Mining’s old guard needs strong medicine
A new report details subpar investor returns in the mining industry over the last decade, particularly big cap diversified companies which have not adapted to new realities.
Global miner and commodity trader Glencore’s (LSE: GLEN) 10% investment in Palladium One Mining (TSXV: PDM), which is developing nickel-copper projects in Ontario and Finland, has boosted the explorer’s stock. Its shares jumped by more than a third on Thursday.
Glencore is paying C$4.25 million for the stake of about 28.3 million shares in a deal expected to close by Apr. 11, Palladium said.
Shares in Palladium One gained 37% on Thursday morning in Toronto to C$0.13 each, within a 52-week range of C$0.075 and C$0.26, valuing the company at C$35 million.
The Glencore investment combines with Palladium One’s acquisition this month of Ontario-focused MetalCorp to give the Toronto-based Palladium a larger scope of projects and more cash on hand. That all-share deal valued at C$3.3 million gives it two critical mineral projects in the province and royalties on five others.
Ryan Walker, a mining analyst with Echelon Capital Markets, said Glencore’s investment endorses Palladium’s strategy and the exploration potential at its main Läntinen Koillismaa platinum group elements-nickel-copper project in Finland and the higher-grade Tyko nickel-copper project in northwestern Ontario.
“We view the strategic investment by Glencore very positively,” Ryan said in a note on Thursday. “We continue to favour Palladium One’s operating jurisdictions and metal mix, which is well suited for the ongoing green energy transition, especially considering jeopardized supply of several key metals from Russia owing to the ongoing aggression in Ukraine.”
Palladium One CEO Derrick Weyrauch said the company looked forward to working with Glencore’s team to advance common exploration and development goals.
“We believe this transaction highlights the deep discount to fundamental value and strategy that Palladium One’s shares represent,” Weyrauch said. “By utilizing its financial resources and expertise Palladium One will continue to execute its strategy of maximizing exposure to critical minerals on a per share basis.”
This week, Palladium One said it discovered a new high-grade zone it’s calling Ember at the 290-sq.-km Tyko project. The discovery is 3.5 km from the Smoke Lake zone on a 20 km-long prospective nickel-copper corridor. Highlights from the first drilling at Ember include hole TK22-104, which cut 6.9 metres grading 1.1% nickel and 0.3% copper from 32 metres depth, including 1.9 metres of 2% nickel and 0.4% copper.
“The management team has been able to put together a sizeable land package focused on critical minerals,” Wayne Ashworth, head of nickel assets for Glencore, said in a statement. “The exploration results to date have been very encouraging.”
The Switzerland-based miner also gets rights to buy Palladium One stock in future issues and to name a member of Palladium’s technical committee.
The Läntinen Koillismaa project in north-central Finland holds 38.2 million indicated tonnes grading 0.6 gram palladium per tonne, 0.2 gram platinum, 0.1 gram gold, 0.1% copper, 0.1% nickel and 64.6 gram cobalt per tonne, according to an April 2022 estimate.
The MetalCorp deal, which is expected to close by the end of April, gives Palladium One the North Rock copper-nickel project near Fort Francis, the Big Lake BL-14 copper-zinc-gold-silver project near Wawa and a 2% net smelter return royalty on the Hemlo Annex property held by Barrick Gold (TSX: ABX; NYSE: GOLD) in the same area just north of Lake Superior.
