Is Future Metals about to surge in value?
“…with the promise of a highly prospective resource – the company’s Panton Project has the highest grade PGM estimate in Australia – confirmed by a brace of upbeat operations updates just last month, is FME now in value territory?…”
As with other mining small caps the value of Future Metals NL (AIM/ASX:FME), exploring for nickel, copper and Platinum Group Metals (PGM) in Western Australia, has taken a hit over the past year, currently trading two-thirds lower than its price last March.
But with the promise of a highly prospective resource – the company’s Panton Project has the highest grade PGM estimate in Australia – confirmed by a brace of upbeat operations updates just last month, is FME now in value territory?
Located on three granted mining licences, in the Kimberley region, just off the Great North Highway and with access to the Port of Wyndham, Panton has a JORC Mineral Resource Estimate (MRE) of 6.9 Moz PdEq at a grade of 1.66 g/t PdEq, including a high-grade reef of 3.2 Moz PdEq at 3.86 g/t PdEq. Since acquiring the Project in 2021 FME has undertaken new drilling and metallurgical test work – building on previous exploration of the site conducted over the past 20 years – and is currently working on a scoping study with the ultimate aim of delivering a low-capital, high margin mining operation with potential for expansion.
Cumulative exploration to date indicates PGM-Ni mineralisation occurring within a 12km by 3km, layered, differentiated mafic-ultramafic intrusion referred to as the ‘Panton Intrusive’. Last year FME pursued extensive development studies and exploration indicating the Project has the potential to host a significant Ni-Cu-PGM sulphide deposit in addition to the known PGM resource. A gravity modelling survey built on existing magnetic data to allow the development of a 3D interpreted geophysical model of the Intrusive, which confirmed the company’s hypothesis that the structure has a keel-like geometry favourable for significant magmatic Ni-Cu-PGM sulphide-rich mineralisation that has not been previously drill tested. The analysis identified another significant anomaly within the Project area, positioned near surface and extending down approximately 2km in depth, with multiple shoot-like bedrock electromagnetic (EM) conductors ‘which may represent an important new target’.
Panton’s developing promise
Two updates published last month seem to confirm the Project’s potential. Results from seven of eight holes in FME’s 2022/23 drilling programme, testing targets identified from historical drilling, EM surveys, and gravity and magnetics inversion modelling, indicated that Panton hosts ‘multiple styles of mineralisation’. The results, when considered with analysis of geophysics, MAGLAG soil samples, stream sediments and ground observations, show a potential embayment feature which sits under cover on the Panton North permit adjacent to the existing JORC Resource: embayment features can act as ‘sulphide traps’, offering a confined localised volume in which sulphide rich magma can settle.
Intersections demonstrating significant sulphide and PGE mineralisation included 53m @ 0.12 g/t PGE3E, 0.18pc Ni, 158ppm Co, 0.10pc Cu from 32m; 83m @ 0.49 g/t PGE3E, 0.25pc Ni, 136ppm Co, 0.04pc Cu from 53m; and 19m @ 0.23 g/t PGE3E, 0.26pc Ni, 158ppm Co, 0.09pc Cu from 240m. The company plans to test the embayment structure with shallow drilling once the Kimberley wet season ends, following further ground mapping and sampling. FME said: ‘The purpose of the 2022 reconnaissance drill programme was to determine whether Panton could host a Ni-Cu-(PGE) sulphide orebody outside of the known chromite mineralisation that the existing JORC Resource relates to, and to determine where there may be a large accumulation of these sulphides. These latest drill results demonstrate that the Panton intrusion hosts multiple styles of mineralisation, including magmatic sulphides which host Ni-Cu-(PGE) sulphide mineralisation.’
A few days later the company published results of its bulk ore sorting and flotation optimisation and repeatability test work which promised to ‘significantly de-risk Panton’s future development’, the consistency of flotation performance indicating the Project’s suitability for ore sorting. Repeated and consistent flotation recorded metallurgical PGM recoveries averaging 78pc at concentrate grades averaging 286g/t PGM3E from the high-grade PGM chromitite ore which makes up 2.9 Moz of the 5.0 Moz PGM3E contained in Panton’s JORC Resource. Results from bulk ore sorting test work demonstrated 97pc recovery of high-grade PGM bearing ore, and rejection of low-grade material and waste. The ore sorting results ‘will have a material impact on mine design’, enabling a reduction in the size of milling and flotation equipment, tailings storage, electricity requirements and water consumption, thereby reducing estimated capital and operating costs.
