Mitsubishi takes stake in Marathon PGM project

Japan’s Mitsubishi will invest US$94.9 million for a 25% stake in Stillwater Mining’s (SWC.U-T, SWC-N) Marathon project, a platinum group metal (PGM) and copper deposit near the north shore of Lake Superior, 10 km north of the town of Marathon, Ont.

Japan’s largest trading company will acquire the 25% interest for about US$81.3 million and meet the venture’s first cash call of US$13.6 million.

Mitsubishi will have an option to purchase up to 100% of PGM production under a related supply agreement. In the meantime it is responsible for funding its 25% share of operating, capital and exploration expenditures, as well as helping Stillwater secure project financing.

Since acquiring Marathon in November 2010, Stillwater has invested US$159 million in the project.

Frank McAllister, Stillwater’s chairman and chief executive, describes the project “as one of the few PGM plays in North America,” and says in a prepared statement that the deal enables the company “to be prudent in balancing the company’s cash requirements for its various projects.”

The project is in the environmental assessment and permitting stage. Once approved it will be developed as an open-pit mine and milling operation, with one primary pit and several, smaller satellite pits.

Concentrates produced at Marathon would be taken off-site to a third-party smelter and refinery for final processing.

Initial projections indicate the mine could produce 200,000 oz. PGMs — mostly palladium — and 37 million lbs. copper a year over an 11.5-year mine life. 

Stillwater will retain 75% of the project and oversee its development, financing and operations, while Mitsubishi will help Stillwater seek project financing.

Pre-production capital costs are projected between US$550 million and US$650 million, with first production of PGMs likely in 2016. 

Stillwater Mining produces platinum and associated metals from a geological formation in southern Montana called the J-M Reef, which hosts the Stillwater mine near Nye, Mont., and the East Boulder mine south of McLeod, Mont.

The company is the largest primary producer of PGMs outside of South Africa and Russia. Management also notes the company is the only known significant source of PGMs in the U.S.

The company operates concentrating plants at both mines to upgrade ore to a concentrate, and runs a smelter, refinery and laboratory at Columbus, Mont., to further upgrade the concentrate to a PGM-rich filter cake. Spent catalyst material is also recycled at the smelter and refinery to recover PGMs.  

At the end of March on the news, Stillwater’s shares were down 0.86%, or 11¢, to $12.65 per share. The company has traded within a 52-week band of $7.37–$16.23 per share, and has 115 million shares outstanding.