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The Best Place to Capitalize on Palladium? Junior Pure-Play Projects

Omri Wallach Omri Wallach, Stockhouse
0 Comments| January 16, 2020

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Click to enlargePrecious metals investors are quickly running out of excuses for ignoring the rise of palladium.

In September, we called it the hottest precious metal as spot prices for palladium reached US $1,600/oz. By December, we were highlighting palladium stocks as prices reached US $1,900/oz. Just a week into 2020, the price of palladium has risen above US $2,100/oz.

If anyone thought the rising price was a fluke before, they’re paying attention now. The almost 25% rise in palladium prices can be traced to two major causes: constantly increasing demand from the automotive industry and global supply concerns.

Stockhouse has already covered the rise of palladium demand, specifically tying the precious metal to reductions in car emissions. Palladium’s main use is to create catalytic converters that reduce harmful automobile exhaust, and as regulations against high emissions show no sign of slowing down, neither does demand for the metal.

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The issue of constrained palladium supply isn’t new either, but its effects are being more acutely felt. The majority of global palladium production comes from Russia and South Africa, so news from South Africa of impacted production had a helping hand in driving up price. Alongside countries and companies uncertain of the supply left in Russia and the country’s poor emissions record, investors eyes are looking for new sources of the precious metal.

The long-term picture is clear: high palladium prices aren’t going anywhere, and mining companies are starting to capitalize. In December, South African company Impala Platinum Holdingsmade a move into North America by acquiringNorth American Palladium Ltd. (OTC:PALDF). Soon, the low supply will force more companies to look for new projects waiting to be mined.

How can investors take advantage of this hot metals sector? Look for junior exploration-stage companies with the resources and upside to match. Case-in-point: New Age Metals Inc. (TSX-V:NAM, OTC:NMTLF, Forum). The Company has not one but two PGM deposits at different stages of development, with the flagship River Valley PGM Project (just outside Sudbury, Ontario) already having a completed Preliminary Economic Assessment.

And the Company’s American project, Genesis PGM in Alaska, was found to be sitting on mineralization of at least 2,000m and open under cover and in both strike directions, with no prior drilling completed. Unlike the majority of palladium projects, where the precious metal is mined as a by-product of platinum, New Age’s holdings place palladium at the front and centre, and by being spread out over different stages of exploration, places the Company on the same long-term trajectory as palladium itself.

Last month, the Chairman and CEO of New Age Metals, Harry Barr, spoke to Stockhouse Editorial about the focus for the Company in the new year. At River Valley, the new year’s exploration and development plan sees the Project well on the path towards a future Pre-Feasibility Study, while in Alaska, the Company is planning to partner up on the Genesis Project, which is primed for additional ground sampling and the first-ever drilling.

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(Mineralized outcrop at the River Valley PGM Project near Sudbury, Ontario | Image via New Age Metals)

Investors familiar with New Age also know that, while the Company is primarily a palladium story, it also has impressive holdings in an “opposing” metal, lithium. As palladium is a critical metal for gasoline and diesel automobiles, lithium is the most well-known battery metal on the market, and a critical component in electric vehicles.

While palladium prices have been rising to the stratosphere, lithium prices have fallen to a potential four-year bottom. A combination of supply glut and a lack of battery production capacity have impacted the metal, but the implied understanding of analysts and experts everywhere is that the recovery of lithium prices is just a matter of time. Demand for electric vehicles is rising, and alongside it is the production capacity for batteries and the necessary materials, including lithium.

That puts New Age in the perfect position for the long-term. On one hand, it has the upswing of palladium. On the other, the Company has seven exceptionally strong lithium and rare element projects in Manitoba waiting to be capitalized on. In close proximity to the historical Tanco mine, New Age already has already received a drill permit from the provincial government for its sizeable Lithium Two deposit which has a historical non-NI 43-101 compliant resource of 544,460 tonnes grading 1.4% Li2O.

No matter which way you look at it, the long-term outlook for palladium and lithium is positive. Investors often dream of getting in on the ground floor of mining success, and in these two cases, the opportunities are ripe for the taking. Palladium is at an all-time high and interest for deposits is staggering, and lithium’s low combined with a sustained increase in demand primes it for a pendulum swing the other way. In both cases, New Age Metals will benefit.



FULL DISCLOSURE: This is a paid article produced by Stockhouse Publishing.


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