Future Metals positioning for PGM rebound

https://blog.the-pick.com.au/news/future-metals-positioning-for-pgm-rebound

While platinum and palladium prices are trading at cyclical lows, Future Metals says it will be ready when prices eventually recover.

Future Metals owns the Panton project in Western Australia’s Kimberley region, which has a resource of 92.9 million tonnes at 2 grams per tonne palladium equivalent for 6 million ounces of contained palladium equivalent.

Its current operational plan is based on a resource of 37.2Mt at 3.3g/t palladium equivalent for 3.9Moz, including a high-grade component of 10.8Mt at 7g/t palladium equivalent for 2.4Moz.

“You simply do not find grades this big in the Western world,” Future Metals executive chairman Patrick Walta told the RIU Explorers Conference in Fremantle.

“That grade … is massive and it affords us a lot of flexibility and the ability to get a big operation up and running in a tier one jurisdiction.”

There has already been more than A$50 million spent at Panton, including a 500m decline, which Walta said shortened the time frame to production.

A scoping study outlined capital costs of A$267 million for an operation producing 117,000 ounces per annum of platinum group metals, as well as 1200tpa of nickel and 134,000tpa of chromite, at all-in sustaining costs of US$789 an ounce over nine years.

That would make Panton a top five PGM producer in the Western world, which Walta said made the company and project “investable” and gave it credibility.

“At the moment, PGM prices are low but that’s fine – we don’t want to be a producer right now,” he said.

“In fact, we’re quite happy to see production coming out of the market.”

Under the base case scenario, the scoping study returned a post-tax net present value of A$153 million, internal rate of return of 21% and a payback period of 4.1 years.

Using a five-year average PGM price case increased the NPV to A$311 million, the IRR to 31% and the payback period to 3.2 years.

Palladium is currently trading at around a six-year low and consultancy Metals Focus expects prices to remain under pressure this year.

Last week, ANZ noted that platinum looked inexpensive against the backdrop of a growing market deficit.

The bank is bullish on platinum and neutral on palladium, but said it expected palladium prices to recover.

Walta said that at the current PGM basket price, 40% of producers were underwater.

“The top quartile is haemorrhaging cash, supply is being stripped out of the market,” he said.

“A lot of that top quartile is old, deep, South African mines that were really propped up by really high prices over the past couple of years – they shouldn’t be in production and they won’t be.

“The curve will change, supply will be stripped out of the market.

“It’s a story as old as time – the cure for low prices is low prices.

“We will be ready for that price rise.”