The price of platinum will exceed gold this year according to US broker Citigroup, which also says investors will need to look to individual miners for out-performance rather than the mining sector overall.
Citi has upgraded it platinum price estimate to US1,700, while gold has been trimmed to US$1,675 from US$1,749.
The broker expects a 94,000 ounce deficit in the market for platinum in 2013, due mainly to spill-over effects of industrial unrest in South Africa during 2012 and mothballing of supply by Amplats and Aquarius, though this shortfall may prove to be short-lived as supply from other sources picks up.
Platinum group Lonmin is now one of the US broker’s conviction buys, alongside Rio Tinto (LON:RIO), and the broker says Lonmin has "turned the corner".
Lonmin's balance sheet is vastly improved and the mining and treatment efficiency improvements demonstrated in the past three years will continue into 2013 and 2014.
First Quantum (LON:FQP) and ENRC (LON:ENRC) were branded as conviction sells.
Citi says the outlook for base metal prices in 2013 reflects lower paced growth from China as it re-evaluates its commodity demand for a far less commodity intensive economy, and supply increases from a number of large growth projects set to deliver first production.
Nickel is most vulnerable with Citi’s forecast for 2013 lowered by about 9% to $19,890 a tonne (t) and in 2014 by 7% to $22,725/t. Forecasts for copper and aluminium remain relatively unchanged, as does the forecast for iron ore, which stays at US$120p/t.
As well as sector leader Rio and Lonmin there are also buy recommendations on Gem Diamonds (LON:GEMD), which Citi says has fallen far enough now to be attractive.
Iron ore group London Mining (LON:LOND) is also a buy even though earnings forecasts for 2013 have been reduced.
Citi says it is a big year for the group, which has to ramp up successfully the second plant in the first half to achieve 3.6mln tonnes capacity and progress to the targeted 5mln tonnes per annum phase 1 run rate in the second half, while also dealing effectively with the rainy season in Sierra Leone. The broker's target price is now £1.80.
Iron ore pellet producer Ferrexpo (LON:FXPO) is also a buy. Citi says the benefits of its $647m investment programme should start to show in 2013 – specifically first ore extracted from the Yeristovo mine, along with progress on planning for the concentrator, which would take the company’s iron ore capacity up towards 20mt. The target price is £3.20.