With the rising costs, Mansoor says, the marginal cost of production becomes too high and it becomes uneconomical to continue mining. “There is a lead time. You can’t just turn a mine on and off.” she says. It takes about five years to build a mine and get it to the production stage. [Fundamentals Favoring Platinum and Palladium ETFs.]

The cost of exploration and mining will continue to be among the issues that platinum miners will face, Mansoor says.

The power situation in South Africa has a potentially dire situation looming. The country has one utility, state-owned Eskom, and it provides power to 95% of South Africans. Demand in winter is historically at a peak of 36k megawatts; the World Cup in June could stretch demand even further. “Eskom potentially does not have enough supply to meet peak winter demand, and Eskom has committed to providing the World Cup with uninterrupted supply.”

Something has to give, and the solution may be a severe one: in order to have enough power with which to supply the World Cup, miners may have to reduce production. The last time this happened in January 2008, platinum prices shot up to $2,100. No one has definitely said this would be done, but it’s a possibility. [Your Guide to Investing in Metals ETFs.]

The issues with rising costs (labor, oil and power supply) are just the attendant risks of most metals; it doesn’t mean they’re unappealing investments. “I think pretty much any investment is risky,” Mansoor says. “There’s a downside and an upside. You always have to be aware that the price can go the other way.”

For more stories about platinum, visit our platinum category.

There are an increasing number of ways to get your platinum and palladium exposure, including:

  • ETFS Physical Platinum (NYSEArca: PPLT)
  • ETFS Physical Palladium (NYSEArca: PALL)
  • UBS E-TRACS Long Platinum ETN (NYSEArca: PTM)
  • UBS E-TRACS Short Platinum ETN (NYSEArca: PTD)
  • iPath DJ-UBS Platinum ETN (NYSEArca: PGM)
  • First Trust ISE Global Platinum Index (NASDAQ: PLTM)

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