Raymond James: Waterberg may prove to be a "game changer" for Platinum Group Metals Ltd.
Waterberg's Size Increased to 10 Moz PGE
Platinum Group Metals Ltd. (PTM) released an updated inferred resource estimate for its 49.97%-owned Waterberg project in South Africa.
We continue to believe that the Waterberg PGE deposit may prove to be a "game changer" for PTM. While we highlight that the deposit is years away from being brought into production, the release of an increased resource estimate provides enhanced visibility to the market about its size, quality and economic potential. With the deposit open in all directions, we anticipate further resource updates in the future, including upgrades into M&I and possibly reserve categories.
- Inferred resource of 10.1 Moz 3E (Pd, Pt, Au), including 6.0 Moz Pd, 3.1 Moz Pt, and 1.0 Moz Au. Contained 3E ounces grew by 54% on the back of a 37% improvement in tonnage and 13% head grade increase.
- Average grade of 3.4 g/t (Pd, Pt & Au) has increased by 13% from the initial estimate of 3.0 g/t. The rise in head grade was driven by higher Pd and Pt weighting in the prill split, which now is approximately 30:60:10 (Pt, Pd, Au). 50 boreholes were included into the resource estimate (up from the inaugural 15 boreholes).
- Average thickness increased 12% to 4.6 m (old: 4.1 m), compared to an average of 1 meter – 1.4 meter thickness of the Merensky Reef and UG2 Chromitite Layer, where most PGM producers currently operate. We continue to believe that Waterberg’s unusual thickness may allow for lower-cost, mechanized mining methods, while the potential shallow depth of the deposit may be amendable to a decline ramp, rather than more costly vertical shaft, and possibly an open pit mining scenario, should the current drill program on the newly granted exploration land prove the deposit approaches the surface, while maintaining grades and thickness.
- Drill rig count up to 15 from 10, with most of the drilling focused on the up-dip potential of the deposit (area under the prospecting permit received last week). PTM’s 37% partner on the project, JOGMEC, has approved the initial $10.0 mln exploration program at Waterberg in 2013.
- PTM will commence a Preliminary Economic Assessment on Waterberg’s 10 Moz PGM resource. For further analysis of the Waterberg deposit and its value to PTM, refer to our Comment published on Jan-25-13 titled, “Raising Our Target Price on Waterberg’s Potential”, price: $1.19.