Platinum Group Metals Ltd. (TSX:PTM) (NYSE American:PLG)
(“
Platinum Group” “
PTM” or the
“
Company”) reports the Company’s financial results
for the three months ended November 30, 2017 and provides recent
events and outlook. For details of the condensed consolidated
interim financial statements for the three months ended November
30, 2017 (the “
Financial Statements”) and
Management’s Discussion and Analysis for the three months ended
November 30, 2017 please see the Company’s filings on SEDAR
(www.sedar.com) or on EDGAR (www.sec.gov). Shareholders are
encouraged to visit the Company’s website at
www.platinumgroupmetals.net. Shareholders may receive a hard
copy of the complete Financial Statements from the Company free of
charge upon request.
As previously announced, the Company has
refocused its business on the large scale, bulk mineable Waterberg
Project in South Africa (the “Waterberg Project”).
The Waterberg Project was recently acknowledged with an investment
of $30.0 million by Impala Platinum Holdings Ltd.
(“Implats”) to buy a 15% stake in the project.
For more information see news releases dated October 16, 2017
and November 6, 2017. Drilling with approximately 17 rigs and
engineering work commenced almost immediately after the Implats
investment, near the end of the quarter. Drill results are
currently being compiled. PTM remains project operator for a
Definitive Feasibility Study (“DFS”) supervised by
a technical committee comprised of members from each joint venture
partner. The technical committee is operating well, focused
on achieving maximum value and drawing upon skills from all joint
venture partners.
During 2017 the Company made the decision to
exit conventional platinum mining by agreeing to sell its position
in the Maseve Mine in a transaction valued at approximately $74.0
million, the proceeds of which will be used to repay a majority of
the Company’s secured debt. For more information see news
releases dated September 6, 2017 and November 23, 2017.
All amounts herein are reported in United States
dollars unless otherwise specified. The Company holds cash in
Canadian dollars, United States dollars and South African
Rand. Changes in exchange rates may create variances in the
cash holdings or results reported.
Recent Events
On November 23, 2017, the
Company executed definitive agreements to sell its rights and
interests in Maseve Investments 11 (Pty) Ltd.
(“Maseve”) to Royal Bafokeng Platinum Limited
(“RBPlat”) in a transaction valued at
approximately $74.0 million (the “Maseve Sale
Transaction”)1. RBPlat is to first pay Maseve $58
million in cash to acquire the concentrator plant and certain
surface assets of the Maseve Mine, conditional upon governmental
approval and the satisfaction or waiver of certain conditions
precedent.
Subject to further governmental approval, RBPlat
is to next pay the Company’s wholly-owned subsidiary, Platinum
Group Metals (RSA) (Pty) Ltd. (“PTM RSA”), $7.0
million in ordinary shares of RBPlat plus approximately $4.0
million in cash to acquire PTM RSA’s remaining loans due from
Maseve, and is to pay PTM RSA and Africa Wide Mineral Prospecting
and Exploration Proprietary Limited, pro-rata to their respective
equity interests in Maseve, a further $5.0 million by issuance of
ordinary shares of RBPlat to acquire 100% of the equity in
Maseve. PTM’s proceeds from the Maseve Sale Transaction
(“RBPlat Proceeds”) are to be used to repay the
Company’s secured lenders, who were collectively owed approximately
$92 million in principal and accrued interest at November 30,
2017.
On November 6, 2017, the
Company, along with Japan Oil, Gas and Metals National Corporation
(“JOGMEC”) and Mnombo Wethu Consultants (Pty) Ltd.
(“Mnombo”) closed a transaction to sell Implats
15% of the Waterberg Project for $30 million, from which the
Company received $17.2 million for its sale of an 8.6% project
interest (the “Implats Proceeds”). Implats
may elect to increase its stake to 50.01% through additional share
purchases from JOGMEC for an amount of $34.8 million and earning
into the remaining interest by committing to an expenditure of $130
million for development work on the Waterberg Project.
Implats will also have a right of first refusal to smelt and refine
Waterberg Project concentrate (altogether, the “Implats
Transaction”)1.
