Palladium surged to US$1,781/oz this week, while nickel has seen a 40% rise year-to-date, adding significant value to the basket of minerals in the big Platreef polymetallic resource in South Africa.
"While many investors are focused on gold, palladium has been far and away the best performing precious metal for the past several years. The strong, upward price appreciation since 2016 of the collective basket of metals to be produced by Platreef when commercial operations commence at the Tier One discovery is encouraging," Friedland said this week.
Recent palladium M&A activity has seen South Africa's Impala Platinum buying North American Palladium for US$751 million and fellow South Africa-based company Sibanye-Stillwater agreeing to buy Lonmin for $286 million to create the world's second-largest palladium producer, after it acquired the Stillwater palladium assets in Montana, USA, in 2016.
At current prices, palladium and nickel comprise more than 60% of the weighted price of the basket of metals in Platreef's resource. Rhodium and gold also make up a significant part of Platreef's contained metal valuation.
A 2017 definitive feasibility study pegged potential Platreef cash costs at US$351/oz of 3PE-plus-gold, net of nickel and copper by-products, and including sustaining capital costs.
The study estimated an initial average annual Platreef production rate of about 219,000oz palladium, 214,000oz platinum, 30,000oz gold and 14,000oz rhodium, for combined output of 477,000oz/y of 3PE+Au. That is all paid for by annual production of 21Mlb nickel and 13Mlb copper, according to Ivanhoe.
Ivanhoe also provided a construction update on the project on South Africa's prolific Bushveld Igneous Complex, saying the first shaft had reached a depth of 950m below surface. The push to the final depth at 1,000m is expected to be completed by mid-2020.
Ivanhoe Mines indirectly owns 64% of Platreef through its subsidiary, Ivanplats, and is directing all mine development work. South African beneficiaries of the approved broad-based, black economic empowerment structure have a 26% stake in the Platreef project.
The remaining 10% is owned by a Japanese consortium of ITOCHU Corporation, Japan Oil, Gas and Metals National Corporation, and Japan Gas Corporation.