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<p><strong>Global Supply Disruptions: Platinum and South African Mine Strikes</strong></p><br/>

<p><strong>Mine Strikes Background</strong></p><br/>

<p>CHARL MALAN: When I look at the commodities world, I consistently say to investors that we need to focus more on supply. Within the South African platinum industry, it’s a very topical issue. The reason why the South African industry is so topical, first of all, is that platinum in South Africa is about 60% to 70% of the world's platinum supply. Second, the unions within South Africa control the majority of the labor force, and the labor force is very critical to the overall supply of platinum, as it is a heavily weighted labor force industry; it's not a mechanized industry. Over the last five months, this industry has gone on strike.</p><br/>

<p>We started off with an industry that generated revenues of around 20,000 rands per ounce. Post-strike settlement, the industry will be negative about 8,000 rands per ounce. Currently the industry is breakeven after the 9% salary increase that the companies were offering. The unions were demanding north of a 100% salary increase, which would have meant breakeven point for this industry would have been 33,000 rands per ounce. We settled around 28,000 rands per ounce. Clearly the industry is making losses – more so than before.</p><br/>

<p><strong>Platinum Outlook</strong></p><br/>

<p>MALAN: What does that mean for the overall industry going forward? I believe the industry overall from a supply side point of view will change significantly. Historically South Africa has produced 5 million ounces of platinum. That has been reduced  to about 4 million ounces at the beginning of 2014 because of many reasons, including labor. Going forward I believe this industry will only be able to produce around 3 million ounces of platinum per year. The main reason is profitability. The union's demands and where the companies eventually settled is such a high number, that at current spot prices, the companies are underwater roughly 6,000 rands per ounce of production. Clearly we have a big problem within this industry in that it has to restructure itself, taking 4 million ounces that are unprofitable, bringing them down to 3 million ounces of more profitable or marginally profitable ounces. Three million ounces of production is not a very big number in an industry that is highly dependent on platinum for autocatalysts as well as for jewelry. I do believe in an industry where we've lost nearly a million ounces of production because of a five-month strike – in my opinion, this industry will be very tight, and prices will be well-supported for that reason. </p><br/>

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