Mackie Research: Hold rating and $1.10 target price for Platinum Group Metals Ltd.
EVENT – PTM Reports on Initial Drilling at Waterberg Extension
Waterberg Extension: Platinum Group Metals announced that drilling on the 87% owned Waterberg Extension Permits has confirmed the extension of the Bushveld Complex and the layered sequence of the F-zone for 4km of strike length beyond the known northern limits of the Waterberg deposit. Further drilling is planned along strike to the north from the current drill locations in the weeks ahead.
WBJV P1 Update: PTM also provided an update on its WBJV P1 project. Recall that late Friday, October 18th Wesizwe Platinum elected to not fund a cash call for a unanimously approved budget for the WBJV Project 1 Platinum Mine (see note dated October 21, 2013). At present PTM is continuing construction with current contractors at the WBJV P1 but will moderate any new contracts. The Company has initiated discussions with qualified empowerment groups for investment into the WBJV Project 1 as a replacement for Wesizwe as its interest dilutes.
Waterberg Shows More Potential: Sulphide mineralization (no assays yet) consistent with the style and content of the Super F part of the known Waterberg deposit has been confirmed over a thickness of 40m in drill hole WE-02, collared 1.4km north of the known Waterberg deposit. Drilling has also confirmed that the Bushveld Complex (geology, not mineralization), continues at least 4km beyond the previously known position. The current Waterberg deposit has an inferred resource of 17.5 million ounces over a ~5.5 km strike length and this latest drilling points to the possibility of increasing the known resource significantly (Figure 1). However, it remains early days at the new land claims, with a great deal of drilling and assaying still required.
WBJV P1 Outcome Remains Unknown: Until Wesizwe is re-engaged or a new BEE partner is found, access to the debt package for the WBJV P1 and the timing to its completion is in question.
$1.10 target price would be more consistent with the first market reaction before publication of new drilling results.
I consider the rise in PPS late yesterday and today slightly premature, since increased resources do not solve the imminent problem of financing and legal complications following Wesizwe's exit.
The $1.10 price target is no where near the intrinsic value of the company. My concern is that the limited amount of investors to take over W share. The amount of money is not crippling and in fact normal strides are on track to complete Bushveld. While Jones was looking at making the approved loan covenants more favorable to PLG, he now is in a position of weakness in the negotiations. The formula is in place for the JV (with W) being adjusted. Not to complicated except for the timing of the pullout. Honestly I moved 25%out of PLG today and into SWC. I'm running out of scotch and my liver quit talking to me the last couple of days.GL