Market Report: Violence boosts platinum miners

Escalating civil unrest and platinum mine closures don't sound like good reasons to start buying shares in platinum mining companies. But that is exactly what happened yesterday.

As violence spread across South Africa's platinum mines, the price of the metal continued to rocket and punters piled in to mining companies, pushing the shares higher.

Lonmin, the third-biggest platinum producer, failed to meet miners' demands for higher pay of 12,500 rand (£936.93) a month. Lonmin's management offered entry-level workers around 5,500 rand, an advance on the 4,600 rand they are currently paid, but less than half that demanded by National Union of Mineworkers.

When the offer was rejected, fears heightened that the violence – more than 40 people have already lost their lives – at Lonmin's Marikana mine will spread across South Africa's platinum belt.

Aquarius Platinum, up 7.7p to 48.8p and the FTSE 250's biggest riser, took the decision to close its Kroondal platinum mine near Rustenburg yesterday until tomorrow night as a precautionary measure. It follows Anglo-Swiss miner Xstrata which closed its chrome mine near the town for the day.

The day before the world's largest platinum producer, Anglo American Platinum, said it had suspended its Rustenburg operations and Impala Platinum is facing new wage demands.

The closures mean less production. Less production means a slowdown in supply, and prices start to rise.

One mining expert predicted the price of platinum could rise to $2,000 an ounce in the next nine months – it has already risen by 20 per cent to more than $1,650 an ounce in the weeks since the Lonmin shootings during the summer. Lonmin ticked up 29p to 614.5p.

It wasn't just the shortage in platinum that was encouraging investors to rush in.

The new, monthly $40bn (£25bn) cash injections in the US – QE3 – helped London's FTSE 100 punch right through the 5,900 mark, taking the riskier stocks of the mining and banking sectors sky high. The FTSE 100 jumped 95.63 points to 5915.55.

A euphoric City of London was motivated by US Federal Reserve chairman Ben Bernanke's confirmation of QE3 on Thursday evening.

He announced open-ended bond buying to turn around the struggling US economy and stock markets across the world were pumped up on the news.

Mr Bernanke's plan, alongside a better European outlook and continued hopes that China will also issue further stimulus, got investors hungry for risk again.

Miners raced to the top of the leaderboard with Kazakhstan copper miner Kazakhmys leading the charge, up 93p to 773p, as copper prices hit their highest levels since early May.

Roman Abramovich's Russian steel producer and miner, Evraz, booked gains of 34.3p to 293.7p.

Glencore, up 25.55p to 378.85p and Xstrata, 67.5p higher at 1,060.5p, were buoyant on expectations that Glencore's takeover could be approved next week.

Miners on the FTSE 250 also shot up as investors ditched the boring and safe stocks. Ferrexpo, the Ukrainian-focused iron ore miner, jumped 29p to 216.9p.

The top faller on the FTSE 100 was broadcaster BSkyB as Bank of America Merrill Lynch issued a sell note even though it announced a share buyback scheme. It lost 24p to 720p.

Investors also fancied a punt on black gold, particularly the type you find in Kurdistan.

Oil explorers in the region were cheered by the likely end to a dispute over oil exporting and payments between the Iraq government and Kurdistan.

Analysts said Baghdad and Kurdistan were now having "constructive dialogue" with an end in sight.

Tony Hayward and Nat Rothschild's oil explorer, Genel Energy, was boosted by the news, spurting up 26p to 731p. Meanwhile, explorer Afren, which earlier this week confirmed it has begun testing a well in the East Simrit prospect in the Kurdistan region, rose 7.7p to 142.8p.

Aim-listed video search engine firm Blinkx has attracted investors to its stock in recent days. On Wednesday it unveiled a deal with TV sports news agency SNTV and yesterday its shares moved up again, up 7.5p to 66.25p.

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