The platinum market has been especially robust over the last year with the price of platinum and associated PGM's reaching new historic highs. Overall the market is expected to remain stable and the demand to continue increasing. These factors certainly add to our cause and vision as a junior exploration company as we see much scope for growth and an opportunity for us to position ourselves to benefit from this.

The following is a summary from Johnson Matthey as published on their website (www.platinum.matthey.com ):

"Global demand for platinum rose by 1.2 per cent to 6.78 million ounces in 2006, supported by an increase in the use of this metal for auto catalysts and a range of industrial applications. This growth more than offset a decline in new metal purchased by the jewellery sector. Supplies of platinum also climbed in 2006, rising at a slightly faster rate than demand, to reach a total of 6.79 million ounces. South African production expanded to 5.29 million ounces, boosted by the addition of new mining capacity, and was the main driver behind this growth. Overall, therefore, the platinum market was effectively in balance over the entirety of 2006, with a nominal surplus of only 10,000 oz.

The automotive market represented the majority of demand (4.20 million ounces), up from 3.80 million ounces the year before. The continuing increase in the market share of the diesel engine has pushed platinum consumption in auto catalysts higher. In Europe, more than half of all new light duty vehicles are now diesel powered and carry platinum-based aftertreatment. Stricter Euro IV emissions legislation came into force in January 2006 and increased the number of particulate filters being manufactured too. Both of these factors pushed platinum consumption in European auto catalysts to a record 2.16 million ounces, despite some palladium usage (in combination with platinum in every case) in diesel exhaust aftertreatment.

Global auto catalyst platinum demand would have been still higher if the price differential between platinum and palladium had not been so great. Since platinum started trading at a premium to its sister metal in 2001, auto makers have worked hard to minimise their precious metal costs. They have done so both by thrifting and by substitution of platinum by palladium on gasoline catalysts.

Since this switching has been happening for several years, there is now more limited scope to reduce platinum requirements. However, the process did continue in 2006, reducing average platinum loadings everywhere, although the negative effect of thrifting on demand was outweighed by increased production of passenger vehicles in Japan and the Rest of the World. Significant volumes of platinum - in excess of 200,000 oz - were also used in the heavy duty diesel market around the world. This represents rapid growth from 2005, with tightening environmental legislation in many countries the prime driving force. Industrial demand for platinum grew too, rising 11 per cent to 1.87 million ounces.

Although a high price encouraged thrifting of platinum in a number of applications, growth was seen in many sectors. A good example is the glass industry which took 30,000 oz of platinum more than in 2005, with expansions in LCD glass manufacturing capacity responsible for the increase.

The electronics sector had a good year, with annual sales of computers increasing by 10 per cent. With the number of hard disks in these and other devices rising, metal purchases by the hard disk sector climbed to 245,000 oz, 26 per cent up on 2005. The chemical sector also saw expanding demand for fertilisers, explosives and polymers, driving platinum demand higher.

A high oil price and national concerns over energy self-sufficiency lifted platinum use in the petroleum refining sector by 21 per cent to 205,000 oz. Platinum demand for global jewellery fabrication fell to 1.61 million ounces in 2006, down from 1.97 million ounces the year before. The decline occurred in all regions, with purchases of new metal by manufacturers falling substantially.

A rising platinum price had little impact on consumer purchasing in China with retailers reporting higher turnover but a slight decline in the weight of metal bought. However, it had a much greater impact on the amount of recycling which reduced net demand by 13 per cent, to 760,000 oz, representing the lowest figure since 1998. Chinese consumers are used to trading-in old jewellery pieces, usually in part exchange for new jewellery.

High prices have encouraged this process. "Old" metal, including unsold stock returned by retailers, now represents perhaps a quarter of total metal requirements, with a corresponding decrease in purchases of new metal by manufacturers.

Manufacturing volumes therefore declined by a much smaller percentage than the fall in demand. Pipeline stocks were also reduced, impacting upon new metal demand. Stocks are probably now close to their realistic minimum level.

In Europe and North America, the higher end of the market fared reasonably well. Cheaper, more fashion orientated products sold less well, however, under competition from other white metals including white gold as high prices affected retailer profit margins. Platinum demand fell as a result.

The Japanese jewellery market also saw demand fall: consumer sales have been dropping off for a number of years due to demographic changes (and slow economic growth) although an increased level of recycling of old rings and chain sold by the public was mainly responsible for the decline in 2006. So, while purchases of platinum jewellery fell, net demand was depressed further by the weight of metal returned to the market.

South African platinum supplies grew to 5.29 million ounces in 2006, with production raised by new mines at Everest and Two Rivers. A good performance from expansions and current operations at Anglo Platinum ensured an enhanced contribution of 2.82 million ounces from that company. Production of platinum by Impala fell slightly while Lonmin's sales were remarkably strong despite problems with its smelters. Although the primary producers took advantage of this increased production to replenish their stocks somewhat after years of market deficits, supplies of platinum grew, particularly in the second half of the year.

Russian supplies of platinum were almost identical to 2005 levels, at 880,000 oz. Although Norilsk Nickel moved to expand its base metal production, lower platinum content in the ore being mined meant that production was only maintained at the same level. Output from Russia's alluvial mines was slightly down.

The platinum price appreciated 14 per cent over 2006 and ended at $1,117. It hit record highs of $1,335 in May and $1,390 in November, but most of the price increase took place in the first half of the year, reflecting the supply demand balance. With South African mining expanding, second half metal supplies were greater than those in the first half. High platinum prices also slowed various market segments including jewellery in the second half of the year. Although the last six months exhibited improved liquidity, the price spike (to $1,390) in November illustrated the residual tightness in the market.

The investment community also had a significant influence on the price. Although long positions on NYMEX and TOCOM fell over the year, fund activity may simply have been displaced into over-the-counter (OTC) transactions and remained significant. There is no doubt that the price of gold and of other commodities were of great importance to the platinum market: it is no coincidence that as gold appreciated, platinum followed it higher, rising $135 over the year."