Platinum Group Metals Reports Third Quarter 2017 Results
788 – 550 Burrard Street
Vancouver, BC V6C 2B5
P: 604-899-5450
F: 604-484-4710
News Release No. 17-349
July 17, 2017
Platinum Group Metals Reports Third Quarter 2017 Results
(Vancouver/Johannesburg) Platinum Group Metals Ltd. (PTM-TSX; PLG-NYSE MKT)
(“Platinum Group” or the “Company”) reports the Company’s operating and financial
results for the three and nine months ended May 31, 2017 and provides an operational
update and outlook . For details of the condensed consolidated interim financial
statements for the three and nine months ended May 31 , 2017 (the “Financial
Statements”) and Management’s Discussion and Analysis for the period ended May 31,
2017 (the “MDA”), please see the Company’s filings on SEDAR ( www.sedar.com) or on
EDGAR (www.sec.gov). Shareholders are encouraged to visit the Company’s website at
www.platinumgroupmetals.net. Shareholders may receive a hard copy of the complete
Financial Statements from the Company free of charge upon request.
All amounts herein are reported in United States Dollars unless otherwise specified.
Some of the operating results and forecasts detailed below were reported in earlier news
releases by the Company dated June 9 and July 7, 2017.
Operations at Maseve Mine
The Maseve Mine delivered 6,925 ounces of platinum, palladium, rhodium and gold (“4E”)
in concentrate during the three month period ended May 31, 2017. However, during the
period Company engineers determined that in some areas of the Maseve Mine
(specifically Block 11) the bord and pillar mechanized mining method was not achieving
required efficiencies. Although produced tonnes have been increasing, grade control was
not being achieved. Based on extensive sampling, face grades were determined to have
generally met est imates, but the fully mechanized bord and pillar mining method ha d
resulted in excess dilution, and therefore lower than planned grades delivered to the
plant. As previously reported, exposed portions of Merensky Reef mine blocks are
exhibiting gentle rolling features . This condition creates grade control issues when
mechanized bord and pillar mining is undertaken.
As a result of the above, in July, 2017 the Company undertook a restructuring of mine
operations. The restructuring aims to reduce ongoing c osts and achieve positive,
sustainable cash flows as soon as possible utilizing the established infrastructure
currently in place at the Maseve Mine. The main mining method will transition from
higher volume bord and pillar mining to a hybrid mining metho d, consisting of
mechanized access drives using the mine’s current equipment and conventional hand -
held methods for stoping. Currently , active mining has been temporarily suspended ,
while contractor activity and labour is restructured. Negotiations and consultation have
been going well. A significant number of the mine workforce will be affected by the
restructuring. Final numbers will be determined in the next few weeks. Equipment and
mobile machinery maintenance and underground infrastructure improvements are being
undertaken during this period. Both bord and pillar and hybrid methods were included
in the project feasibility study. Mining is expected to resume within the next few weeks.
PLATINUM GROUP METALS LTD. …2
A recently completed second segment of the underground conveyor toward Block 11 is
expected to reduce trucking requirements and improve performance of the underground
mine in the months ahead.
Mining and Milling Overview
A summary of monthly production for the nine months ended May 31, 2017 follows:
Month Dry Tonnes
Milled
Average Grade
gms/tonne
Recovery % 4E Ounces in
Concentrate
September, 2016 55,897 1.29 78.4 1,823
October, 2016 22,316 1.59 79.3 907
November, 2016 29,945 1.58 81.4 1,237
December, 2016 39,297 1.51 79.2 1,509
January, 2017 34,661 1.53 79.2 1,351
February, 2017(1) 36,848 1.64 82.3 1,602
March, 2017(1) 43,961 1.88 82.3 2,189
April, 2017 41,853 2.00 83.8 2,256
May, 2017 50,484 1.81 83.4 2,480
(1) Approximately 7,825 dry tonnes of ore mined in February 2017 were milled in March 2017.
In addition to primary decline development to the first infrastructure level , at May 31,
2017, approximately the following development has been completed and surveyed in the
north mine area:
i) 4,550 meters of lateral access development, including access from primary
declines to mining blocks, ventilation passages, return airways, ramps, waste
raises and haulages;
ii) 5,706 meters of progressive reef development consisting of raise and diagonal
development into mining blocks, reef drives, reef cubby’s and reef muck bays;
iii) 24,714 square meters bord and pillar and long hole stoping; and
iv) 1,862 meters of progressive infrastructure development for cross cuts, station
drives, substations, refuge bays, workshops and water management facilities.
