History and comparisons with other WA PGM plays

Background

As part of my investment process I like to research the history of projects and comparisons with other projects intending to do the same or similar. I believe a lot can be gathered from understanding the history of projects, where they have come from and then comparing them to what is currently out in the market. I rarely share this but have done so with QPM and shared my research on HC when it was a penny dreadful compared to its 'peers' in SRL and AUZ. It had a market cap of circa $6m compared to SRL ($200m) and AUZ ($80m). Now its market cap ($254m) exceeds both SRL ($164m) and AUZ ($80m) combined.

Links for reference below.
PURE MINERALS LIMITED (ASXM1) - Comparisons with other HPA and NiSO4, CoSO4 companies., page-1 - HotCopper | ASX Share Prices, Stock Market & Share Trading Forum
PURE MINERALS LIMITED (ASXM1) - History/Comparisons and the next 12 months, page-1 - HotCopper | ASX Share Prices, Stock Market & Share Trading Forumnow lets get onto FME

FME Value Proposition

I believe most shareholdersbelieve FME to be excellent value compared to the other prominent WA PGM playson the ASX being Chalice (CHN) and Podium (POD). A simple comparativetable is shown below. Ceteris Paribus if a similar EV/ounce ratio was used asPOD for FME, FME would be valued at 40c. Applying the same EV/ounce ratio toFME as CHN would yield a share price of $2.19 based on current resources. This ratherelementary and unsophisticated comparison is highlighted in the table below.

	Stock	Future Metals (FME)	Podium Minerals (POD)	Chalice Mining (CHN)
1	Grade	4.89% 3E	1.54% 3E	0.94%3E
2		2.17% Pt	0.8% Pt	0.16% Pt
3		2.38% Pd	0.64% Pd	0.75% Pd
4		0.31% Au	0.04%Au	0.03% Au
5	Others	0.2%Ni	0.1%Ni	0.16%Ni
6	3E Ounces	2.4Moz	2.8Moz	10MOz
7	Market Cap	70m	140m	2800m
8	Cash	5.6m	7.9m	65m
9	EV	64.4m	132.1m	2735m
10	EV/ounce	26.83333333	47.17857143	273.5

Perhaps the most obviouslystriking difference between the 3 deposits is the grade. Future Metals has byfar the highest grade. Why is that so? One must remember that this resource wasmodelled during 1H2003. During that time the palladiumprice fell to as low as $155US/oz (graph below). Accordingly the cutoff gradeused to model the resource was high, being 2g/t. Modelling the resource in thismanner meant that only the ultra high grade top and middle reefs were used inthis particular resource. From this point on, this resource has been used untiltoday.

Palladium Price Chart. Link - Palladium Prices - Interactive Historical Chart | MacroTrends

On the contrary. Podium andChalice have modelled their resources in the last few years which has seen significantlyhigher prices for PGMs. They were able to include a lot of mineralization thatwould not have been considered ‘economic’ in 2003. For instance the cutoffgrade used for FMEs Panton resource is higher than the average grade of its 2 peersand by some way.

Future Metals have recently beenmaking much noise about pursuing a shallow bulk tonnage strategy, and haveannounced some extremely exciting historic results along those lines. In laymanterms they are looking to include a whole heap of mineralization thatpreviously was considered uneconomic in 2003 when the Palladium price was sub $200US/oz.For those oblivious the palladium price now trades at $2400US/oz some 12 timeshigher than when this resource was modelled. That is to say, that FME are nowpursuing a strategy along the lines of POD and CHN and given that all 3 are in thesame jurisdiction (WA) and all have excellent infrastructure access a morereadily comparison will be able to be made.

00349283.tif (asx.com.au) - link to 2003 resource which is what is used til this day.

For those of you who havefollowed FME you would know how ridiculously undervalued shareholders view the2.4Moz of 3E (Pd+Pt+Au) that FME holds. I have listened in on presentations andpitches regarding FME and all have expressed how undervalued these 2.4Moz arecompared to peers. Here is the spanner in the works. I went thru all the oldhistoric Platinum Australia announcements and stumbled across something a couple of months ago that I believe up until last week no one else was aware of. The Pantonproject was listed as having 4.5moz of Pt+Pd+Au (3E) at a grade of 1.9g/t whenconsidering some of the bulk tonnage mineralization the company is currentlyexploring.

