Southern Palladium goes north in search of money

ROGER Baxter, former CEO of the Minerals Council South Africa, is recently back from meeting North American investors to whom he’s been extolling the virtues of Southern Palladium — one of the JSE’s few mineral exploration counters.“We met with some pretty big funds, some of the biggest global funds out there,” said in an interview from Perth, where he now lives part of the year.After taking a short break from the Minerals Council, where he tirelessly “engaged” (fought) the damaging Zuma government, he took up with Southern Palladium, first as a non-executive chair, and now as its executive with a directive to drive marketing of the firm, among the other responsibilities of the board’s chair.One topic that came up in the discussions was a listing in Toronto. London is another possible destination for the company’s share, given that Anglo American Platinum (Amplats) is to take a secondary listing there in the new year as part of its proposed demerger from Anglo American. “I won’t get into any of the details; it was part of our telling the story of this great project,” said Baxter.The project is Southern Palladium’s 70%-owned Bengwenyama mineral deposit, a 40-million-ounce platinum group metal (PGM) resource in the North West’s Eastern Bushveld. The project has Modikwa, a mine jointly owned by African Rainbow Minerals and Amplats, on its northern boundary. It “slipped through the cracks”, said Baxter on why Bengwenyama eluded South Africa’s PGM majors.A pre-feasibility study, published in October, has targeted 400,000 ounces of PGMs a year. But the project comes with a $698m total capital cost. Given last year’s meltdown in palladium and rhodium prices in particular, this is a hard sell.Tough marketThe long-term prospects for PGMs are difficult to call. Previous market forecasts of demand for battery electric vehicles (BEVs), which are expected to eventually replace the internal combustion engines which PGMs supply, have proved too optimistic.While BEVs are the future of mobility, also known as the drive-train, their gradual ascendancy could yet be offset by hydrogen technology, which requires PGMs in its engineering. Yet how the science behind hydrogen can be made commercial, and when, and at what cost, is anyone’s guess.Even on a shorter-term time frame, the PGM market is a tough nut to crack. Citi analyst Ephrem Ravi said in a report this month that the bank has turned “constructive” on PGM prices, after the palladium price slid 12% over 30 days after making gains previously.This is not something which you do in one big bang. We access ore within 18 months based on the way that we’ve designed for early access. You want early access so you can get early access to cash flow – Roger BaxterHowever, Adrian Hammond, an analyst for Standard Bank Group Securities, expressed doubts, especially on whether metal stockpiles, hoarded by automakers from the Covid years, had been exhausted.“We weren’t on a fundraising journey; we were there just to open doors,” said Baxter of the North American visit. “We were there to start getting Southern Palladium on the investment radar screen. When the time is right, we’ll go back with what our requirements are.”While commodity markets are notoriously tricky for project developers, Bengwenyama does have an ace in the hole. It is relatively shallow, about 50 metres from the surface, which enables Southern Palladium to start generating revenue without going the whole hog on capital costs, and — potentially — at a relatively low total cost, about $700/oz.“Even if prices were to fall 15% from where we are now we can still make this project work,” said Baxter.Capital raisingAbout $50m will be spent in the first year of Bengwenyama’s development, followed by $150m each in the second and third years.“When we go back to the markets, there are multifaceted options for raising capital,” said Baxter. “This is not something which you do in one big bang. We access ore within 18 months based on the way that we’ve designed for early access. You want early access so you can get early access to cash flow.”One aspect of Southern Palladium’s marketing that may need addressing in the long term is its name. Baxter says it’s not a priority. But given that rhodium forms the largest portion of the ore body, not palladium, Southern Palladium is a misnomer of note.Palladium, heavily exposed to diesel autocatalysts where EVs are expected to make a major dent, is also the least attractive of the PGMs. Southern Rhodium doesn’t make sense either. “Southern PGMs,” he adds, after a bit of prompting.Southern Palladium isn’t the only game in town. Platinum Group Metals, a Toronto-listed business with an established following among analysts there, is further down the track in developing its Waterberg joint venture — a bulk mining approach that also markets itself as a project with low-cost mining.“We hold the view that Waterberg’s relative attractiveness comes from its ability to replace some of the deep underground, high-cost PGM supply from South Africa,” said Raj Ray, an analyst for BMO Capital Markets.“Given the increased interest in the PGM market, we believe Platinum Group Metals could benefit from a potential turnaround in PGM prices.”A version of this article first appeared in the Financial Mail.The post Southern Palladium goes north in search of money appeared first on Miningmx.Weiter zum vollständigen Artikel bei Mining.com Weiter zum vollständigen Artikel bei Mining.com