Platinum Metals .(PLG) - 2024 Q2 - Quarterly Report

Preliminary Notes & Disclaimers Note Regarding Forward-Looking Statements Forward-looking statements in the report are subject to significant risks and uncertainties that could cause actual results to differ materially - The report contains forward-looking statements concerning future activities, including the completion of the Waterberg DFS Update, securing financing, obtaining environmental permits, and developing next-generation battery technology[3][8][10] - A wide range of factors could cause actual results to differ from expectations, including financing needs, history of losses, metal price fluctuations, legal proceedings, political instability in South Africa, and operational mining risks[11][12][15] Legislation and Mining Charter 2018 South African legislation, including the MPRDA and Mining Charter 2018, mandates specific BEE shareholding levels for mining rights - Under the MPRDA and Mining Charter 2018, Waterberg JV Co. was required to have 26% BEE shareholding for the grant of its mining right, which must increase to 30% within five years of the grant's effective date[19] Mineral Reserves and Resources Mineral resource and reserve estimates adhere to Canadian NI 43-101 standards, differing from SEC requirements, and are reviewed by a qualified person - Mineral resource and reserve estimates are prepared under Canadian NI 43-101 standards, which differ from SEC Modernization Rules, potentially leading to significant differences in reported mineralization compared to U.S. standards[23] - The technical and scientific information in the MD&A has been reviewed by Robert van Egmond, P.Geo., an independent Qualified Person as defined by NI 43-101[24] Description of Business Overview Platinum Group Metals Ltd. focuses on the Waterberg Project in South Africa, holding a 50.02% controlling interest and assessing financing and offtake options - The Company's primary focus is the engineering and development of the Waterberg Project, a PGE and base metal deposit located on the Northern Limb of the Bushveld Igneous Complex in South Africa[33] - As of February 29, 2024, the Company held a controlling 50.02% interest in the Waterberg Project, with partners including Implats (15.0%), Mnombo (26.0%), JOGMEC (12.195%), and Hanwa (9.755%)[28] - The company is exploring options for concentrate offtake, including discussions with existing South African smelters and assessing the feasibility of constructing its own smelter and base metal refinery (BMR)[30] Lion Battery Technologies Inc. The company develops next-generation battery technology through Lion Battery Technologies Inc., a joint venture with Amplats, funding research and securing five U.S. patents - Lion Battery Technologies Inc. is a joint venture with Amplats to develop next-generation battery technology using platinum and palladium, with PTM owning a 52.08% interest in Lion as of February 29, 2024[37][31] - Lion has an agreement with Florida International University (FIU) to fund a research program and holds exclusive rights to all intellectual property developed, which includes five U.S. patents issued to date[38][39] - To advance commercialization, Lion has engaged The Battery Innovation Center (BIC) to conduct independent trials and validation of its proprietary platinum and palladium-based electrode technology[40] Properties Waterberg Project The Waterberg Project, the company's flagship, is undergoing a DFS update and pre-construction work, focusing on concentrate processing, mining rights, and ESG - As of February 29, 2024, $42.5 million in accumulated net costs had been capitalized to the Waterberg Project, with total expenditures on the property since inception from all sources approximately $87.2 million[164] Recent Activities and DFS Update Recent activities include $1.6 million spent on Waterberg, a $21 million pre-construction program, Implats' interest dilution, and an ongoing DFS update expected mid-2024 - Approximately $1.6 million was capitalized at the Waterberg Project during the six-month period ended February 29, 2024, for work including feasibility engineering and community engagement[153] - Implats declined to fund its pro-rata share of the Stage Three Budget, resulting in its interest in Waterberg JV Co. being diluted to approximately 14.951%, with Platinum Group funding the shortfall[155][156] - An update to the Waterberg DFS is in process and expected to be completed in mid-2024, including revised mineral resource/reserve estimates, costs, and financial models, superseding the 2019 DFS[157][215] Concentrate Offtake and Processing The company pursues concentrate processing strategies, including offtake agreements with existing smelters and evaluating building its own smelter/BMR in South Africa or Saudi Arabia - The preferred option for concentrate processing is to secure offtake terms with an existing smelter/refiner in South Africa, with discussions ongoing with several operators[198] - The company is studying the feasibility of constructing its own smelter and BMR in South Africa to process Waterberg concentrate[159][199][200] - A Cooperation Agreement was signed with Ajlan & Bros to study the establishment of a stand-alone PGE smelter and BMR in Saudi Arabia, which may offer competitive energy costs, a lower tax rate, and government financing incentives[160][202] Waterberg DFS (2019) Highlights The 2019 Waterberg DFS outlined a large-scale, 45-year mine with an after-tax NPV of $982 million, initial capital of $874 million, and 420,000 4E ounces annual production Waterberg 2019 DFS Key Metrics | Metric | Value (at Spot Prices, Sept 4, 2019) | | :--- | :--- | | After-Tax NPV (8% discount) | $982 million | | After-Tax IRR | 20.7% | | Estimated Project Capital | $874 million | | Peak Project Funding | $617 million | | Annual Steady State Production | 420,000 4E ounces | | Life of Mine Average Cash Cost | $640 per 4E ounce | Waterberg Mineral Reserves & Resources (2019 DFS, 2.5 g/t 4E cut-off) | Category | Tonnes (millions) | Grade (g/t 4E) | Contained Metal (million oz 4E) | | :--- | :--- | :--- | :--- | | Proven & Probable Mineral Reserves | 187 | 3.24 | 19.5 | | Measured & Indicated