Results For The Three Months Ended
November 30, 2017
During the three months ended November 30, 2017,
the Company incurred a net loss of $12.44 million (November 30,
2016 – net loss of $2.45 million). General and administrative
expenses during the period were $1.41 million (November 30, 2016 -
$1.17 million), and losses on foreign exchange were $3.13 million
(November 30, 2016 – $1.54 million). Stock based compensation
expense, a non-cash item, totalled $0.03 million (November 30, 2016
- $0.04 million). During the first quarter the Company
recognized closure and care and maintenance costs for the Maseve
Mine in the amount of $5.92 million (November 30, 2016 –
nil). In the comparative period all mine operating costs and
revenues were capitalized to the Company’s carrying value of the
Maseve Mine. Finance income consisting of interest earned and
property rental fees in the three months amounted to $0.129 million
(November 30, 2016 - $0.30 million). Loss per share for the
period amounted to $0.08 as compared to a loss of $0.03 per share
for the first quarter of fiscal 2017.
Accounts receivable at November 30, 2017
totalled $0.63 million while accounts payable and accrued
liabilities amounted to $7.72 million. Accounts receivable were
comprised of proceeds on sale of concentrate, value added taxes
repayable to the Company in South Africa and amounts due to/from
partners. Accounts payable included contract severance and
closure costs, care and maintenance costs, drilling expenses,
engineering fees, accrued professional fees and regular trade
payables.
During the first quarter approximately $0.4
million was spent at the Waterberg Project for engineering and
exploration activities. At period end, $20.3 million in net
costs had been capitalized to the project (after the disposition of
8.6% interest in the Waterberg Project during the period).
Total expenditures on the property since inception are
approximately $49 million. For more information on mineral
properties, see Notes 4 to 6 of the Financial Statements.
Subsequent to November 30, 2017, on December 22,
2017 the Sprott Resource Lending Partnership
(“Sprott”), a secured lender and first lien holder
to the Company, advanced the Company $2.75 million pursuant to a
new bridge loan for up to $5.0 million available before January 31,
2018. The proceeds are primarily to fund direct expenditures
relating to the closure and ongoing care and maintenance of the
Maseve Mine, reasonable corporate overhead expenditures and
outstanding amounts due and owing to the secured lenders. The
new bridge loan is subject to the same security provisions,
interest rate, and covenants as the existing Sprott loan facility,
as amended. The new bridge loan, together with any accrued
but unpaid interest, will be repayable on the earlier of i.) the
date which is 10 business days after the closing of the first step
of the Maseve Sale Transaction; ii.) the closing of any equity or
debt financing by the Company; and iii.) January 31, 2018. In
consideration for the new bridge loan Sprott was paid a bonus fee
of $250,000 on December 22, 2017.
Effective January 1, 2018 the Company issued
2,440,629 common shares in settlement of $691,110 of bi-annual
interest payable on $19.99 million of outstanding convertible
notes. The common shares were priced on the simple average of
the daily volume weighted average price of the Company’s common
shares on the NYSE American exchange for the 10 consecutive trading
days ending on December 28, 2017 multiplied by 92.5%.
Outlook
The Company’s key business objectives are to
advance the Waterberg Project and repay its secured lenders.
The Company plans to increase its profile by focusing on the
competitive nature of the large-scale Waterberg palladium reserves
at a time when palladium is attracting market attention and
palladium supply is estimated to be in deficit.
In the near term, the Company’s liquidity will
be constrained until the Maseve Sale Transaction is complete and
financing has been obtained to repay and discharge remaining
amounts due to the Company’s secured lenders and for working
capital purposes. Amounts due to the lenders before the
receipt of RBPlat Proceeds total approximately $107.75 million,
including the $2.75 million portion of the new bridge loan drawn to
date and a termination fee for the Maseve Mine production payment
obligation in the amount of $15.0 million, if paid by March 31,
2018. All of the approximately $74.0 million RBPlat Proceeds
are to be applied to the Company’s secured debt. As part of
re-structuring arrangements agreed with the secured lenders the
Company must raise $20.0 million in subordinated debt and/or equity
within 30 days of the first lien loan facility of approximately $40
million being repaid from the RBplat Proceeds, and raise a further
$10.0 million in subordinated debt and/or equity before June 30,
2018.
