MoneyTalks: 3 stocks with exposure to PGEs and why you should take a closer look
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MoneyTalks is Stockhead’s regular drill down into what stocks investors are looking at right now. We’ll tap our extensive list of experts to hear what’s hot, their top picks, and what they’re looking out for.
Today we hear from Seneca Financial Solutions investment analyst Ben Richards.
Platinum group elements (platinum, palladium, rhodium, ruthenium, iridium, and osmium) tend to fly under the radar when talking about ‘battery minerals’ but they have an important role to play in the global energy transition.
“The demand side of the equation is tied to decarbonisation,” Richards says.
“Auto-catalysts use platinum, palladium, rhodium to reduce car exhaust emissions in ICE vehicles and represent the biggest current use of PGEs.
“Hydrogen fuel cells also use high platinum content and could be a future growth driver for the metals.”
PGE deposits also commonly contain copper and nickel – two other commodities with tailwinds from the well-documented EV thematic.
“Supply of PGEs has some jurisdiction related issues,” Richards explains.
“The Bushveld Complex in South Africa (68% global supply) has been experiencing falling grades over time as miners turn their attention to mining lower grade reefs due to depletion of high-grade reefs.
“And Russia (24% supply) has come under pressure along with other commodities they produce due to war with Ukraine.
“We think ESG friendly projects in attractive jurisdictions such as Australia and the Nordics will be well placed to negotiate offtakes and financing to de-risk their projects.”
“There is no doubt Chalice has made a large-scale discovery fairly close to Perth, but we think the valuation looks full at this level given that Chalice has defined 20 million ounces of contained PGEs at Gonneville,” Richards explains.
“They will need to grow that resource to justify the current market cap and have a lot of de-risking activity ahead of it that must be completed such as scoping study, feasibility studies, exploration, off-takes, financing.”
The metallurgy of the Julimar project is also very complex.
“Their Gonneville resource of 350 million tonnes at ~0.58% nickel equivalent is polymetallic so investors should be wary about looking at the headline grade stated in nickel equivalent terms because that consists of just 0.16% nickel, with some platinum, palladium, copper and cobalt.
“If it was just straight nickel, it would be a lot easier to extract and sell – the extent of metal recoveries is the unknown with the project and caused the delay to the scoping study that was expected to be released December quarter 2022.”
Three years has passed since the discovery was made in March 2020.
“The initial excitement has created some indigestion in the share price action more recently, as realisation of the technical complexity and lack of near-term cash flow sets in,” Richards adds.
“While we are neutral on Chalice, strategic interest or positive results from their scoping study could de-risk the project and see shares trade higher.”
Galileo’s Callisto discovery has potentially opened an entire new PGE district near Norseman in Western Australia, Richards says.
“Galileo controls most (95%) of the ground around the project area and continues to hit good mineralisation in drill holes, which underpins confidence in the prospective strike area to the north.
“They still haven’t found the source rock, which is often the highest grade and most attractive part of a mining discovery but with around $20 million of cash in the bank and backing from renowned prospector turned rich lister Mark Creasy, the company is well-funded to keep drilling.”
Galileo’s managing director Brad Underwood has worked with Creasy in the past and both are savvy operators, he adds.
“Mark Creasy is well known for the Nova nickel discovery in the Fraser Range in 2012 which was later sold to Independence Group (now IGO).
“Brad owns 4.36% of GAL, Mark Creasy owns 27.43%, and importantly IGO owns 8.28%. Creasy and IGO both cornerstoned the July 2022 capital raise.
“IGO bought out Western Areas in 2022 as it looks to restock its nickel deposits.”
Kingsrose has three PGE projects in Scandinavia with low tax rates and clear permitting procedures.
All three projects have had some historic work done but are largely untested by modern exploration techniques (e.g. geophysics) which KRM will employ, Richards says.
“Penikat in the central Lapland belt in Finland is the flagship project – it is one of the highest grade PGE exploration projects globally outside of South Africa and Russia, with a multimillion ounce JORC exploration target of 2.8 to 7.7 Moz 6E PGEs.
“The project looks like it could be of interest to major miners, given the influx of activity in the region by big players like Boliden, Lundin Mining, and Anglo American.
“Kingrose is cashed up from a past producing gold mine in Indonesia, which has been recently sold for cash and hence, the risk of capital raise is reduced for the next 12-18 months.”
The company’s management has some runs on the board, too, with managing director Fabian Baker previously running Tethyen Resources, which was acquired by Adriatic Metals (ASX: ADT).
“Newsflow from Penikat and Kingsrose’s other two projects in Norway, including the recently acquired earn-in arrangement with the Rana project, could see the share price re-rate in 2023 and beyond,” Richards adds.