Platina Resources Limited (ASX:PGM) has struck a multi-million deal for its non-core Skaergaard Palladium and Gold Project in Greenland which will be sold to Canada’s Eastern Zinc Corp (CNSX:EZNC).
This will create more than A$8.3 million in value and enable Platina to focus on core projects, including its namesake NSW project, which has potential to become Australia’s first scandium producer with cobalt, platinum and nickel credits.
Platina will receive C$500,000 cash and C$7.15 million worth of Eastern shares for the project, which hosts one of the world’s largest undeveloped palladium resources with a significant gold endowment.
Shares have been as much as 24% higher this morning to 3.1 cents intra-day, up from 1.1 cents on March 24.
Deal unlocks project value
Platina managing director Corey Nolan said the deal unlocked value in the project which was expected to grow with the help of substantial financial and technical resources.
He said: “The challenge for a company our size is that Skaergaard requires a significant capital investment to keep the licences in good standing and advance the project through the drilling and feasibility stages.
“Eastern has the cash resources and an exploration and geological team based in the northern hemisphere that will be dedicated to developing the project.”
Will be a major Eastern shareholder
Upon completion of the sale, Platina will become a major shareholder in Eastern and will have a right to a board seat.
Following the acquisition of Skaergaard, Eastern plans to change its strategic focus to palladium and expand the number of palladium projects in the portfolio, with a company name change to reflect its strategic direction.
The board of Eastern has a very strong technical capability, including two geologists and a metallurgical engineer, the ideal skill set required to move Skaergaard towards the next phase of development.
Eastern recently completed a C$2 million capital raising and has a potentially large pool of capital available if its in-the-money share warrants were to be exercised at current market prices.
Injection of new funding
Nolan said: “This deal will allow Platina shareholders to share in the project’s prospective value increase while providing Platina with an injection of new funding to pursue other opportunities.
“Platina has canvassed some of its major shareholders, who believe that this strategy of disposing a non-core asset is appropriate at this time.”
He also said that Eastern’s planned sizeable investment in drilling and technical studies would significantly boost the project’s potential to be one of the world’s most advanced palladium projects.
The transaction will be subject to final confirmatory due diligence and regulatory approvals in Australia and Greenland.
Greenland Mines Department recently renewed Skaergaard’s exploration licence for a further three-year period and waived all the 2020 tenement expenditure obligations.
Strong palladium demand
Since a scoping study was completed in December 2019 highlighting the project’s development potential, palladium and gold prices have performed strongly, up year-on-year 42% and 34%, respectively.
The price outlook for both is expected to remain strong and positively impact the project’s economics and business case.
Palladium demand, which is principally used in catalytic converters, is being driven by stricter environmental standards around car emissions.
Global palladium supply is struggling to meet demand with a number of industry commentators are forecasting large supply deficits over the coming years pointing to a positive price outlook.
As well as the Platina Scandium Project in central NSW, Platina is also earning up to a 70% interest in the Blue Moon Zinc-Copper-Gold Project in California, which has a NI 43-101 resource open at depth and along strike and has favourable metallurgy.
The company also has a 30% interest in the Munni Munni JV project in WA’s Pilbara region, which has a major PGE occurrence and potential for conglomerate hosted gold.
Published at Mon, 01 Jun 2020 06:41:00 +0000-Platina Resources strikes multi-million deal for Skaergaard Palladium and Gold Project