Investec upbeat on platinum

By Brian Gorman

LONDON (Reuters) - Platinum prices have potential to hit news highs in the medium term as soaring costs in top producer South Africa may force some miners to pull out, putting pressure on supplies, a natural resources fund manager said.

South Africa accounts for 75 percent of global production of the precious metal, but most miners in the country are losing money on a cash basis, George Cheveley, co-manager of the Investec Enhanced Natural Resources Fund, told Reuters.

"Labour costs are being settled at 10 percent up; electricity went up 30 percent. The supply side is extremely challenged at the moment," said Cheveley. "This cannot continue".

He believes some producers will pull out but demand will remain strong, boosting prices of the metal.

The dollar price of spot platinum has risen about 50 percent in 2009 and hovers near recent one-year highs. It was quoted at about $1,328 (810.2 pounds) an ounce on Tuesday.

The Investec Enhanced Natural Resources Fund, launched in May last year, gained 33.5 percent in the year to September, while the Lipper Global Sector Natural Resources benchmark rose 3.8 percent.

Its top allocation is in platinum through exchange-traded commodity instruments, accounting for 4.1 percent of its total fund, up from 3.5 percent a month earlier.

Cheveley was also bullish on the outlook for prices of most other metals, including gold and copper.