The spectre of a shocking global recession is turbocharging demand for safe-haven shares. And I consider platinum producer Tharisa (LSE: THS) to be one such lifeboat for ISA investors to buy in these turbulent times.
A backdrop of severe macroeconomic and geopolitical stress is powering gold prices to fresh landmark highs. But it’s not the only ‘investment metal’ which is enjoying a demand surge from scared investors.
Data just released from the World Platinum Investment Council (WPIC) illustrates this point perfectly. Demand for platinum bars and coins totalled 312,000 ounces between January and March as Covid-19 fears grew. This was up 300% from the quarterly norm of 70,000 ounces recorded in 2019. And the body expects safe-haven consumption of the metal to remain strong throughout 2020. It predicts that bar and coin demand will balloon 115% to 605,000 ounces this year.
The green factor
Now the WPIC notes that physical platinum demand from the auto sector slumped in quarter one because of plant closures. This dropped 17% year on year to 132,000 ounces. It expects the market to recover during the rest of the year, though, helped by new emissions regulations that are being rolled out in China and India in 2020. The metal is implanted in catalytic converters to reduce carbon production.
The drive to cut car fumes shouldn’t just increase platinum demand in the near term, however. Plans to reduce global greenhouse gases over the next decade has accelerated in all four corners of the globe in recent years. Some experts believe that the coronavirus outbreak will ramp up legislative action in the future, too, given the link between high infection rates and territories with elevated pollution levels.
It looks like the likes of Tharisa can expect both investment and industrial demand for its mined material to remain robust during the 2030s, then. But this isn’t the only reason to buy into the South African mining giant today. The brilliant progress the safe haven is making on the production front provides another sound reason to buy.
Buy it for the global recession
In half-year financials last week Tharisa said that it mined 2.3m tonnes of reef during the first quarter. This was up 2.3% from the same 2019 period.
On the flip side, production of platinum group metals (or PGMs) dipped 1.6% year on year, to 66,500 ounces. This reversal was a reflection of Covid-19-related plant shuttering though. In fact, output from the Tharisa mine remains solid and output from the Genesis and Voyager independent processing plants exceeded nameplate capacity prior to the lockdown.
Tharisa is clearly in great shape, then. But its forward price-to-earnings (P/E) ratio of just 15 times fails to reflect its bright profits outlook for the new decade. But this undemanding multiple is not the only reason why the business isn’t a brilliantly valued safe haven. Right now it also sports an inflation-crushing 3.5% dividend yield for 2020. I think it’s too good to miss right now.