For some time now, I've been trying to learn more about palladium. I feel safer investing in something when I fully understand it from all angles. However, this has proven quite a challenge with palladium. For one reason or another, there seems to be a great divide among investors, some being extremely bullish, while others are highly skeptical of the metals future. What information I've uncovered is just as obscure, with several articles contradicting themselves or giving no hard evidence for their claims.

Palladium, being a precious metal as well as an industrial metal, seems to have as many uses as silver, being used in many of the same fields. This includes photography, jewelry, dentistry, medicine, the auto industry, and as a chemical catalyst in the production of synthetic fibers. However, I'm told many industries have tried to completely eliminate or reduce the amount of palladium they use due to it's relatively high cost, using base metals such as nickel in its place. How effective these metals are at performing the same tasks, I'm not sure, but this doesn't point to a very bullish future for palladium.

Also, Russia is said to produce 51% of all palladium (as of 2006) and currently sits on untold millions of ounces of physical metal. All the estimates I could find ranged between 3 to 10 million ounces. They could use this vast reserve to balance the market, filling gaps in the supply if demand were to increase, or decreasing their exports to fluctuate the price. Again, this brings great uncertainty to the market, not only for investors, but also to any industrial sector dependent on palladium.

Even with all the uncertainty, many believe palladium will put in another good run. Looking at the yearly trends, palladium climbs from roughly $85 in 1992, to nearly $1100 in 2001, then loses over half its value in the same year. Investors have been riding a roller coaster of ups and downs ever since, with the metal sometimes rising or falling hundreds of dollars in the span of only one month. So I just need to know... Whats up with palladium?

First: I don't know.

Second, I believe that if palladium is viewed as an investment metal by the market, it will be more stable. Unfortunately it is not commonly or widely viewed as such.

Third, if another, cheaper metal can be used, expect it to be used more widely in the future and palladium's uses to decrease. I believe this will happen because the entire commodities sector is going up, and that will mean a lot of manufacturers trimming expenses whenever and wherever possible. If they can substitute nickel or silver, then they will... but then again if those same people can substitute palladium for platinum then you may find more uses. One really never knows.

All commodities are going up, and have been going up for years. How long it will last, who knows, but I do expect any precious metal will get a nice bump when gold and silver finally hit their moonshot. (Some argue that gold is already going parabolic -- I guess we'll soon see!)

So, to get back to first point, I just don't know... but opinions are like elbows: pretty much everyone's got one or two.

For anyone bullish on palladium, I would encourage you to look at a mining exploration company (which I personally hold) Colossus Minerals (CSI on the TSX). This is also one of the companies in the new, Van Eck "Junior Miners" fund.

Quite simply, this company has struck some VERY rich ore in Brazil - which contains not only large amounts of palladium, but also VERY large amounts of gold and platinum. The only issue with this company is whether they can "prove up" enough ounces to make this deposit commercially viable.

When it comes to ore-grades, you may NEVER see richer ore samples in your life.

Thanks for the info Jeff! I've checked the recent drill tests from the Serra Pelada operation, and I've never seen numbers even close to these! Not to mention the deposits proximity to the surface...

I thought that would "whet your appetite".

Here's another tid-bit about Colossus. They also have information on some of the "historical" drilling done by CVRD - who for a while sort-of owned this property.

They had one intercept (very short, mind you) with the gold exceeding 100,000 grams/ton (no misprint), and platinum in excess of 200 g/ton, and palladium grading over 1,000 g/ton.

Tonnages are still an issue with this company, but IF the quantity is there, the quality speaks for itself.

100,000 grams per ton?

US $3,671,000 PER TON OF ORE??

I think I need new pants.

Pd is a catalyst, just like Pt. This means it accelerates a chemical process, but is not consumed in the reaction. That is why catalytic converters are recycled. 2d major point is jewelry usage.

Norilsk is reported to have stockpiles, but the amount is questioned. I believe it is a lot less than is reported. Being a Russian company, I just don't trust them. Norilsk has a controlling interest in SWC, the Montana PD and PT miner They were allowed to take a controlling interest in an American company which produces a strategic metal by a previous administration. What's up with that? They wouldn't let the Chinese buy Unocal, but will let the Russians buy out a strategic mineral co.

The only CAN play is PAL. They have put their Pd mine on maintenance until prices improve, but have recently proved up a lot more Pd reserves. They now make their bread and butter by gold mining. but IMO, will reopen their Lac de Iles mine soon.

Regarding Colossus in Brazil, those grades are really impressive, but they only have 240 acres to mine. VALE owns all the land around them. In addition, Colossus must split some of the revenue with the grampineros ( the hand diggers who dug out the original pit). Maybe they will make a go of it, but it is not for me. I did study it thoroughly before I made that decision.

Regarding the previously high prices, I say, Why not again? It will be a nice run, in either fizz or PAL.

Thanks for the info/observations, Dave.

Yes, your points about CSI are certainly valid. I took some profits on that one - and then ended up adding more again.

Don't know if you have still been following it, but they just released a news release announcing a new deal with the garempeiros. It certainly looks to me like better terms than the original deal - which always looked pretty scary to me.

Their last drill holes were not only spectacular, but were "step-out" drilling - meaning they are expanding the known area of mineralization.

On the other hand, as I mentioned in my "Check-list" commentaries, some ore-bodies are a lot more vertical than others - which seems to be the case here. So it's hard to say whether the intervals in the drilling represent "true widths".

On the third(?) hand, given the small land package, if mineralization is more or less vertical, this could indicate that the veins they have tapped-into go down a long ways - which would be a good thing in this instance.