The contribution of mined tonnage from Block 11 is a critical factor to achieving positive
cash flow at the Maseve Mine. The overall geological confidence in this block has not
changed. Block 11 is a large, well -drilled and stable mining block estimated to host
545,000 4E Merensky Reef ounces (3,066,512 tonnes at 5.53 gpt 4E Indicated). This
block is modelled as on average as flat dipping at an average of nine degrees, with an
average seam thickness of 157 cm (as published in the technical report titled “An
Independent Technical Report on the Maseve Project (WBJV Project areas 1 and 1A)
located on the Western Limb of the Bushveld Igneous Complex, South Africa” dated
August 28, 2015, with an effective date of July 15, 2015). Increasing the proportion of
hybrid mining is expected to improve the grade to the mill.
PLATINUM GROUP METALS LTD. …3
Results For The Nine Months Ended May 31, 2017
During the nine months ended May 31, 2017, the Company incurred a net loss of $ 287
million (nine months ended May 31, 2016 – net loss of $ 1.6 million). During the nine
month period, the Company recorded a $280 million impairment of the Maseve Mine (of
which $225 million was recognized in the three months ended May 31, 2017), which was
taken primarily to recognize the effect of missed production targets and the transition to
a more gradual production rate from the hybrid mining method. A stock compensation
expense of $1.1 million was also recognized in the current period (May 31, 2016 – $0.09
million). General and admin istrative costs dropped from $4.5 million in the p revious
comparable period to $4.2 million in the current period , principally from cost cutting
measures. The currency translation adjustment recognized in the period is a gain of $41
million (May 31, 2016 - $80 million loss) due to an 9.5 % increase in value of the Rand
against the US Dollar in the current period as compared to a 19% decrease in the value
of the Rand in the comparable period.
Accounts receivable at May 31, 2017 totalled $2.9 million while accounts payable and
accrued liabilities amounted to $ 12.5 million. Accounts receivable were principally
comprised of amounts receivable on sale of concentrate, value added taxes repayable to
the Company in South Africa , amounts receivable from partners and tax and other
receivables. Accounts payable and other current liabilities included contract development
and mining fees, drilling expenses, engineering fees, accrued professional fees and
regular trade payables for ongoing exploration, development and administration costs.
During the nine month period ended May 31, 2017 the Company incurred and capitalized
approximately $91 million (May 31, 2016 - $90 million) in development, construction,
equipment and other costs for the Maseve Mine. Initial proceeds from concentrate sales
before commercial production are treated as a reduction in project capital cost with $12.6
million being recognized to development costs in the period ended May 31, 2017. As at
May 31, 2017, post impairment, the Company carried total deferred acquisition,
development, construction, equipment and ot her costs related to the Maseve Mine of
$317 million.
During the period ended May 31, 2017, approximately $3.3 million was spent at the
Waterberg Project for engineering and exploration activities. This work was fully funded
by the Company’s joint venture partner the Japan Oil, Gas and Metals National
Corporation (“JOGMEC”). At period end, $22.7 million in net costs had been capitalized
to the Waterberg Project. In fill drilling at Waterberg as part of an ongoing Definitive
Feasibility Study (“DFS”) has confirmed good grades and thicknesses for fully mechanized
bulk underground mining. Work on power, water and other infrastructure planning has
continued with positive results.
For more information on mineral properties, see Notes 4 and 5 of the Financial
Statements and the MDA
Recent Financing
On April 26, 2017, the Company announced the closing of an offering of 15,390,000
common shares at a price of US$1.30 per share, for aggregate gross proceeds of $20
million. Details of this offering may be found in the Company’s April 19, 2017 Prospectus
Supplement to a Short Form Base Shelf Prospectus dated October 14, 2016. Net
PLATINUM GROUP METALS LTD. …4
proceeds to the Company after fees, commissions and costs were approximately $18.4
million.
Subsequent to period end, on June 30 , 2017, the Company closed an offering of $20
million aggregate principal amount of convertible senior subordinated notes to certain
institutional investors. The Notes will bear interest at a rate of 6 7/8% per annum,
payable semi-annually on January 1 and July 1 of each year, beginning on January 1,
2018, in cash or at the election of the Company, in common shares of the Company or a
combination of cash and common shares, and will mature on July 1, 2022, unless earlier
repurchased, redeemed or converted. The Notes will be convertible at any time at the
option of the holder, and may be settled, at the Company's election, in cash, common
shares, or a combination of cash and common shares. If any Notes are converted on or
prior to the three and one-half year anniversary of the issuance date, the holder of the
Notes will also be entitled to receive an amount equal to the remaining interest payments
on the converted Notes to the three and one-half year anniversary of the issuance date,
discounted by 2%, payable in Common Shares.