The Company has set aside an amount of $5.0
million from the Implats Proceeds toward its share of DFS costs,
including drilling in progress. Waterberg JV Co. plans to
advance the Waterberg Project to completion of a DFS and a
construction decision for a total cost of approximately $10.0
million, paid pro-rata by Waterberg JV Co. shareholders.
Drilling to increase the confidence in certain areas of
the known mineral resource to the measured category is
underway. Technical teams from all of the partners, including
Implats, and independent engineers are involved in the technical
planning and oversight of the DFS. Waterberg JV Co. plans to
file a mining right application during 2018.
The Waterberg Project has the potential to be a
low-cost platinum and palladium producer based on a fully
mechanized mine plan. The deposit is dominated by
palladium. The price of palladium has approximately doubled
since late 2015 due to its primary use in catalytic converters for
automobiles and limited market supply.
The Company continues to actively assess
corporate and strategic alternatives with advisors BMO Nesbitt
Burns Inc. and Macquarie Capital Markets Canada Ltd.
Qualified Person
R. Michael Jones, P.Eng., the Company’s
President, Chief Executive Officer and a significant shareholder of
the Company, is a non-independent qualified person as defined in
National Instrument 43-101 Standards of Disclosure for Mineral
Projects (“NI 43-101”) and is responsible for
preparing the technical information contained in this news release.
He has verified the data by reviewing the detailed information of
the geological and engineering staff and independent qualified
person reports as well as visiting the Waterberg Project site
regularly.
About Platinum Group Metals
Ltd.
Platinum Group holds significant mineral rights
and large-scale reserves of platinum and palladium in the Bushveld
Igneous Complex of South Africa, which is host to over 70% of the
world's primary platinum production. Platinum Group is partnered at
Waterberg with JOGMEC, Implats and Mnombo, an empowerment partner.
Platinum Group is the operator of the Waterberg Project, a bulk
mineable underground deposit in northern South Africa. Implats
recently made a strategic investment in the Waterberg Project.
“Frank R. Hallam”
On behalf of the Board of
Platinum Group Metals Ltd.
For further information contact:
R. Michael Jones, President
or Kris Begic, VP, Corporate
Development Platinum Group Metals
Ltd., Vancouver Tel: (604) 899-5450
/ Toll Free: (866) 899-5450
www.platinumgroupmetals.net
1 For more details please refer to the Financial
Statements and Management’s Discussion and Analysis for the three
months ended November 30, 2017, the Company’s Annual Report on Form
20-F and the Company’s Annual Information Form for the year ended
August 31, 2017.
Disclosure
The Toronto Stock Exchange and the NYSE American
LLC have not reviewed and do not accept responsibility for the
accuracy or adequacy of this news release, which has been prepared
by management.
This press release contains forward-looking
information within the meaning of Canadian securities laws and
forward-looking statements within the meaning of U.S. securities
laws (collectively “forward-looking statements”). Forward-looking
statements are typically identified by words such as: believe,
expect, anticipate, intend, estimate, plans, postulate and similar
expressions, or are those, which, by their nature, refer to future
events. All statements that are not statements of historical fact
are forward-looking statements. Forward-looking statements in this
press release include, without limitation, statements regarding the
compilation of drill results; the operation of the technical
committee; the receipt and timing of required government approvals,
satisfaction of other conditions precedent and consummation of the
Maseve Sale Transaction as described herein; the Company’s intended
use of proceeds derived from the Maseve Sale Transaction; the
Company’s plans following the Maseve Sale Transaction; subsequent
events related to the Implats Transaction; the completion of the
DFS for, and other developments related to, the Waterberg Project;
repayment of, and compliance with the terms of, indebtedness; the
Company’s liquidity, working capital and requirements to raise
additional funds; the Waterberg Project’s potential to be a
low-cost platinum and palladium producer; Waterberg JV Co.’s plans
to file a mining right application in 2018; the Company’s ability
to continue as a going concern; and the Company’s assessment of
corporate and asset level strategic alternatives. Statements of
mineral resources and mineral reserves also constitute
forward-looking statements to the extent they represent estimates
of mineralization that will be encountered on a property and/or
estimates regarding future costs, revenues and other matters.
