Never is the stock market uninteresting. There will always be an industry that is popular for one reason or another. The top palladium stocks have performed well this year, increasing commodity prices.
In actuality, commodities stocks are one of the only sectors with momentum. As inflation heats up, investors want to dispose of risk. Moreover, energy stocks and commodities such as precious metals frequently see the most substantial price movements when this occurs.
After reaching an all-time high of more than $3,000 per ounce in May 2021, palladium prices have fallen in tandem with the market downturn. They are presently above $1,700, a considerable decrease from their peak in May 2021. After the closure of many mines due to the epidemic, the supply continues under strain, which may help explain falling pricing. Unlike Gold and Silver, most palladium is extracted from another material. As a result, the imbalance enhances margins, resulting in increased earnings.
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An Overview of the Palladium Industry
Palladium is the rarest and currently most costly precious metal, and its natural form is silvery-white and reflective. The symbol for the chemical element palladium is Pd, and its atomic number is 46.
William Hyde Wollaston, an English chemist, discovered palladium in 1803. Wollaston separated palladium by dissolving platinum in a combination of nitric and hydrochloric acid and then observing the presence of a second metal. Wollaston called it palladium after the 1802-discovered asteroid Pallas, named after Pallas Athena, the Greek goddess of knowledge, practical arts, and cautious battle.
The Platinum Group Metals (PGMs), including rhodium, iridium, ruthenium, osmium, and platinum, are distinguished by having the lowest melting points and densities. Palladium is one of these PGMs. Palladium is utilized primarily in automotive catalytic converters and in groundwater remediation, numerous chemical applications, medicine, dentistry, hydrogen purification, electronics, and jewelry.
About forty percent of palladium output originates from Russian mines, while South Africa also has significant palladium deposits. The only palladium mine in the United States is the Stillwater mine in Montana, whereas the only palladium mine in Canada is the Lac des Iles mine in Ontario.
Since 2018, when it traded for less than $1,000 per troy ounce, palladium’s price has quadrupled to $2,850 per troy ounce. Despite the current decline in the gas-powered automobile sector, palladium stocks have also risen substantially.
3 Ways to Invest in Palladium
1. ETFs
Exchange-traded funds (ETFs) backed by palladium follow the precious metal like an index fund but trade on an exchange like stocks. The Sprott Physical Platinum and Palladium Trust (ARCA: SPPP) and the Aberdeen Standard Physical Palladium Shares are examples of palladium ETFs (ARCA: PALL).
The Sprott Physical Platinum and Palladium Trust ETF aims to invest and hold the vast majority of its assets in palladium and platinum bullion. Currently, the trust possesses about 47,000 ounces of palladium and over 61,000 ounces of platinum. The portfolio is maintained in custody by a Canadian government-owned federal crown corporation.
The Aberdeen Standard Physical Palladium Shares are meant to mirror the performance of the palladium price with fewer transaction costs. It keeps roughly 204,000 ounces of palladium in a secure vault owned by JPMorgan Chase & Co. in London (NYSE: JPM).
2. Bullion
Holding tangible assets like palladium bullion is an additional method of investing in palladium. In reality, investors may purchase palladium bullion bars, palladium bullion coins, or collector palladium coins for portfolio expansion. This strategy may be suitable for many types of investors, including those seeking to invest both modest and significant sums of money in the metal. Palladium bars and wafers offer an alternative, but they are not as accessible.
3. Stocks
Lastly, investors may get palladium exposure by investing in a palladium-focused company. This strategy of investing in palladium can be challenging, as the majority of the world’s palladium is mined in nations with primary platinum deposits. As a result, it is challenging to make palladium exposure on its own.
How to Invest in Palladium Shares
Most people will gain exposure to the palladium industry by trading palladium stocks.
Using leveraged derivatives such as CFDs to speculate on palladium share price movements up or down constitutes trading. Increased exposure due to the use of leverage magnifies both earnings and losses proportionally.
10 Best Palladium Stocks in 2022
1. Norilsk Nickel
Norilsk Nickel is the leading producer of palladium in the world, and it is also one of the world’s largest producers of platinum, nickel, and copper. Norilsk Nickel’s activities have been significantly hampered in 2020 and 2021 thus far due to waterlogging in two of its Siberian mines.
The firm said on 16 March 2021 that this would postpone mining production by three to four months until the mines reopened. The announcement was advantageous for palladium, as its price rose 5 percent to over $2800 on the same day — the highest price of a year. Unfortunately, Norilsk did not see the same effect, as its stock fell by 5.5%.
Nonetheless, Norilsk reported 2020 sales of $15.5 billion, an increase of 15% over 2019. While earnings before interest, taxes, depreciation, and amortization (EBITDA) decreased by 3 percent to $7.7 billion and net working capital decreased by 28 percent to $700 million, the company remained remarkably liquid, with free cash flow of $6.6 billion, a 36 percent increase over 2019’s figures.