Loan Facilities Amended
As reported in a news release dated June 15, 2017 t o accommodate the Company for
delayed production ramp -up at the Maseve Mine, a syndicate of lenders led by Sprott
Resource Lending Partnership ("Sprott") and Liberty Metals & Mining Holdings,
LLC ("LMM") have agreed to amend their existing loan facilities to the Company and
provide waivers, in each case, until October 31, 2017, with regard to minimum cash and
working capital requirements, achievement of production targets, certain events of
default and the requirement to pay the lenders 50% of the proceeds of equity and debt
financings. Sprott and LMM are each to be paid a fee of US $200,000 and
US $400,000 respectively in consideration of the above amendments, both at the same
time upon the maturity or repayment of the Sprott facility. The Liberty facility is in
second secured position and is scheduled for repayment subsequent to the Sprott facility.
Outlook
The Company’s key business objectives are to improve operational efficiency and
advance underground development and production ramp-up at the Maseve Mine with the
objective of achieving positive cash flow and to advance the Waterberg Project. As the
Company develops and implements a new hybrid mining production ramp-up plan it will
assess its forward production guidance. Earlier production guidance provided by the
Company is no longer valid and should not be relied upon. In the coming
months, Platinum Group will provide operational updates on the results of the hybrid
mining plan ramp-up and will provide forward production guidance. The objective of the
restructured mine will be on reducing costs and achieving positive cash flow as quickly
as possible with reduced focus on the rapid ramp-up of ounce production.
In the near term, the Company’s liquidity will be constrained as development at the
Maseve Mine will continue to utilize a majority of the Company’s cash on hand until
positive cash flow is achieved. Lower metal prices, delays in product ion ramp-up or a
stronger Rand could all result in requirements for further financing. Successful transition
to more hybrid mining (as described above), with a smaller labour force, at the Maseve
Mine will be key to achieving positive cash flow.
PLATINUM GROUP METALS LTD. …5
The Company is currently working with BMO Capital Markets and Macquarie Capital to
review and assess corporate and asset level strategic alternatives.
Currently the Company has $20 million in cash. In order to achieve positive cash flow
and to maintain its working capital covenants in 2017 under existing loan facilities, the
Company estimates that it will need to source $10 million to $20 million of additional
funding by way of refinancing its existing debt, the issuance of new debt, private or public
offerings of equity or the sale of project or property interests. The Company has active
discussions in all areas of additional funding with several parties.
Ongoing advancement of the Waterberg Project towards a D FS in 2017 is currently
funded by JOGMEC.
About Platinum Group Metals Ltd.
Platinum Group, based in Johannesburg, South Africa and Vancouver, Canada, has a
successful track reco rd with more than 20 years of experience in exploration, mine
discovery, mine construction and mine operations.
Formed in 2002, Platinum Group holds significant mineral rights and large scale reserves
of platinum and palladium in the Bushveld Igneous Complex of South Africa, which is
host to over 70% of the world's primary platinum production. The Company is currently
focused on ramping up the Maseve Mine, its first near -surface platinum mine, to
commercial production and on expanding reserves.
Platinum Group has delineated new low cost, near surface reserves on the North Limb of
the Bushveld Complex on the Waterberg Project. Waterberg represents a new bulk type
of large scale, shallow, low cost platinum, palladium and gold deposit. Waterberg is one
of the only large scale dominantly palladium deposits in the world.
Qualified Person
R. Michael Jones, P.Eng., the Company’s President, Chief Executive Officer and a
significant shareholder of the Company, is a non-independent qualified person as defined
in National Instrument 43-101 Standards of Disclosure for Mineral Projects (“NI 43-101”)
and is responsible for preparing the technical information contained in this news release.
He has verified the data by reviewing the detailed information of the geological and
engineering staff and the Independent Qualified Person reports as well as visiting the site
regularly.
On behalf of the Board of
Platinum Group Metals Ltd.
“Frank R. Hallam”
CFO and Director
For further information contact:
R. Michael Jones, President
or Kris Begic, VP, Corporate Development
Platinum Group Metals Ltd., Vancouver
Tel: (604) 899-5450 / Toll Free: (866) 899-5450
www.platinumgroupmetals.net
PLATINUM GROUP METALS LTD. …6
Disclosure
The Toronto Stock Exchange and the NYSE MKT LLC have not reviewed and do not accept
responsibility for the accuracy or adequacy of this news release, which has been prepared
by management.
This press release contains forward-looking information within the meaning of Canadian
securities laws and forward-looking statements within the meaning of U.S. securities laws
(collectively “forward -looking statements”). Forward -looking statements are typically
identified by words such as: believe, expect, anticipate, intend, estimate, plans, postulate
and similar expressions, or are those, which, by their nature, refer to future events. All
statements that are not statements of historical fact are forward -looking statements.