In April 2002 Platinum Australiaannounced the following (clink link below for entire announcement):

Platinum Australia Limited (ASXLA) is pleased to announce the

overall mineral Resource at its Panton Platinum Palladium Project has

been upgraded to 4.5 million ounces of Platinum Group Metals (PGM*)

and Gold, representing a 33% increase on the interim Resource

announced in November 2001.

Link to the 2002 PLAannouncements below.
Link 1. Company announcements- Text version - ASX
Link 2. Company announcements- Text version - ASX

Looking back to the graph it is interesting to note that that in 2002 when the 4.5moz was announced the Palladium price was at a respectable level for its time, being nearly $400US/oz, as stated earlier by the time 2003 rolled around the palladium price crashed to sub $200/oz and from then on the resource was only quoted with the 2g/t cutoff ie only with the top reef and some middle reef.

4.5Moz is a considerable increase insize (88%) and the overall grade holds its own against both POD and CHN.Moreover there is a clear path forward in terms of a mining operation now.

Updating the comparative tablepreviously used would yield the following

If we were to value the resource at the same EV/Ounce valuation as POD it would yield 72c a share for FME. If the Chalice valuation was used a valuation of $4.13 would be yielded for FME.

Some questions naturally follow and in the interest of saving everyonetime and effort I will do my best to address them.

1. Did the Company know this? No. This is no slighton management. One must remember that up until the start of this month thecompany had a board of directors but no real active full time management. It isn’tthe role of directors to rummage through announcements from 20 years ago. FMEhad an ‘Executive Chairman’ however he resigned recently but it should be notedhe was from the Red Emperor days. Effectively we were a ship without a captain.This has been addressed with the recent incoming hires, who I believe are agood fit. I think overall the lack of a management team previously (as opposed to a boardof directors, of which we do have some very good ones) has been a major weight to theshareprice.

2. Will the company announce this? No. I made the company aware of this announcement, they do not have this resource model and I believe this either isn’t JORC compliant or predates it so as such their hands are tied. It should however be noted, that a considerable amount of this resource was in the measured category so there is a considerable amount of drilling to back this up. It should also be noted that the entirety of drill hole data is on file with the company. I have enquired and the steps forward would be to receive assay results from the recent drilling plus the 25 historic holes which will be re-assayed for bulk tonnage mineralization and incorporate these results, with the existing data (used to define the 4.5Moz) to come up with a new Mineral Resource Estimate. No prizes for guessing a base case scenario there…

3. Where are these additional ounces coming from? These ounces are from the mineralized dunite in the footwall to the upper reef. This dunite grades on average 1g/t and previously was completely excluded from the resource. As stated in the announcement on the 8/12/2021 the company is now pursuing a bulk tonnage strategy whereby the shallow portions of the deposit will have the top reef, middle reef and now the dunite mined and processed with an underground operation thereafter. It should be noted that the Dunite resource does not include inside it the Upper and Middle reefs. Hence a section of say 200m open pitt would contain Upper Reef (higher grade), Dunite (1g/t) and possibly middle reef (3g/t).

4. Where should FME sit on an EV/Ounce ratio? It is my believe that FME should sit at a premium to POD on an EV/Ounce. There are a host of reasons why, I its higher content of palladium vs PODs is a significant economic advantage. I believe when considering the bulk tonnage mineralization it lends itself to an open pit operation more readily than the long string lined POD resource. This is not to say I feel POD is overvalued, quite the contrary on the whole I feel POD may well be undervalued. I feel based on what we know that that FME is significantly undervalued relative to POD. In regards to Chalice. I believe Chalice will and should command a premium per ounce over the other two due to several factors being scale, geology, pockets of extremely high grade mineralization. I feel as FME, and POD for that matter, both continue to add ounces and prove up metallurgy their relative discount to CHN will reduce.