2. North American Palladium
North American Palladium (PALDF) is a palladium stock with a market capitalization of around $720 million that has gained more than 60 percent since the beginning of the year. The stock rose to almost $20 per share in March, when palladium prices first peaked, more than tripling from the year’s start, before falling sharply. Although this short-lived stratospheric gain may have been spurred mainly by palladium’s enthusiasm at the time, North American Palladium’s long-term potential remains good.
The only mining asset owned by the firm is the Lac des Iles mine in Ontario, Canada, which has experienced significant expansion in recent years. The factory produced 56,121 ounces of palladium during the previous quarter, resulting in record quarterly revenue for the corporation, and annual production was around 237,000 ounces. The company’s net income was $28 million, an approximately 160 percent rise from the $10.8 million recorded in the second season of 2018.
The mine’s palladium reserves have been revised, with prior estimates indicating that the Lac des Iles mine possessed 36 million metric tons of ore. However, business data implies that this number might reach as high as 40,9 million metric tons, extending the life of this mine, which is the firm’s lifeblood.
North American Palladium anticipates that the average all-in-sustaining cost (AISC), a vital indicator of a project’s total costs, will be $834 per ounce of palladium. Given that the precious metal is trading at around $1,600 per ounce, it is easy to see how the corporation might be poised for substantial growth if production increases and expenditures continue to decline. North American Palladium has maintained a clean financial sheet and is now debt-free, except for capital leases.
3. Anglo American Platinum
Anglo American Platinum is the world’s largest producer, producing almost two million ounces annually. While platinum is the company’s primary product, it is also one of the largest palladium producers in the world.
In March 2020, South Africa went into a tight lockdown, which halted mining output for many months, causing considerable problems for Anglo American Platinum. Then, a second plant outage at the company’s platinum division hampered palladium production. Palladium and other precious metal output, including that platinum, rhodium, and gold, decreased as a result of 14%.
Nevertheless, Anglo American increased its EBITDA by 39 percent to a record R41.6 billion in 2020. At the same time, the high prices of platinum and palladium led to a significant R38 billion increase in net revenue to R137.8 billion and a 72 percent increase in its return on capital employed for 2020.
4. Sibanye Gold
Sibanye Gold (SBSW -0.79%), despite what its name may imply, is one of the world’s major palladium producers, with an annual output of 154,000 ounces. Most of its output is derived from palladium assets acquired through the acquisition of the Stillwater Mining Company. This Montana-based producer has historically been the leading U.S. palladium miner.
Sibanye Gold, a large-cap miner, valued at $12,1 billion, has seen its shares increase by more than 70 percent since the start of 2019. Most of Stillwater’s inherited palladium output is divided between two underground mines in south-central Montana that also produce platinum and other precious metals.
Even though the company’s South African mines generate more gold than palladium, the company’s palladium-focused assets have experienced the highest growth in recent years. According to the company’s integrated annual report, adjusted EBITDA for its U.S. Stillwater palladium-producing facilities increased from $161 million in 2017 to $314 million in 2018, with projections of $400 million to $500 million in 2019 if palladium prices stay robust. Moreover, Sibanye Gold’s palladium division is the most lucrative of all its businesses, with a 26 percent adjusted EBITDA margin compared to a 19 percent margin for its South African gold-focused project.
Sibanye Gold is not reliant on a single mine or facility to produce income, assuring investors of the company’s diversification. Palladium and gold are two very profitable precious metals that Sibanye Gold focuses on.
5. Impala Platinum
Impala Platinum, sometimes known fondly as ‘Implants,’ is a platinum metals mining business whose name is derived from its primary mine near the South African mining town of Rustenburg. Impala Platinum, founded in the 1960s, is a significant palladium producer with a global presence, especially with its 2019 acquisition of North American Palladium Ltd, situated in Canada.
Impala Platinum, like many of its palladium competitors, benefited from soaring palladium prices. The firm posted record-breaking interim earnings of R14.4 billion (an increase of 328 percent) and sales of R58.12 billion (an increase of 107 percent).
Contrary to the majority of palladium miners, Impala Platinum’s output increased in 2020 due to the incorporation of North American Palladium Ltd. The miner experienced a 10 percent growth in 6E output (the umbrella term for platinum and its five other ‘noble’ metals) and anticipates a comparable 2021 overall, noting that ‘continued market tightness in rhodium and palladium is anticipated to underpin elevated prices over the medium term.’
6. Northam Platinum
Northam Platinum is the fourth largest platinum producer in South Africa and a significant player in the palladium market. Northam Platinum specializes only in palladium, platinum, and rhodium, whereas most other miners on our list mine the 6E metals.
