By James Macharia JOHANNESBURG (Reuters) - South Africa should see a "modest" rise in platinum output in 2009 after a decline this year, but long-term mine expansions will be restricted by power supply, Johnson Matthey said on Tuesday. "We should see some increases in production, but we are cautious about how much," said Alison Cowley, a senior analyst at metal refiner Johnson Matthey (JM). "On the balance of probability, production should increase next year, but very modestly," Cowley told a media briefing to launch the company's 2008 interim platinum review. JM said South Africa's output of the metal is expected to drop 5 percent to 4.78 million ounces in 2008, and that lower output from South Africa would be the main factor undermining the global supply of platinum this year. The closure of Anglo Platinum's (Angloplat) Amandelbult mine, which is the second-biggest mine owned by the world's No. 1 producer of the metal, was the single biggest factor that curbed South African output. The mine was shut for months after it was flooded, cutting output by some 67,000 ounces. A serious power shortage in South Africa, which halted mines for five days in January and has since limited mines to less than their normal electricity requirements, led to a direct loss of 60,000 ounces, JM said. Closures due to safety issues, smelter outages, labour problems and a lack of skills also hurt output, JM said. All top-three South African producers, Angloplat, second-ranked Impala Platinum and the world's No. 3 producer Lonmin have had a difficult year, and will all produce less of the metal than they did last year, JM said. Cowley said it was likely that South Africa's production in 2009 would increase, but would be lower than had earlier been anticipated. Some producers would postpone mine expansions owing to the global financial crisis, which has dented commodity prices and demand, she said. "It would be very surprising in the current climate, at current prices, not to see some projects being deferred," Cowley said. She said a worse outlook for the exchange rate would see even more projects pushed to the back burner. SURVIVAL Lonmin said on Tuesday it will close some high-cost mines and cut costs by restructuring its operations with a slimmed down management structure to survive the market downturn. Analysts have also urged bigger producers, in a sector dominated by Anglo American Plc's unit Angloplat and Implats to reduce output to stimulate prices and share prices. JM said the precious metal hit an all-time record of $2,276 an ounce on March 4 after a power shortage in South Africa disrupted mining and led to supply worries. Platinum has since fallen to around $810 an ounce on Tuesday, on worries of weaker global economic growth and lower demand from the auto industry, the biggest user of the metal. On the power crisis, JM said South African producers had come to terms with steady supply of 95 percent of their normal requirements, and that some were installing emergency power supply measures to cope with unexpected power cuts. But a fragile power system posed the biggest challenge. "Electricity is likely to continue to be a constraint in the platinum industry for the next five years," JM said.

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