a cent, to $1.1904/lb., while lead gave up substantial morning gains, shedding a penny and two-thirds, to $0.8617/lb.

Copper was hit by economic concerns as well as persistently high stockpiles. Inventories monitored by the LME now stand at 182,000 metric tons, the highest level since January.

“I think the sentiment still remains pretty vulnerable,” said analyst Sudakshina Unnikrishnan at Barclays Capital. “The concerns still remain on board about how the global economy is developing. Concerns about the slowdown and how that links back to demand are pretty much in place.”

Gerard Burg, an analyst at the National Australia Bank, added that, “There are still grey clouds over the United States and Europe … The trend for metals is down. The global economy is looking softer than in some years and supply is moving into surplus for some of these metals.”

Lead got hammered as the dollar strengthened. Prices had risen as much as 3.8% after the LME reported another 450-ton decline in inventories, to 78,700 metric tons, the lowest level since June 12.

In company news, the UK’s Panel on Takeovers and Mergers has told Xstrata CEO Mick Davis to “put up or shut up” by October 2 on the firm’s pre-conditional offer for platinum group metals producer Lonmin (LMI). Lonmin sought a ruling after Xstrata (XTA) made its hostile offer of ₤33 a share, which Lonmin rejected out of hand, on August 6.

The Panel ruled that, by 5pm on 10/2, Xstrata must either announce a firm intention to make an offer for Lonmin or announce that it does not intend to make an offer. If Xstrata does not commit to making an offer by the deadline, it will effectively be precluded from doing so for the next six months.

Source: Base metals treading water -  Still seen as highly vulnerable.

For the tail of the tape; the TSX Exchange gained 1.63%, while the TSX Gold Index (TSE:XGD) rallied 2.9% and the TSX Venture Exchange, Canada’s largest junior exploration bourse, tacked on 0.28% with the declining issuers beating out the advancers by a 462 to 362 margin on volume of 101 million shares traded.

The big news of the day did not include any Canadian listed stocks as mining giant Xstrata (LON:XTA) made a $10 billion cash offer for Lonmin (LON:LMI), the world’s third largest platinum producer. Xstrata tabled a $33 per share bid that Lonmin says is opportunistic despite its 42% premium over Tuesday’s closing price.

Back at home, Atac Resources (CVE:ATC) appears to have tagged at its wholly owned Rau property in the central Yukon. The discovery hole returned 1.24 grams gold per tonne over 68.69 metres. The company describes the mineralization as stratabound in limestone/dolomites with assays pending for nine nearby drill holes that cut similar thicknesses of the same type of mineralization. Atac ended the session up C$0.125, at C$0.375.

Axmin (CVE:AXM) added C$0.015 to close at C$0.23 after the junior reported a 46.7 metre intercept running 3.9 grams gold per tonne at its Komahun project in Sierra Leone.

It was a good day for shareholders of Hathor Exploration (CVE:HAT) despite no new developments at its 90% owned Roughrider uranium zone in the prolific Athabasca basin of Saskatchewan. Hathor ended the session up C$0.51 to a new high of C$3.72.

Consolidation is continuing and the weakness in the resource market means only the strong will survive. We will see what Thursday trading has in store.

Source: Resource Stock Roundup: Thursday, August 7th, 2008

No other precious metal has a tighter supply than platinum.

Though platinum prices have remained high over the last few years, supplies are getting thinner by the day as South African production draws to a standstill. Lately, these tight supplies have helped platinum prices shoot up north of US$2,000.

In fact, platinum has climbed so high that its sister metal, palladium is becoming the new exciting speculation. Right now, palladium is sitting at 56% off its all-time high in 2001 of US$1,100 an ounce. The platinum-to-palladium differential hit its widest level in history in late May as platinum prices rocketed to new highs.

So the question is: Has the price of platinum climbed so high that industries will start switching to palladium?

The Boom in Platinum

Platinum has a variety of uses. The automobile industry uses platinum for gasoline-powered catalytic converters and it’s also widely used in jewelry.