Northam stated in March 2021 that it would discontinue its strategic relationship with smaller platinum producer Zambezi Platinum by repurchasing preference shares for R2 billion. At the time of the announcement, Paul Dunne, the CEO of Northam, said he expected the change to be accompanied by a doubling of output to one million ounces of PGMs annually.
In 2020, Northam’s normalized top-line revenues jumped by 73.6% to R3.3 billion, while operating profits soared by 75.6% to R5.2 billion. Despite the epidemic, the firm stated it was operating at “nearly full” capacity, with a 15 percent rise in refined metal output in 2020. The business also announced the “first meaningful metal production” from its Booysendal South mine in March 2021, which may significantly influence its future palladium output.
7. Ivanhoe Mines
Ivanhoe Mines Ltd. of Vancouver, Canada, discovers, develops, and recovers PGMs and other metals and minerals. In addition to interests in South Africa, the business holds a 100 percent stake in the Western Foreland exploration project in the Democratic Republic of the Congo (DRC). Ivanhoe Mines has also formed a partnership with a Japanese consortium and others to acquire the recently found Platreef project, which has considerable amounts of palladium, platinum, rhodium, gold, copper, and nickel. Moreover, the mining business is modernizing the old Kipushi mine located in the DRC. Ivanhoe Mines stock now qualifies for Benzinga’s list of stocks under $10.
8. New Age Metals
Founded in 1996 and originally known as Pacific Northwest Capital Group, New Age Metals Inc. is tasked with discovering and developing PGM, precious metal, and base metal mining locations across Canada. The Vancouver, Canada-based corporation holds a 100 percent stake in the River Valley Palladium project in the Dana and Pardo townships of Northern Ontario and the Genesis polymetallic project in Southcentral Alaska. Additionally, New Age Metals owns interests in eight lithium properties located north of Winnipeg, Manitoba.
9. Platinum Group Metals
Platinum Group Metals Ltd. was established in 2000 in Vancouver, Canada, and is involved in the exploration and development of palladium and platinum resources. The firm focuses primarily on South African real estate, including a 50 percent stake in the Waterberg project on the Western Bushveld complex. In addition to mining and exploration, the firm develops palladium and platinum-based battery technologies for the next generation. PLG stock now qualifies for Benzinga’s list of stocks priced under $5.
10. A-Mark Precious Metals
Instead of investing in miners, A-Mark Precious Metals is a trading firm for precious metals. The company currently has three business divisions: Direct to Consumer, Secured Lending, and Wholesale.
A-Mark sells bars and coins of precious metals like Gold, Silver, Platinum, and Palladium. In light of this, the corporation is less susceptible to fluctuating metal prices than others on this list. The company’s top line is expanding due to more direct-to-consumer sales and broader margins. The gross profit for the third quarter climbed by 6 percent to $72 million.
What Must You Know Before Investing in Palladium?
The “top four” precious metals in the world are gold, silver, platinum, and palladium. Due to its rarity and challenging mining process, palladium is the most expensive of the “top four” precious metals.
Although palladium is slightly less expensive per ounce than its rarer and lesser-known relative rhodium, it is much more expensive than gold and one of the most often traded commodities. Russia and South Africa are the two significant palladium producers in the world, and both are renowned for their vast natural deposits.
Due to its highly restricted application and high price, palladium has no dedicated miners, unlike gold and silver, which specialized corporations mine. Instead, it is a byproduct of mining for other metals.
Because of this, the primary factors influencing palladium’s price are frequently mining-related, such as the ratio of the precious metal’s supply to its demand – something palladium traders must keep in mind.
Palladium is used in modest amounts in a variety of applications, but its largest user is the automobile industry, which employs it in catalytic converters and hybrid electric vehicle exhausts. Nonetheless, the growth of electric vehicles (EVs), which do not require precious metals, might significantly impact palladium’s appeal.
Is Now an Optimal Time to Invest in Palladium Stocks?
The stocks listed above have already experienced substantial increases, with PLG stock gaining by +161 percent in the past year alone, serving as an illustration. NMTLF is the lone penny stock on our list and has gained 173% over the past year.
Most of these picked palladium stocks have increased dramatically over the last year due partly to an acute palladium supply deficit. Palladium is one of the most expensive precious metals in the world, and its usage continues to expand.
Due to palladium’s scarcity and continued industrial usage, prudent investors may choose to wait for a fall in palladium stocks or the stock market in general. However, these stocks are likely still a solid long-term investment.
Final Thoughts
The Covid-19 epidemic halted palladium manufacturing for several global suppliers, resulting in record-breaking prices for the metal. Trading palladium company stocks is one of the most acceptable methods to gain exposure to palladium’s present peak value. With demand fixed and supply considerably less definite, the future appears bright for palladium; yet, electric vehicles may be on the horizon, reducing the need for palladium by its largest client, the automobile industry.
