I am very bullish at present with Platinum Australia...

I am very bullish at present with Platinum Australia (ASX:PLA).

Back in 2000 to 2003, this company tried to become the first Australian Platinum mining company with a mine called Panton. The stock rallied well back then as they went through the various drilling and exploration and a very high resource was calculated at around 6g/ton Platinum group of metals. The platinum group of metals consists of Platinum, Palladium, Rhodium and Gold.

The project was sound, but the Palladium price at the time dropped from about $600/g to about $200. It is about $180 or so still today. So the BFS came back as a no start despite the huge resource available and the share price plummeted.

Most Platinum in the world is mined in South Africa. This is a where companies like Aquarius Platinum (ASX:AQP) are found. So Platinum Australia took an interest in this region and made some JV agreements for tenements in this location including the Smokey Hills project.

Platinum Australia has been drilling these South African projects and the Smokey Hills project resource is coming up very good results with some 8g/ton.

Normally, when a viable JORC defined resource is found, a BFS (Bankable Feasibility Study) is done to determine whether a mine is viable and this is to be undertaken in early 2006 at Smokey Hills.

Normally, if the BFS comes back good, then it can take several years to get an underground mine up and running. However, Platinum Australia is going to start up quickly with an Open Cut mine and then transport the ore to a nearby mill for processing which they already have a JV partner. This has two effects, in that firstly Platinum Australia will have revenue very quickly without having to build a production mill, and secondly while paying down the mine loans, can build its second and third mine including possibly the first Australian Panton mine also in an Open Cut lowest cost fashion.

Platinum Australia is due to list on the AIM in London in a few months which I believe will raise significant interest in the company at or about the time the JORC resource is defined and the BFS has started.

Now what is interesting is that when the original Panton mine BFS study was undertaken, and shelved due to the Palladium price, the Platinum price was around $600 and the Rhodium price was around $1000. Although the Palladium price has not recovered since the shelving, the Platinum price has risen to over $900 (up about 30%) and the Rhodium price has screamed to over $2000 (up near 100%). Also the Gold price has strengthened.

Since the Smokey Hills project drill results are show significantly higher grade than Panton, and the availability of an existing processing mil to Smokey Hills makes me very bullish to Platinum Australia becoming a mid tier Platinum producer within 12 months!

Given this and the AIM exposure leads me to believe that the current share price of 13 – 17 cents on a 100m shares as an absolute undervalued bargain for the next 12 months.

There is no guarantees the Smokey Hills mine will start nor the Panton mine reconfigured, but I consider at the current share price, the company is massively undervalued at present and given the risks is a pretty good play over the next 6-12 months.

You should do your own research and seek professional investment advice before making any investment decisions, and I encourage you to do so, however the upside in my opinion with this company is significant for the patient investor over the next 6-12 months.

AQP and PLA have a similar amount of shares on issue at present.


ITG.