Palladium

Southern Palladium climbs 27% with a bullet

Wed 08 Jun 22, 5:03pm (AEST)
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Key Points

  • Shares in Southern Palladium were up 27% at the close
  • Since Russia invaded Ukraine on February 24, palladium prices soared to all-time highs
  • Bengwenyama’s shallow orebody is regarded as a key differentiator from other PGM players

Shares in minerals explorer and developer Southern Palladium (ASX: SPD) were up 27% at the close after the company completed a $19m initial public (IPO) offering at 50¢ per share today.

Based on a share price of $0.635 the explorer is heading towards the close today with a market cap of around $45m.

Upon listing the company will acquire 70% of unlisted company Miracle Upon Miracle Investments – which holds the Bengwenyama Palladium-Rhodium (PGM) project in South Africa’s Bushveld Complex, which contains around 75% of the world’s PGM resources.

To the uninitiated, Rhodium is used as an alloying agent for hardening and improving the corrosion resistance of platinum and palladium.

These alloys are used in furnace windings, bushings for glass fibre production, thermocouple elements, electrodes for aircraft spark plugs, and laboratory crucibles.

Supply down: Prices up

Much of the recent increase in palladium and platinum prices, currently around US$2010/oz and US$1007/oz respectively is being attributed to sanctions and boycotts against Russia which produces about 40% of global supplies of palladium and 10% of platinum.

Since Russia invaded Ukraine on February 24, palladium prices soared to all-time highs on both supply fears, and with consumers seeking more ethical/non-conflict suppliers of PGMs.

This bodes well for South Africa, which is the only country to challenge Russia in its palladium output.

Box seat

By default, this also bodes well for Southern Palladium – considering that the proportions of palladium and platinum at the Bengwenyama project are roughly even at around 44% each.

CEO Johan Odendaal notes the project’s conventional metallurgy means the company is in the enviable position of being able to sell concentrate to local smelters on commercial terms.

“We’re currently sitting on a basket price of around $3000/oz at current prices, which is fantastic,” Odendaal said.

Resource

Phase one drilling at the project – which currently has a JORC 2012 Inferred Resource of 18.80 million oz (3 PGE + gold) - is expected to commence within the next four weeks and will cover 25,000m and 63 boreholes on the shallower area of the project.

Phase two is expected to comprise around 14,000m for 12 boreholes, and management suspects that within 18 months, the resource could potentially double to 40m ounces.

Commenting on today’s announcement Odendaal notes that what sets the project apart is that the company doesn’t have to go and explore for platinum – it already know it’s there.

Shallow ore body

Located at the Eastern Limb of the Bushveld Complex, Bengwenyama’s shallow orebody is regarded as a key differentiator from other PGM players.

Odendaal told investors that there's potential for at least the first 20 years of production to be mined within 500m from surface. By comparison, Odendaal notes that peers, are mining at depths of 1,500-2,000m.

“So very deep and vertical shafts that are very capital intensive… whereas with in terms of access for our project, it’s the last shallow project on the Bushveld complex, and we will focus on a decline which is less capital intensive,” Odendaal explained.

The deposit is also understood to be situated close to smelters owned by the industry’s two majors Impala Platinum or Implats and Anglo-American Platinum with all necessary infrastructure already established to advance project development.

Is Southern Palladium a value play?

If the share price appreciation of companies within the PGM universe - up 50%-plus since September 2020 – is any proxy, Odendaal believes it’s reasonable to expect Southern Palladium to experience similar share price performances.

“Especially Galileo (ASX:GAL) which now has a market cap of around $300m, with results from just six drill holes and, as yet no resources – remarkable,” noted Odendaal.

“SPD with its 18.8Moz in inferred resources, and priced at under $2/oz (equity basis) is very low for the sector – Chalice (ASX: CHN) is capped at over A$200/oz. This is a real value play, with significant upside as the company demonstrates with the drill rig that the resources are real.”

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What a difference a day makes: Southern Palladium up 25% on its first day of trading.

 

Written By

Mark Story

Editor

Mark is an investigative financial journalist and editor who started his career working for Marathon Oil in London. He has a degree in politics/economics and a diploma in journalism. Mark has worked on 70-plus newspapers and financial publications across Australia, NZ, the US, and Asia including: The Australian Financial Review, Money Magazine, Australian Property Investor and Finance Asia. Mark is passionate about improving the financial literacy of all Australians through the highest quality content. Email Mark at [email protected].

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