With precious metals staging a renewed rally, Future Metals offers investors exposure to a Tier 1 PGM development opportunity with exploration upside – all in a first class location.
In these brief blog, I’ll give you five reasons why you should add Future Metals to your watch-list.
As retail investors navigate their way around a particularly challenging market, especially the junior segments such as AIM, opportunity knocks for those with an eye for value and who are prepared to position whilst others ponder!
Future Metals boasts Australia’s highest grade and second largest PGM deposit (a significant 6.9Moz PdEq JORC Resource development project) along with significant exploration potential (recent drilling confirming the presence of what could be a large Nickel/Copper sulphide system).
You can read my full research note on Future Metals here
Five reasons it should be on your watch-list
Asset Quality & Location
Junior mining companies with Tier 1 assets are hard to find. There are many with smaller projects that may support a c.5-10 year mine life and may have a modest JORC Resource with limited historic drilling. Many of these however will not make it to the ‘big-time’ with a best hope of achieving a small operation (if they can raise Capex) and then try to grow organically, that can be done, but not easy!
By Tier 1, I mean a world-class resource in terms of scale and size and that exists in a top tier jurisdiction such as the US, Canada or in Panton’s case Australia.
I covered a company, Horizonte Minerals, a few years back as they had a large-scale nickel project in Brazil. The company progressed the project through development, PEA/DFS etc and last year secured a funding package of c.£400m – few companies will achieve this.
As previously mentioned, Future Metals’ Panton is a large 6.9Moz PGM deposit (the second largest in Australia and the highest grade in Australia). The project will also importantly offer ‘optionality’ in how to start operations i.e. they can go for a smaller higher grade operation to reduce Capex or alternatively a bulk operation that will require more Capex (the latter a major would likely undertake)
To put Future Metals and Panton into context, Panton is around 1/4 of the size of Chalice Mining’s Julimar project which is also at development stage. Chalice also have some other projects but Julimar is the headline at a whopping c.30Moz PdEq
Chalice sports a current valuation of £1.6bn, if we attributed 1/4 valuation to Future Metals with Panton at a similar stage we would arrive at a valuation of c.£400m!
The point of the above comparison is not to directly compare the companies (as you never can and in fact, Julimar incorporates a large nickel sulphide discovery, something Future Metals are also looking to demonstrate at Panton) but highlight that both have large PGM deposits in the same jurisdiction and at similar stages.
One can see from the comparison however that Future Metals sits way below the 1/4 (£400m) valuation based on resource size, at todays market cap of just £13.5m.
As touched upon in the recent section, Panton offers some very interesting exploration upside as the deposit extends at depth and step-out. The company have recently completed preliminary drilling including a deep drill hole, the company commented…
The next fully-funded drilling programme is due to commence shortly, targeting the nickel sulphides (mentioned above) in the BC1 embayment feature “Drilling planned for Q2 2023 to test the shallow BC1 target and other targets at the Panton West prospect“
This is an exciting and potentially high-impact drilling campaign given the results of prior drilling.
Rising PGM Market
“Commodities are set to generate “superior total returns” in 2023 and likely to outperform other asset classes again, driven by a fundamental shift in the global macroeconomic landscape and low inventories, analysts at Goldman Sachs said“
As I write this article, platinum and palladium are up 3.43% and 5.4% on the day respectively and as per the quote above, market commentators expect another year of outperformance from commodities.
Platinum (which accounts for around 32% of Panton’s high-grade reef zone) is expected to rise to as much as $1200oz this year as a supply crunch bites. Power cuts, war, and hybrid cars are predicted to cause a platinum price surge in 2023
It’s also worth looking at Panton’s bulk mineralisation also though as as you can see from the below there is a significant nickel portion and that commodity itself is very important when considering the green revolution and the famous Elon Musk comment that EV batteries should be called nickel/graphite batteries!
Much like other junior mining companies, Future Metals has seen a significant drop in share price currently trading around 3.4p, despite recent funding secured at 7p. This is clearly representative of a difficult market where we have seen ‘risk-off’ and in some cases ‘forced’ selling. The irony in this from my perspective is that this is exactly the ‘buy zone’, especially when looking at companies with world class mining projects!
Arguably then, given the company are funded for the remainder of the year with a number of high impact catalysts and underlying commodity strength, Future Metals looks the ‘cheapest’ it’s been and in my view at a deep discount to other market peers, notwithstanding the rise in commodities since the project acquisition and the breakthrough they have made in ore processing that should further enhance the economics.
Significant Valuation Catalysts
Lastly, the company are very active on two main themes.
The development pipeline for Panton includes a scoping study that is in progress due for release around Q3. The scoping study was pushed back for good reason as the company reported in February that they had made a Mining and Processing Breakthrough which you can read in the link but was significant enough to expand the scope of the study and will likely have a material impact on the numbers!
Along with the scoping study we can probably also expect to see an update MRE given the results of the recent drilling and the step-out drilling results.
The above are potential re-rating catalysts in their own right but perhaps more ‘exciting’ is the imminent drilling campaign which as previously mentioned is going to target Ni-Cu mineralisation at some new highly prospective targets identified recently. Positive results here could truly propel the share price given the importance of these metals and the ever growing concerns over supply of them!
As mentioned previously if you want a higher level update on the company and its projects and why I am invested, you can read my full research note on Future Metals here
Don’t forget to follow me on twitter for more updates https://twitter.com/TheMoneySponge
Research materials prepared based upon my own analysis and research. Accuracy cannot be guaranteed and research notes should not be taken as investment advice. Please always do your own research.