Investment demand is also draining platinum supplies. Recently, another platinum exchange traded fund (ETF) began trading in New York. In 2007, two platinum ETFs began trading in London and Zurich, respectively, effectively draining more supply from a thinning market.

Platinum initially led the bull market in the precious metals complex earlier this decade. But now platinum has fallen behind silver (+330%) and gold (+234%). Since December 2001, platinum has recorded a 230% total return.

Meanwhile, platinum’s sister, palladium has lagged behind the other metals. Palladium also still has an abundant supply. That’s mainly because Russia dumped a large supply of palladium on the market earlier this decade. As other metals have risen in price, palladium prices have declined 54% over the last seven years.

Deficit of 480,000 Ounces in 2007, 711,000 Ounces in 2008

No other precious metal has suffered more from growing supply shortages since last year than platinum. And it’s getting worse.

According to Johnson Matthey, a metals and chemicals forecasting firm, platinum reached a deficit of 480,000 ounces last year. They’re forecasting platinum will hit yet another record deficit of 711,000 ounces in 2008.

Platinum Sails to the Moon and Beyond

This follows massive production downgrades from AngloPlatinum (OTC-AGPPY-PK) and Lonmin (LON:LMI) – two of the world’s largest platinum mining companies.

Platinum production in South Africa accounts for about 80% of global output. Just in 2007, South African production declined 4.9% to 5.04 million ounces. South African mines are facing several issues including smelter closures and a host of safety issues interrupted mining operations.

Worse, widespread electricity shortages in South Africa this year are lending to another major price increase. Still, supplies continue to shrink and extend into a major net deficit situation. South African platinum output has hit its lowest levels since 2002 and continues to contract in 2008.

Can’t Hide Production

Unlike crude oil, which has doubled year-over-year in the midst of a parabolic bull market, spot platinum is much easier to quantify in terms of overall supply.

It’s hard to hide platinum output. We know that one country mines more than 75% of all output. And if that one country can’t boost supplies, it’s an easy speculation that prices are going to rise much higher.

In short, South Africa can’t produce enough supply to meet demand. And according to Johnson Matthey, global platinum output last year fell 4.1% to 6.55 million ounces and that amount was easily absorbed by the auto industry and jewelry market.

Palladium to Benefit?

Palladium is the worst-performing precious metal this decade. But it might receive a big boost if platinum prices remain so high.

Palladium always competes with platinum in the auto industry for catalytic converters. So if prices continue to rise, the industry will have to switch to the cheaper metal — palladium.

In the absence of a significant drop in jewelry demand or a major recession in new auto sales outside of the United States, platinum prices are likely to remain high. That should help palladium, which has gained a cumulative 29% in 2008.

Palladium Starts Its Rise to the Top

Palladium, however, remains in net supply surplus heading into 2009. Unlike platinum, there are no threats to palladium’s production. Russia is the main palladium producer. And unlike South Africa, where mining output has stalled, Russia continues to supply the palladium market.

Platinum prices will have to rally significantly from current levels if palladium is to absorb market share in the auto industry. Still, judging by technical chart patterns since 2006, palladium is looking strong.

Platinum Up-Crash Ahead?

Since 2003, spot platinum prices have soared a cumulative 250% from US$594 an ounce to US$2,077 now. Platinum reached an all-time high of US$2,290 in March and sits 9.3% below that best level.

According to RBC Capital Markets, platinum demand continues to average about 3-4% annual growth. Once again, that’s mainly from catalytic converters and jewelry.

If platinum supplies continue to shrink, which is almost a virtual guarantee with these production problems in South Africa, we will have a much higher platinum price by Christmas.

The advent of exchange traded funds investing in platinum since last year in Switzerland and now in the United States since May will continue to suck more supplies from an already strained market. This is bad news for consumers, but great news for investors seeking the Perfect Storm in the commodities markets.

Platinum and palladium are probably two smart speculations in mid-2008. If you divide your portfolio equally between these two metals, you’re likely to get a handsome reward over the next 12-24 months.

Source: Why These Two Twin Metals Will Skyrocket By Christmas