After discovering the Waterberg deposit in South Africa in 2011, Platinum Group Metals (TSX: PTM; NYSE-MKT: PLG) has expanded the project’s inferred resource three times in just one year: from 6.2 million oz. platinum, palladium and gold (PGM) in September 2012 to 10.1 million oz. PGM in February 2013, and 17.52 million oz. PGM in September 2013. The metal ratios stand at 30% platinum, 60% palladium and 10% gold.
The Vancouver-based company announced another milestone on Oct. 2, with news that South Africa’s Department of Mineral Resources has given it the prospecting rights to start exploration on a 530 sq. km extension north of the Waterberg resource. The Vancouver-based company has already dispatched seven drills to punch holes that are spaced 1 km or more, over 20 km.
The extra ground — called the “Waterberg Extension,” in which Platinum Group Metals owns 87% — is adjacent and north of the Waterberg deposit. Platinum Group Metals owns 49.9% of the Waterberg deposit, with partners Japan Oil, Gas and Metals National Corp. and a private empowerment partner holding the balance.
The partners are working on a preliminary economic assessment of Waterberg that they hope to complete before year-end. The deposit contains mineralized layers within a number of different zones (T1, T2 and F) that are shallow, tabular and cover 5.5 km of strike length. The most shallow edge of the Waterberg deposit reaches a depth of 130 metres.
In a research note entitled: “Don’t wait for Waterberg — buy now,” mining analyst Leon Esterhuizen and his team at CIBC in London say that the junior’s share price could double over the next 12 to 18 months to $2, and that it is a takeover candidate.
“Now that these permits have been granted, we expect PTM to launch an aggressive, wide-spaced drilling campaign that could deliver quick and clear proof of the much-larger deposit that is visible in [gravity and magnetic] geophysical expressions from airborne-data gathering — none of which attracts value in the share price,” Esterhuizen writes.
“This deposit is known to extend beyond the current drilled area,” he continues, “with geophysical evidence pointing to a strong potential that this original find could extend for as much as 25 km — around five times more than already drilled to date.”
Esterhuizen adds that the Waterberg resource has impressive widths, with the targeted zones averaging 4.6 metres, while large areas have widths as thick as 30 metres. “The combination of a wide orebody at shallow depth allows for a significantly lower unit cost . . . lots of reef tons with little or no off-reef or waste development. This is compounded by the fact that such widths clearly allow for mechanized mining . . . and such [shallow, wide, decent-grade] dynamics allow for relatively low capital expenditures and short lead times, relative to conventional Bushveld mines.”
He says that Waterberg could be “the third-best, cash flow-generating asset in the business, with certain capacity to be anywhere amongst the top three.”
He continues that “whatever the value of this find, one thing that stands out clearly, even at this early stage, is that this deposit will lend itself to low-cost, mechanized mining. “We believe combining that crucial aspect with the enormous size potential computes to a real ‘must-have’ asset for any company aiming to be an important long-term, strategic player in this space.”
The mining analyst says that there are “almost no people living on the land.” A main power line passes within 28 km of the property, and a state-owned water supply pipeline will be built by 2018 that runs less than 20 km from the site.
In addition to Waterberg and the Waterberg Extension, Platinum Group Metals is in building what it calls the “WBJV Project 1” platinum mine in the Western Limb of the Bushveld complex. Platinum Group Metals owns 74% of the low-cost, high-grade project, with Africa Wide Prospecting owning the remainder.
News of the prospecting rights to the Waterberg Extension was released on Oct. 2. On Oct. 3, PGM’s share price climbed 5.7% to $1.11 on 1.3 million shares traded. On Oct. 4 the stock jumped 16.2% to $1.29 per share on 2.1 million shares traded. At press time PGM closed 15% higher at $1.28 per share, with 2.1 million shares changing hands.
The company has 400 million shares outstanding.
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