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A Junior Pure-Play Ready to Capitalize on Palladium’s Upswing?

Stockhouse Editorial
2 Comments| May 12, 2020

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Click to enlargeWhat now seems like a lifetime ago, but is only just a couple of months past, palladium hit an all-time high in USD, when an ounce of the precious metal was trading at over $2,800. The emergence of COVID-19 has disrupted the global economy and almost no industry has escaped the carnage unleashed by this new virus. Palladium is no exception due to its demand stemming from the automobile industry which has contracted significantly since the start of this year.

However, there have been some more positive headlines for palladium coming out in recent weeks highlighting a recovery
Click to enlargefor vehicles being sold in China. Additionally,
UBS raised its second quarter-end price forecast for palladium to $2,300 an ounce, up from $2,000.

It was in January when Stockhouse covered New Age Metals Inc. (NAM) (TSX: V.NAM, OTCQB: NMTLF, Forum) as a key player in the palladium market, presenting this stock in a feature article, looking at the Company which owns 100% of one of the largest primary palladium projects in North America.

NAM boasts a portfolio with not only one, but two platinum group metal (PGM) projects at different stages of the exploration and development curve. The Company’s flagship River Valley Primary PGM Project (located just outside Sudbury, Ontario), recently completed a Preliminary Economic Assessment (2019). Its second project, the Genesis PGM project in Alaska, has evidence of mineralization traced on surface for 2,000 metres, which appears to remain open and under cover in along strike.

Globally, primary palladium mining projects are very rare. Palladium is mined mainly as a by-product of nickel and platinum group metal mining in Russia and South Africa, respectively. Steady production from primary nickel and platinum metal operations paired with increasing palladium demand from the automobile sector have contributed to a supply-demand deficit in palladium in recent years. The sparsity of primary palladium producers is what makes NAM’s River Valley Project so unique; the primary metal in the project mineral resource is palladium.

Let’s get up to date on what the Company has been involved with so far this year ….

Drilling commences:

(Image via New Age Metals Inc.)

New Age Metals started drilling at its 100%-owned River Valley PGM Project in March of this year. The drill program is the first phase of the Company’s 2020 exploration and development program. The purpose of the drill program is to test three target types in eight holes totalling about 1,600 metres within and adjacent to the Pine and Dana North Zones of the River Valley deposit. The drill targets consist of induced polarization chargeability features, possible extensions of higher-grade trends, and potential linkage of the Pine Zone to the Dana North Zone at depth. Based on information available from historic drilling, the two zones are currently modelled as a major south-southeast plunging fold. The 2020 drilling aims to test for evidence of this fold and the presence of any thickened and higher-grade PGM sulphide mineralization within the fold nose.
The results of the drilling are anticipated to be released by the end of Q2 2020.

Sprott investment:

The Company’s endeavours were given a significant boost in February 2020, with the news that influential Canadian billionaire mining investor Eric Sprott made a significant investment into NAM’s operations.

Under the terms of the deal, he acquired 14 million units of New Age Metals, in accordance with a private placement, for aggregate consideration of $700,000 representing roughly 9.8% of the outstanding shares).

As stated in the news release on the acquisition:

“Mr. Sprott has a long-term view of the investment and may acquire additional securities of New Age Metals including on the open market or through private acquisitions or sell securities of New Age Metals including on the open market or through private dispositions in the future depending on market conditions, reformulation of plans and/or other relevant factors.”

Looking to the future:

(Image via New Age Metals Inc.)

The impacts of COVID-19 have spread across the globe and the resource sector has not been immune. Mine shutdowns mandated by government stay-at-home orders have affected major producers and junior explorers. During this pandemic, precious metal prices have responded in various ways. For the purpose of this article we will focus on Platinum Group Metals, specifically palladium and it’s economic backdrop.

The automobile sector, which represents the primary demand source for palladium, has suffered significant drops in sales across the globe. Approximately 85% of palladium is used in catalytic converters for internal combustion engine vehicles, as part of their anti-pollution system. However, palladium has been in a structural deficit since 2012 and the virus pandemic has contributed to a slowdown of production from many of the palladium producing operations globally. The net effect on the 1.1 million ounce deficit in 2019 from decreasing auto sales and decreased production in 2020 remains to be determined.

Although the palladium price has fallen from its February high, it has maintained above historical average pricing with a 30% increase year-over-year as at May 7, 2020 (Kitco).This is a very positive sign for players in the palladium space, like NAM.

For the balance of 2020, NAM plans to address recommendations made in the 2019 Preliminary Economic Assessment. The recommendations include follow-up drill programs to the recently completed phase 1 program, a rhodium assay program, downhole geophysical surveys, and metallurgical testwork focused on improving metal recoveries. At present, NAM is self-funding the work at River Valley. However, a strategic partner is sought to expedite development, in order to more fully capitalize on the current attractive metal pricing seen today for PGMs.

New to investing in Metals & Mining? Check out Stockhouse tips on How to Invest in Metals & Mining Stocks and some of our Top Metals & Mining Stocks.

For more of the latest info on Metals & Mining stocks, check out the Metals & Mining Trending News hub on Stockhouse.

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

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