The TSX-listed Canadian palladium stocks we’ve dug up could benefit from increased demand for palladium in the future
SmallCapPower | October 11, 2019: Palladium is a shiny, silvery-white metal that resists corrosion. Approximately 85% of global demand for palladium is for catalytic converters, used in cars with internal combustion engines (ICE), which contain between three to five grams of the metal. It is also used in jewellery, dental fillings, and electronics. Most palladium production comes as a by-product of nickel and platinum mining, with Russia and South Africa controlling ~80% of global palladium production. Strong demand and falling global inventories have led to an impressive rally this year, with the price of the metal up ~31% year-to-date. Potential future catalysts for the metal include: the adoption of electric vehicles, which require 10%-15% more palladium than ICE vehicles; and mass adoption of emissions standards globally, requiring more palladium to be used in catalytic converters to producer cleaner emissions. Today we have identified four TSX-listed Canadian palladium stocks that could benefit from increased global demand for the metal.
*Share price data as at October 9, 2019, data obtained from S&P Capital IQ
North American Palladium Ltd. (TSX:PDL) – $19.65
Metals and Mining
North American Palladium is a Canada-based precious metals producer that owns and operates the underground Lac des Iles palladium mine (LDI), located 106km northwest of Thunder Bay, Ontario. North American Palladium is the world’s only pure-play palladium producer. The property also has a mill with a processing capacity of approximately 15,000 tons per day. On August 1, 2019, PDL reported Q2/19 financial results, highlighted by revenue of $135.6M, a 44% increase YoY, with free cash flow (FCF) of $35.4M. The Company sold 56,121 oz/Pd during the quarter and 112,896 oz/Pd during the first six months of 2019. Management has indicated that it plans on paying a dividend of $0.10 per quarter if palladium prices exceed US$1,200/oz. Management has also provided production guidance of 220,000 to 235,000 oz/Pd for F2019E. On October 7, 2019, North American Palladium said it had agreed to be acquired by Impala Platinum Holdings Limited for C$19.74 per share in cash.
- Market Cap: $1,156.2M
- 30-Day Return: +23.1%
- YTD-Return: +82.1%
- 30-Day Average Trading Volume: 235,160
Eastern Platinum Limited (TSX:ELR) – $0.22
Metals and Mining
Eastern Platinum is a Canada-based, platinum-group-metal (PGM) company engaged in the mining, exploration and development of PGM properties in South Africa. The Company’s properties are situated on the western and eastern limbs of the Bushveld Igneous Complex, which contains the world’s largest reserves of PGM elements. On March 1, 2019, Eastern entered into an agreement with Union Goal Offshore Solution Limited for the construction, re-mining and processing of the tailing resource and offtake of chrome concentrate from Barplats Mines (Pty) Limited tailings facility, called the Retreatment Project, located at the Company’s Crocodile River Mine in South Africa. The Company plans to have this project fully operational with material revenues by Q3/19.
- Market Cap: $20.4M
- 30-Day Return: -33.3%
- YTD-Return: +18.9%
- 30-Day Average Trading Volume: 13,390
Ivanhoe Mines Ltd. (TSX:IVN) – $3.18
Metals and Mining
Ivanhoe Mines is a mining development company with projects in South Africa and the Democratic Republic of Congo. Its Kakula discoveries in the DRC now form its flagship project. Its other assets are the Kamoa copper deposit, 5km from Kakula, the Platreef PGE-Ni-Cu-Au development project in the Bushveld region of South Africa, and the Kipushi zinc/copper mine in the DRC. Ivanhoe Mines is planning on becoming a mid-sized diversified mining company within the next decade, with the development of three world class, copper, PGM and zinc projects in South Africa and the DRC. CIBC Capital markets estimates that Ivanhoe Mines could start producing palladium by F2022E.
- Market Cap: $3,789.7M
- 30-Day Return: -10.9%
- YTD-Return: +34.2%
- 30-Day Average Trading Volume: 602,740
Platinum Group Metals Ltd. (TSX:PTM) – $2.12
Metals and Mining
Platinum Group Metals is a Canadian exploration-stage company with operations in South Africa. Platinum Group Metals is focused on the production ramp up at the Maseve Mine, and the exploration and initial engineering on the Waterberg platinum deposit. The Waterberg Project is a bulk underground deposit in northern South Africa. The deposit was discovered by the Company and has the potential to be a low-cost producer of palladium, platinum, rhodium and gold. On October 7, 2019, Platinum Group Metals released a NI 43-101 technical report for the Waterberg mine. The report estimated Mineral Resources for the Waterberg Project that included 242.4 million tonnes at an average grade of 3.38 g/t 4E, 0.10% copper (Cu) and 0.18% nickel (Ni) in the Measured and Indicated (M&I) category, and an additional 66.7 million tonnes at an average grade of 3.27 g/t 4E, 0.11% Cu, and 0.15% Ni in the Inferred category. Additionally, the estimated Inferred Mineral Reserves contains a total of 19.5M oz of Pd, Pt, Rh, and Au.
- Market Cap: $124.2M
- 30-Day Return: -4.9%
- YTD-Return: +3.4%
- 30-Day Average Trading Volume: 24,540
Disclosure: Neither the author nor his family own shares in any of the companies mentioned above.
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