Palladium Powers On

The platinum-group metal with a supply deficit

From 2018 to 2020, no other metal matched palladium’s dramatic ascent, moving from US$966/oz in February 2018 to US$2,800/oz in February 2020. Indeed, the C$1 billion Impala Platinum announced it would pay for North American Palladium’s Lac des Iles mine, near Thunder Bay, Ontario, seemed like a steal in hindsight.

Since the market crash in mid-March 2020, palladium’s price action has been steady, trading in the US$2,300/oz to US$2,400 range from July 2020 until February 2021; a superb margin for producers, many of which produce palladium as a by-product. With the automobile industry expected to rebound in 2021 as economies open up in a post-Covid landscape, and a nine-year production deficit still very much an issue, palladium demand should remain robust for the foreseeable future.

Since acquiring the Marathon palladium property in Ontario from Sibanye Stillwater in 2019, Generation Mining (TSX: GENM) published a PEA for the project in January 2020. The study was conducted at US$1,275/oz palladium, far below today’s prices, but still resulted in an IRR of 30% and an NPV of C$871 million. Executive chairman, Kerry Knoll, described the PEA as a “game-changing document” for the company, and the feasibility study due in Q1 2021 will move Generation further towards development.

image

Before a construction decision can be made, the permitting process, which was started by the previous operator, should be complete in early 2022, according to Knoll, who noted that during this time, GENM will focus on financing, exploration, and detailed engineering.

Knoll also spoke of the investment opportunities available for investors in palladium in a far less crowded (but also less covered) space than precious metals: “If you want to invest in a palladium producer, you do not have many choices, and none in North America. There are only a handful of development companies and we are the only one doing a feasibility study at the moment.”

The other option for investors is betting on the jockey in an early-stage play, and Clean Air Metals (TSXV: AIR) has a management team of some repute, including executive chairman Jim Gallagher, former CEO of North American Palladium (NAP) before its sale to Impala, and CEO Abraham Drost, former CEO of Carlisle Goldfields before its sale to Alamos Gold in 2016. “Upon examination of the project, I was astounded at the historic high-grade drill intercepts and agreed to join,” revealed Drost, speaking of AIR’s Escape Lake project just north of Thunder Bay.

image

Drost elaborated on AIR’s Thunder Bay North project, a high-grade, multi-ounce platinum and palladium magma conduit system consisting of two sub-horizontal conduits, one of which is the Current Lake deposit, with a 9.8 million tonne historic estimate, with the the Escape Lake deposit 3 km to the west. “We have recognized that this system has a lot of similarities structurally and stratigraphically to the Norilsk mining district in Russia and similar exploration techniques,” he said, commenting that the C$85 million already spent on the project by previous owners Rio Tinto and Panoramic also attracted the AIR team.

For the Current Lake deposit, Nordmin Engineering is due to deliver an initial resource validation under NI 43-101 in Q1 2021, with a PEA or scoping study expected in Q2. “We can credibly say that not only are we going to explore and delineate the project, we have the experience and track record to build it,” concluded Drost.

According to a palladium forecast by Metals Focus, the palladium price will hit a new all-time high in 2021 on the back of growing car sales in China, tighter emissions rules favoring hybrid vehicles, continuing shortages, and a weaker US dollar. With this in mind, the outlook remains favorable for palladium-focused juniors in tier-one jurisdictions such as Ontario.

Image courtesy of Generation Mining