Forward-looking statements in this press release include, without limitation, statements
regarding the Company’s restructuring of operations; financing requirements and the
adequacy of capital, including, but not limited to, the amount of additional funding
required to achieve positive cash flow and to maintain the Company’s working capital
covenants in 2017 under existing loan facilities; anticipated or potential developments at
the Maseve Mine including the date of expected resumption of mining, changes to the
primary mining method and the expected improvement of grade of material delivered to
the mill, development and construction activities, conveyor details (including but not
limited to the potential impact of the second segment of the underground conveyor
toward Block 11), improved stoping and tr amming, access to Block 11, mine plans,
production trends, estimates and assumptions, cost estimates, contractor and labour
developments, and production and cost efficiencies; the impact of the restructuring plans
on the Company’s financial condition and a ny future benefits of implementing the
restructuring plans; future cash flow and the effects of developments on cash flow;
corporate and asset level strategic alternatives; the potential for expanding reserves; the
potential economics of the Waterberg Proj ect, if developed; ramp -up and potential
achievement of commercial production at the Maseve Mine; the Company’s key
objectives; and the Company’s plans and estimates regarding exploration, studies,
development, construction, production, cash flows and othe r activities and
developments. Statements of mineral resources and mineral reserves also constitute
forward-looking statements to the extent they represent estimates of mineralization that
will be encountered on a property and/or estimates regarding future costs, revenues and
other matters. Although the Company believes the forward -looking statements in this
press release are reasonable, it can give no assurance that the expectations and
assumptions in such statements will prove to be correct. The Company cautions investors
that any forward-looking statements by the Company are not guarantees of future results
or performance, and that actual results may differ materially from those in forward -
looking statements as a result of various factors, including risks related to indebtedness;
the Company’s capital requirements may exceed its current expectations; the uncertainty
of cost, operational and economic projections; the ability of the Company to negotiate
and complete future funding transactions; variations i n market conditions; the nature,
quality and quantity of any mineral deposits that may be located; metal prices; other
prices and costs; currency exchange rates; the Company’s ability to obtain any necessary
permits, consents or authorizations required for its activities; the Company’s ability to
produce minerals from its properties successfully or profitably, to continue its projected
growth, or to be fully able to implement its business strategies; risks related to contractor
performance and labour disruptions; and other risk factors described in the Company’s
Form 40 -F annual report, annual information form and other filings with the U.S.
Securities and Exchange Commission (the “SEC”) and Canadian securities regulators,
which may be viewed at www.sec.gov and www.sedar.com, respectively. The Company
does not assume any obligation to update forward -looking statements, whether as a
PLATINUM GROUP METALS LTD. …7
result of new information, future events or otherwise, other than as required by
applicable law.
Cautionary Note to U.S. and other Investors
Estimates of mineralization and other technical information included or referenced in this
press release have been prepared in accordance with NI 43-101. The definitions of proven
and probable reserves used in NI 43-101 differ from the definitions in SEC Industry Guide
7. Under SEC Industry Guide 7 standards, a "final" or "bankable" feasibility study is
required to report reserves, the three-year historical average price is used in any reserve
or cash flow analysis to designate reserves and th e primary environmental analysis or
report must be filed with the appropriate governmental authority. As a result, the
reserves reported by the Company in accordance with NI 43 -101 may not qualify as
"reserves" under SEC standards. In addition, the terms " mineral resource", "measured
mineral resource", "indicated mineral resource" and "inferred mineral resource" are
defined in and required to be disclosed by NI 43 -101; however, these terms are not
defined terms under SEC Industry Guide 7 and normally are not permitted to be used in
reports and registration statements filed with the SEC. Mineral resources that are not
mineral reserves do not have demonstrated economic viability. Investors are cautioned
not to assume that any part or all of the mineral deposits in these categories will ever be
converted into reserves. "inferred mineral resources" have a great amount of uncertainty
as to their existence, and great uncertainty as to their economic and legal feasibility. It
cannot be assumed that all or any part o f an inferred mineral resource will ever be
upgraded to a higher category. Under Canadian securities laws, estimates of inferred
mineral resources may not form the basis of feasibility or pre -feasibility studies, except
in rare cases. Additionally, disclos ure of "contained ounces" in a resource is permitted
disclosure under Canadian securities laws; however, the SEC normally only permits
issuers to report mineralization that does not constitute "reserves" by SEC standards as
in place tonnage and grade witho ut reference to unit measurements. Accordingly,
information contained or referenced in this press release containing descriptions of the
Company's mineral deposits may not be comparable to similar information made public
by U.S. companies subject to the reporting and disclosure requirements of United States
federal securities laws and the rules and regulations thereunder.