Based on these factors, we view the fundamentals for the PGM market as being the strongest of all the precious metals. Demand is likely to continue to improve, while supplies are likely to continue the declining trend in response to the structural challenges in South Africa, Russia and Zimbabwe. This background suggests the potential for significant spikes in PGM prices that could be amplified by speculative investments in this relatively small market. Given the lack of substitutes for PGMs in autocatalysts and the relatively low cost of PGMs compared to the total cost of an automobile, demand for PGMs is not likely to subside even with a dramatic increase in platinum and palladium prices.
Large PGM deposits are scarce outside of South Africa, Russia and Zimbabwe. With the improving fundamentals, investor interest in the PGM sector has been increasing, particularly over the past six months. We believe that the market will need to look for alternate sources of PGM supply in geopolitically stable and predictable environments. This may present a positive dynamic for PGM equities in the junior mining sector and particularly companies like Prophecy Platinum with large resources in politically stable countries like Canada, which was ranked 8th in the world in the Fraser Institute's 2012/2013 Survey of Mining Companies.
While Prophecy Platinum's primary focus is on developing its PGM resources, the Company also has significant exposure to nickel and copper. Nickel prices deteriorated for much of 2012 due to economic concerns globally, but especially due to concerns of a hard landing in China, combined with market expectations that the nickel market surplus would increase as several large nickel projects commence production. In the past few months, however, the nickel price has moved well off its August 2012 lows and technical challenges associated with large nickel laterite projects have resulted in less nickel production than expected. These technical challenges along with proposed export restrictions by Indonesia will likely curb new low cost laterite production and drive up marginal production costs. Another implication of the low nickel price environment is that there have been very few new nickel sulphide deposits being developed, which some analysts believe could create a dramatic shortfall for nickel sulphide smelter feed in the next few years. Therefore, while nickel prices remain weak in the short-term, they are not as poor as predicted in 2012 and could lead to a nickel deficit situation in the next several years due to a lack of development.
The copper market has remained fairly balanced and prices have remained in the $3.40-3.80/lb range for the past six months. Copper prices rose to their highest levels since October 2012 in early February of this year in response to improving economic data from China and the United States, before pulling back with markets and a typical slowdown in activity seen around the Lunar New Year. In addition to our positive outlook for platinum and palladium, we remain bullish over the long-term for both copper and nickel in the context of high demand growth from China and the rest of the developing world.
With our new, experienced senior management team in place, 2013 should be a transformational year for Prophecy Platinum. Our Wellgreen technical team is currently updating geological model based on all of the historical exploration at the Wellgreen project and is targeting a significant drill program for 2013 that will include confirmatory drilling as well as test the resource expansion potential of several high priority targets. Infill confirmatory drilling will be done to upgrade Inferred Resources to the Indicated Resource category with a target to issue an updated resource model by Q1 2014.
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