South African mine production may drop as foreign investors get "cold feet" following a call from the youth wing of the ruling African National Congress to nationalize the industry, Impala Platinum Holdings Ltd. said.

"There is definite worry around this particular topic" among European and U.S. investors, David Brown, chief executive officer of Johannesburg-based Impala, said in a speech in the city yesterday. Impala is the world's second-largest producer of platinum, accounting for a quarter of global output.

"Investors, the traditional suppliers of risk capital to this industry, are getting cold feet," Brown, 48, said. "The risk associated with future investment in South African mining has increased considerably as seen from the outside world" because of nationalization and other concerns, he said.

The ANC agreed in September to study nationalization following demands from Julius Malema, leader of the party's youth arm. South Africa is the biggest producer of platinum, used in devices to cut vehicle emissions and in jewelry, chrome and manganese. It also produces gold and is the biggest supplier of coal to European power plants.

The mining companies have caused the debate by not doing enough to sell stakes to black investors, foster development in communities around mines and develop their mainly black workforces, Sandile Nogxina, the outgoing director-general of the country's Department of Mineral Resources, said, Johannesburg's Business Day reported today, citing an interview with the official.

Eoin Treacy's view A common complaint in many countries has been the slow pace of trickle down between the booming commodity export sector and those at the lower end of the income scale. The problem is compounded when a county has a large unemployed young population which has been aggravated by inflationary pressures in basic food stuffs. South Africa's rather chequered political history lends an additional dimension to the calls for nationalisation.

South Africa, despite some dismal forecasts, has so far maintained a pro-growth and investment stance. It has also held inflation to a manageable level and the currency has been stable. Nationalisation is seldom a recipe for efficiency and would represent deterioration in the country's economic governance which could be a blow to investor sentiment.

The FTSE/JSE All Share Index, which is heavily weighted by BHP Billiton (circa 24%), has been ranging between 30,000 and the 2008 peak near 33000 for a year. It rallied impressively from the lower side this week and a sustained move below 30,000 would be required to check medium-term scope for additional upside.

Anglo American (6.5% of the Index) capped an impressive advance in February with a weekly key reversal and has posted a progression of lower rally highs since. It rallied impressively this week but a sustained move above ZAR34,000 would be required to indicate a return to medium-term demand dominance.

SAB/Miller (5.9% of the Index) has held a progression of high reaction lows since early 2009 and bounced emphatically this week from the region of the 200-day MA. A sustained move below ZAR23,000 would be required to question medium-term upside potential.

Platinum is particularly sensitive to conditions in South Africa. A power outage in 2008 resulted in reduced supply and a massive upward acceleration. At present, prices do not reflect a problem with supply and have been largely rangebound between $1650 and $1900 since late 2010. Following an abrupt decline this month, prices found at least short-term support this week and a sustained move below $1650 would be required to question potential for some additional higher to lateral ranging.

Platinum miners have almost universally underperformed the metal over the last two years and remain largely rangebound with a downward bias. This Chart Library Performance Filter contains a representative sample. Many have returned to a potential area of support at the bottom of their respective ranges and may rally provided platinum prices continue to improve.