FME said: ‘Optimisation and variability flotation test work has demonstrated highly repeatable results with strong recoveries at high concentrate grades. The ore sorting results are significant, as it is the key to increasing mineable tonnes while ensuring the ore reporting to the mill is high grade.’ This would facilitate ‘increased economies of scale within the mine, utilising conventional underground mining methods, while decreasing processing plant capital costs by increasing the grade of the mill feed, with negligible losses of high-grade ore.’ In summary, the two February updates ‘demonstrated a credible metallurgical solution which places Panton firmly on the development pathway.’ The company said it was also advancing discussions with potential technology partners to assess ‘a low-capital downstream integration option at Panton’. Downstream integration enables the production of high margin metals products while also significantly decreasing the emissions profile associated with those products, thus helping FME differentiate itself from the majority of established South African and Russian PGM producers, which use coal-fired power and generate other emissions such as sulphur dioxide.
FME extends its project position
The two updates followed news earlier this year that FME was to more than double its exploration position at Panton by securing the right to farm-in to the adjoining Panton North exploration ground, along with the Copernicus North project. Panton North contains an extension of the prospective keel position already identified, with anomalous nickel, copper and PGE grades confirmed by historic drilling and soil and rock chip sampling. The new ground is contiguous to the existing Panton Project, opening additional development flexibility. Copernicus North is a ‘highly anomalous’ Ni-Cu prospect along strike from the historic Copernicus Ni-Cu mine.
The Farm-in and Joint Venture Agreement (with Octava Minerals) allows FME to earn up to a 70pc interest in both the Panton North and Copernicus projects by sole funding exploration expenditure of A$2m over four years. FME said: ‘Panton North and Copernicus North have been subject to only limited, shallow drilling despite compelling geochemical and EM anomalies. There is a significant opportunity to apply modern geophysical techniques, such as those being applied at Future Metals’ Panton Project to identify high quality targets for economic accumulations of Ni-Cu-PGE sulphides at depth.’
The company is aiming to complete its scoping study in H2 2023. It will examine two pathways: a concentrate-only scenario where a bulk Ni-PGM concentrate is produced via flotation and sold into the non-ferrous smelting market, and a downstream integrated scenario where a concentrate is processed further using hydrometallurgical methods to produce upgraded PGM and base metals products. The potential benefits of hydrometallurgical processing include ‘improved payabilities, reduced logistics costs and significantly less sensitivity to many elements deleterious to smelters, such as chrome.’ FME believes a low emission upgraded PGM product from Australia would be ‘highly sought after by potential customers in the hydrogen and automotive industries’ sensitive to the ESG implications of accumulating emissions through the supply chain.
Outlook
Considering the precipitous decline in its value over the past year, a case can be made that FME is now looking rather interesting. The company’s price has tumbled from 12.5p 12 months ago to just under 4p at the time of writing, taking its market cap to A$22.15m. But there are indications FME may have something special at Panton, a copper, nickel and PGM suphide system that, if confirmed – and of course it is an ‘if’ – might be of interest to the majors. As TMS has reported multiple times over the past few months – along with the rest of the investor press – the emerging green economy is going to need transition metals just like those at Panton, and lots of them: the lack of investment in new mines, sanctions on Russia (a major PGM supplier), and surging demand for electric vehicles and other green technologies is generating a swelling supply crisis. Big companies are working to lock-in deals with suppliers to secure future inventory.
FME has time to continue to embellish Panton’s appeal: the company is funded for its current programme, stating a cash position as at 31 December 2022 of A$5.79m (December 2021: A$5.6m). It undertook fundraising last year, raising A$6m in August on the ASX, and £0.5m (A$843,012) in October on AIM (both figures before expenses). If the company can build on its results so far this year it seems set to become an ever more attractive proposition to potential buyers – and investors. It’s worth noting how quickly other small caps such as Eurasia Mining (LON:EUA) and Chalice Mining (ASX:CHN) surged in value after the promise of their assets was confirmed.
At this price FME is one worth watching over the next few weeks. Look out for remaining deep hole drilling results from the company’s current programme, the new operations earmarked for later this year, and the scoping study due in H2.
