I was warned that Platinum Group Metals’s chief executive Michael Jones isn’t exactly media friendly. But he did agree to talk to us, and if he does have a grumpy side, set it aside for the ten minutes or so of our discussion. PGM’s share price has tanked, dropping to a tenth of its value in the 2008 peak. In Jones’s opinion, the current market cap of $460m is laughable considering its assets and its $125m in the bank. If he is only half right, it’s the kind of stock that opportunists and bargain hunters should be grabbing. – AH
Alec Hogg kicked off the interview asking PGM chief executive Michael Jones to elaborate on some extravagant claims made in a Plenary session about his company’s platinum discovery in Limpopo….
Well, we think we found the #2 platinum deposit in the world, actually. We see Waterberg as an industry-changing discovery. It’s 12km long. We haven’t found the end of it and its big difference is that it’s thick. Whereas conventional platinum mines are one to one-point-four metres thick, Waterberg goes up to 60 metres thick and this allows for large-scale mechanised mining, which has the potential to not only change the economics, but the safety equation as well, by reducing the rock/human interface. We’re very excited about that and I think that it’s very exciting for South Africa that a new, major discovery has been made.
Your company has been in SA for 12 years yet you’re 70 percent of the way to mining. How much longer before you start bringing PGMs to account?
On our Western Bushveld joint venture we’re planning to be in production in the fourth quarter of 2015 (this year), so we’re almost there. We have the luxury of having a fair amount of capital to do underground developments. We have a nine-month program of simply, building a stockpile and building our openings underground. The mill construction has gone very well, so we’re in a good position to be in production at the end of 2015.
The really, exciting prospect: 600,000+ PGM ounces p.a. is in the north. We’ve heard stories here in South Africa.  Robert Friedland (Ivanhoe) is one of them with mixed reviews. What makes you guys different? Looking at your shareholder base, you’ve certainly convinced some very big names.
We know Ivanhoe very well. They’re based a few blocks from us in Vancouver, Canada. They’re a very serious, technical company. Of course, they’re supported by the Japanese Government and Hitachi, so that’s a very serious technical development as well. They’re sinking their shaft now, so I would take that one quite seriously. What makes us different is the shallowness of the deposit. Waterberg is within 150 metres of surface and that allows us to use declines rather than vertical shafts, and that’s a real quantum change in terms of the capital involved in building the mine.
The shareholder base that you have: Blackrock, Templeton, many of the Blue Chip names…
We worked very hard at that. We wore out a lot of shoe leather over 12 years, talking about our scientific basis for the company, our management style, and the deposit we had. At the end of the day, good grade thickness near surface develops good investors.
How big is the deposit that you’ve discovered?
Right now, Waterberg has a resource of 280-million tons at about three grams/ton – a total of 29-million ounces. We artificially cut the deposit off at 1250 metres deep. It will probably go as deep as you want it to go. We’re not interested in deep PGM mining. We’re aware that in the main part of the complex, mines are developed down to two kilometres and below. That’s not our business. We see a 20+-year resource above the 1000-year level and that’s what we’d like to do. Going to the North, we have not found the end of the deposit. We stepped out 1.5kms. We hit the deposit again, and I’m literally watching my cellphone for the next 1.5kms step-out, which is just about the target depth. We see a whole limb of the Bushveld complex now. The Bushveld rocks are heavy, so they show up quite well, on gravity. We’ve flown an airborne gravity system over about 1000km2 area, and we see this limb going for more than 25kms. It really is something very significant.
You feel optimistic about South Africa – not a commonly shared sentiment right now?
On the technical basis, we’re very optimistic about South Africa’s geology. Everyone forgets because gold production has been declining, but its host to the greatest gold deposit in the world. Its host to the greatest chrome deposit in world. Its host to the greatest platinum/palladium, great coal deposits, and iron ore. The list goes on. For the last 100 years, there’s been good exploitation of resources, but we see many companies (just on their mineral lease) looking down dip and the fundamental exploration that we’re used to doing in a large land mass like Canada… We’re very pleased to be at a stage in the development of the mineral belts where there are things like Waterberg that you can find. We see the reaction to mineral discoveries – quite differently, here in South Africa than we do in Canada. For example, I was involved in developing a mine in the Canadian diamond fields and when diamonds were finally discovered, after much scepticism in Northern Canada, it sparked a staking rush of thousands and thousands of square kilometres. Literally, billions of Dollars were spent on exploration. Amazingly, when we discovered Waterberg, nobody reacted and in fact, the next ten kilometres of Waterberg was actually, sitting open for staking for a month because we didn’t realise which way it went. We’d already announced it in a public press release and through the cadastral system and the good ability of being able to stake claims now in South Africa, we were able to pick up the entire 1000 km2 area, to ourselves.
Why do you think that is?
I think that South Africa’s blessed with enormous continuity of its deposits and the large mining houses are used to having a smorgasbord of minerals laid out in front of them. As Canadians, we have the second-largest land mass in the world, with only 30-million people and our deposits are literally, little dots spread out across that enormous land mass. In order to have a mineral industry in Canada, we have to think very dynamically and we have to think in terms of exploration with fairly high risk. We’re used to taking those risks in large scale. That’s part of our culture, so that’s the difference.
PGM is a great name, but it isn’t listed in Johannesburg. Is there any particular reason for that?
I started the company in Canada, in 2000 and merged with my partner, Frank Hallam’s company in 2002. I couldn’t believe that the name (Platinum Group Metals) was actually available. For our listing in Johannesburg – we’re very well supported by shareholders in New York, London, and Toronto. We have two listings now. We’ve been asked (many times) about a listing in South Africa. We would be interested, but we want to see the investor interest first and so far, we’ve been supported internationally.
Have you ever seen it this tough to raise money?
No. I’ve been raising money since 1984 and in 31 years, I’ve never seen the business this tough. Frankly, the valuations are crazy. Companies such as ours are devalued down to just above your cash position, even though you control 29-million ounce deposits. It’s unbelievable. The sector is so far out of flavour. Commodity prices are off, but they’re not that bad. Markets are cyclical. I’ve seen at least six cycles in my career. This happens to be the deepest one down, but what a great opportunity for investors coming in. The smart money is here. The smart money still has money and it is investing, so maybe that’s a signal out there – to look at a company like ours, see who the shareholders are, and there’s a reason why a company like Blackrock manages more assets than anybody else in the world does. That’s the kind of investor that you really, should be thinking about following.
When you say ‘the smart money’s here’, do you mean here at Indaba – at this conference?
Over 50 percent of our stock is around the conference. They’re involved in our site tour. The long-term investors are here and they see this as a great opportunity. The average retail shareholders etcetera should be thinking very carefully about what the larger funds are doing.
This new Waterberg discovery: how long will that take to bring to account?
We’re planning to complete a pre-feasibility study at Waterberg in the middle of this year and then, we’re going into definitive engineering. That’s going to take at least a year to complete, so we wouldn’t see any application for a mining right being completed until 2017/2018. This is a very big project. You’re talking about close to 700,000 ounces per year. It’s a capital investment of about $850m, so we have a lot of engineering to do. I think it’s going to come on at a very exciting time in the platinum market. You see good trends in auto recovery and the sales of automobiles. We see growing interest in Asian jewellery and platinum, and we see the deep mines becoming rather old and tired. Safety is another big factor. The idea of working extremely deeply in tough conditions is not really, that palatable and so we think that the transition to mechanise mining in the north limb comes at a great time.
