With The Support Of Some Illustrious Shareholders, Magma Metals Is Building Up A Strong Ground Position In Platinum And Base Metals In Canada.
By Our Man in Oz / www.minesite.com
Australians don’t really understand platinum, which is a surprising thing to say given the strength in depth of the country’s mining industry, and its ability to create platinum success stories such as Aquarius, Platinum Australia, and Nkwe Platinum. But, dig beneath those names and there is a common theme is actually Africa, not Australia, as those three companies all operate in southern Africa. Australia itself has no platinum mines, and only a handful of investors who follow the metal, which has always been treated as a distant relation to the real Aussie target, gold.
Hardly surprising then that Magma Metals, the next Australian platinum success story, is struggling to be heard at home, but starting to register strongly on the radars of international investors who have been closely watching the evolution of what’s shaping up to be a very promising Canadian platinum discovery.
And should any sceptical Aussie investor want a second opinion about the potential of Magma’s lead Thunder Bay North project, then they need only take a look at the company’s share register. This platinum and base metals project has attracted Anglo American onto Magma’s share register, and the major now holds top spot with a 12 per cent interest. Not far behind is that canny firm of London professionals, Anglo Pacific, with a seven per cent stake. And the impeccable corporate connections continue at board level too. Terry Burgess, newly appointed chief executive of OZ Minerals, and former head of business development at Anglo American, has recently opted to retain his Magma seat, despite an expectation that he would be a full time OZ man.
There seems no doubt that Burgess, and others, can see where most Australian investors cannot, the geological appeal of Thunder Bay North. Magma has just delivered a maiden resource of 690,000 ounces of platinum equivalent minerals on the property, which might perhaps even be enough to start a mine. However, Magma has decided to drill ahead, targeting that magic million ounces that really attracts investor attention (in places other than Australia), and this makes Minesite’s Man in Oz wonder why Magma sticks with its ASX listing and doesn’t instead scurry across to Canada, or London, where platinum is far better understood. On the ASX, Magma shares fell after the announcement of the maiden resource, from around A80 cents to recent trades at A66.5 cents, a price which values the company at a lazy A$108 million.
“We’re planning a TSX listing around October”, was the straightforward answer from Magma chief executive, Keith Watkins to the straightforward question, when Minesite called into his Perth office. “There might be a fundraising at the time, but it’s not absolutely essential, because we’ve got A$17 million in the bank which is plenty for the drilling we have planned.” The aim of the ongoing two-rig exploration campaign is to expand the major area of interest currently centred around Beaver Lake on the Thunder Bay property, and to prove a resource at the next site in the complex geology long ago created by ancient flows of volcanic material, at nearby Steepledge Lake.
It’s the geology of Thunder Bay, as much as the lake-dominated local Canadian geography, which confuses investors in Watkins’ home country of Australia. The orebody being pursued by Magma is part of a rift system. The volcanic flows occurred deep inside the earth, and not, as they did at famous locations like Australia’s Kambalda, on the surface.
The closest geological comparison with Thunder Bay North is the Norilsk Nickel’s giant Talnakh deposit in Siberia, and Vale’s Voisey’s Bay project in Canada. Magma’s work - the story of which is well told in a company presentation which you can find here - started with the discovery of platinum-rich glacial boulders near Current Lake in 2001. Magma staked out the area in 2005, but Watkins admits that back then Thunder Bay North was regarded as the company’s project that was least likely to succeed.
Gold and nickel in Australia at locations such as Griffins Find and Laverton were then top of the target list, and remain of interest. But, the real game today, and the reason Anglo American is sitting on the Magma share register, and is likely to appoint a director to replace Burgess as he spends more time at OZ, is Thunder Bay North, although not necessarily for the platinum. A curiosity of Anglo’s involvement is that the Magma investment is via the parent company and not Anglo Platinum, and the explanation for that is Anglo’s interest in the potential for a major base metals discovery in a regional setting that already features a number of big nickel and copper projects.
Watkins told Minesite that he was “broadly happy” with the initial resource estimate, but had hoped for more. “It’s one of those statistical calculations to do with tonnage and grade, and the understandable conservative approach of a firm such as SRK”, he said. “We’re pretty confident we can grow the resource, and feed a higher figure into the scoping study which we plan to start in October.” The plan, he said, is to spend about eight months on the scoping work, with completion targeted for mid-2010. One of the key tasks will be analysing the best ore treatment method, with one option being to produce a concentrate on site, and then to rail it to a smelter at Canada’s metal treating centre of Sudbury.
The key point in those comments is that Watkins is stretching his thinking away from the business of drilling and resource expansion, and along to mining and processing, steps which will completely change the way the stock market sees Magma. One issue then will be whether Australian investors will recognise what’s happening to a local company which is operating far from home in a suite of metals they do not understand. A TSX listing is an essential step for Magma, followed by a visit to London by Watkins. That will give him the opportunity to tell more clued-up audiences about his fascinating drilling work along the narrow trail which is the ancient lava flow that will be the first mining target – and about the enormous potential that’s likely to follow as the geological knowledge base expands.
MMB Price at posting:
68.0¢ Sentiment: None Disclosure: Not Held