Although the Company believes the forward-looking statements in
this press release are reasonable, it can give no assurance that
the expectations and assumptions in such statements will prove to
be correct. The Company cautions investors that any forward-looking
statements by the Company are not guarantees of future results or
performance and that actual results may differ materially from
those in forward-looking statements as a result of various factors,
including risks related to indebtedness; risks related to the
nature of the Maseve Sale Transaction and the uncertainty as to
whether the Company can successfully obtain required government
approvals, satisfy other closing conditions and consummate the
Maseve Sale Transaction; potential delays in the foregoing; the
Company’s capital requirements may exceed its current expectations;
the uncertainty of cost, operational and economic projections; the
ability of the Company to negotiate and complete future funding
transactions and either settle or restructure its debt as required;
variations in market conditions; the nature, quality and quantity
of any mineral deposits that may be located; metal prices; other
prices and costs; currency exchange rates; the Company’s ability to
obtain any necessary permits, consents or authorizations required
for its activities and to effect the Maseve Sale Transaction; the
Company’s ability to produce minerals from its properties
successfully or profitably, to continue its projected growth, or to
be fully able to implement its business strategies; risks related
to contractor performance and labor disruptions; and other risk
factors described in the Company’s most recent annual report,
annual information form and other filings with the U.S. Securities
and Exchange Commission (“SEC”) and Canadian securities regulators,
which may be viewed at www.sec.gov and www.sedar.com, respectively.
The Company is not considering investments in Bitcoin or
Blockchain. Proposed changes in the mineral law in South
Africa if implemented as proposed would have a material adverse
effect on the Company business and potential interest in
projects.
Cautionary Note to U.S. and other Investors
Estimates of mineralization and other technical
information included or referenced in this press release have been
prepared in accordance with NI 43-101. The definitions of proven
and probable reserves used in NI 43-101 differ from the definitions
in SEC Industry Guide 7 of the SEC. Under SEC Industry Guide 7
standards, a "final" or "bankable" feasibility study is required to
report reserves, the three-year historical average price is used in
any reserve or cash-flow analysis to designate reserves and the
primary environmental analysis or report must be filed with the
appropriate governmental authority. As a result, the reserves
reported by the Company in accordance with NI 43-101 may not
qualify as "reserves" under SEC standards. In addition, the terms
"mineral resource", "measured mineral resource", "indicated mineral
resource" and "inferred mineral resource" are defined in and
required to be disclosed by NI 43-101; however, these terms are not
defined terms under SEC Industry Guide 7 and normally are not
permitted to be used in reports and registration statements filed
with the SEC. Mineral resources that are not mineral reserves do
not have demonstrated economic viability. Investors are cautioned
not to assume that any part or all of the mineral deposits in these
categories will ever be converted into reserves; "inferred mineral
resources" have a great amount of uncertainty as to their
existence, and great uncertainty as to their economic and legal
feasibility. It cannot be assumed that all or any part of an
inferred mineral resource will ever be upgraded to a higher
category. Under Canadian securities laws, estimates of inferred
mineral resources may not form the basis of feasibility or
pre-feasibility studies, except in rare cases. Additionally,
disclosure of "contained ounces" in a resource is permitted
disclosure under Canadian securities laws; however, the SEC
normally only permits issuers to report mineralization that does
not constitute "reserves" by SEC standards as in place tonnage and
grade without reference to unit measurements. Accordingly,
information contained or referenced in this press release
containing descriptions of the Company's mineral deposits may not
be comparable to similar information made public by U.S. companies
subject to the reporting and disclosure requirements of United
States federal securities laws and the rules and regulations
thereunder.
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