Mineral Resources | 242 | 3.38 | 26.4 | | Inferred Mineral Resources | 67 | 3.27 | 7.0 | Mining Right and Community Considerations The Waterberg Mining Right, granted in January 2021, faces a new legal challenge, while the company invests R428.9 million in community development and plans for water and power - The Waterberg Mining Right was granted on January 28, 2021, and registered on July 6, 2021, with all initial appeals against the grant dismissed by the DMRE Minister on October 13, 2022[216][217] - A new application was filed in the High Court in March 2024 seeking to set aside the grant of the Waterberg Mining Right[79] - The Social and Labour Plan (SLP) includes a budget of R428.9 million (approx. $22.34 million) over five years for Human Resource Development and Local Economic Development projects[191][82][61] Environmental, Social and Governance (ESG) The company demonstrates strong ESG commitment, achieving an improved Digbee score of BBB in 2023, with objectives focused on environmental care, community welfare, and robust governance - The company works with Digbee Ltd. for independent ESG assessment and improved its overall score from BB in 2022 to BBB in 2023[85][65] - Core ESG values include caring for the environment, contributing to community welfare, ensuring safe workplaces, and promoting good corporate governance[84][223] - The company has established an Environmental, Health, Safety and Technical Advisory Committee (EHST Committee) to assist the Board in its oversight of ESG matters, including policies on human rights and environmental stewardship[93][94] Discussion of Operations and Financial Condition Liquidity and Capital Resources As a development-stage company, PTM relies on equity financing, holding $5.8 million cash as of February 29, 2024, sufficient for 12 months, but requiring significant additional funding for mine construction - The company had cash on hand of $5.8 million at February 29, 2024, which is projected to be sufficient for budgeted expenditures over the next 12 months, excluding major mine construction costs[124] - In September 2023, the company completed a non-brokered private placement for gross proceeds of $2.5 million[76] Contractual Obligations as at Feb 29, 2024 (in thousands of $) | Period | Lease Obligations | Environmental Bonds | Total | | :--- | :--- | :--- | :--- | | < 1 Year | 104 | 42 | 146 | | 1 - 3 Years | 287 | 127 | 414 | | 4 - 5 Years | 100 | 84 | 184 | | > 5 Years | - | - | - | | Total | 491 | 253 | 744 | Results of Operations For the six months ended February 29, 2024, the company reported a net loss of $2.4 million, an improvement from the prior year, primarily due to reduced general and administrative expenses Results of Operations (in millions of $) | Period Ended | Feb 29, 2024 | Feb 28, 2023 | Change | | :--- | :--- | :--- | :--- | | Six Months | | | | | Net Loss | (2.4) | (2.8) | Improvement | | General & Admin Expenses | 1.8 | 2.0 | Decrease | | Three Months | | | | | Net Loss | (0.8) | (1.2) | Improvement | | General & Admin Expenses | 0.7 | 0.9 | Decrease | Quarterly Financial Data (in thousands of $, except per share) | Quarter Ended | Net Loss | Basic Loss Per Share | Total Assets | | :--- | :--- | :--- | :--- | | Feb. 29, 2024 | 813 | 0.01 | 49,494 | | Nov. 30, 2023 | 1,558 | 0.02 | 50,940 | | Aug. 31, 2023 | 1,614 | 0.02 | 50,021 | | May 31, 2023 | 1,236 | 0.01 | 48,169 | | Feb. 28, 2023 | 1,199 | 0.01 | 51,150 | Other Corporate and Financial Information Dividends, Related Parties, and Share Data The company has no dividend history or plans, with Deepkloof (HCI) as a key related party holding a 26.3% interest, and 102,480,148 common shares outstanding as of February 29, 2024 - The Company has never paid dividends and has no present intention of doing so, as all available funds will be invested to finance its business[104] - As of February 29, 2024, HCI (via Deepkloof) held a 26.3% interest in the Company and has the right to nominate one person to the board of directors[106] - As of February 29, 2024, the Company had 102,480,148 Common Shares, 4,379,787 incentive stock options, and 533,327 restricted share units outstanding[108] Risk Factors The company faces numerous risks, including the potential impact of international conflicts on commodity prices, supply chains, and financial markets - The company faces risks from international conflicts and geopolitical tensions, which can cause volatility in commodity prices and supply chain disruptions, adversely affecting the business[110][131] - The company successfully defended a legal action from Africa Wide concerning the 2018 sale of Maseve, with costs awarded to the defendants and paid in February 2024[112][141] Outlook The company aims to advance the Waterberg Project to a construction decision, contingent on financing and offtake, while navigating mixed PGE market outlooks and leveraging strategic battery technology investments - The key business objective is to advance the Waterberg Project to a development and construction decision, which requires securing project financing and a concentrate offtake agreement[113] - PGE prices have been volatile and declining since their 2021/22 peak, but long-term demand for platinum (fuel cells), copper, and nickel (EVs) is projected to be strong, while palladium demand could soften with EV market penetration[143] - The investment in Lion Battery Technologies represents a strategic opportunity in the lithium battery field, creating potential for vertical integration and new market development for platinum and palladium[144] Critical Accounting Estimates and Judgements Management applies significant judgment in assessing mineral properties for impairment and determining control over joint venture entities, specifically consolidating Mnombo and Waterberg JV Co - The company applies judgment to assess mineral properties for impairment indicators, such as adverse changes in metal prices, decreases in mineral reserves, or changes in the business climate[115][137] - For accounting purposes, the Company has judged that it controls Mnombo (49.9% ownership) and Waterberg JV Co. due to its power over the investees and its role in providing all material capital[138][146]