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22 www.resourceworld.com j u n e / j u l y 2 0 1 5 M any participants in the mineral exploration sector and readers of Resource World will tell you that the market for mineral exploration companies is in a deep multi-year funk. In the past, bear markets such as this one ended because of a recovery in metal prices and/or a discov- ery of a world-class, high-grade resource. But in order to generate the flow of specu- lative capital, the latter must be held by market participants and not by mega mining companies. Many people I have talked to are wor- ried that not enough exploration dollars are being spent to yield a significant discovery. I think there are promising dis- coveries in the market, but the market is not reacting to them. Normally, when a company releases exceptional drill results, one would think the market would spike. However, with the prevailing negative market sentiment, many times this does not happen. My opinion is that the bear market is masking truly exciting discoveries, which will only appreciate in value when and if commodity prices recover. The movements of market leaders in base metals suggest that the highly anticipated recovery may be upon us in the next six months. So where are the discoveries? Well, Platinum Group Metals has a palladium/platinum discovery in South Africa. Platinum Group Metals Ltd. [PTM- TSX; PLG-NYSE MKT] is my Broker's Pick due to the recent price action in the stock, thus making it inexpensive rela- tive to its recent trading range and book value. Platinum Group Metals is nearing completion of a US $514-million mine, the Western Bushveld Joint Venture Mine (WBJV). The company reports that the project is over 80% complete, and it antic- ipates completion within the scope of its current financial resources, which includes over $100 million in cash and an undrawn $40-million oper- ating loan from Sprott. The company is carrying 100% of the cost of the WBJV mine project, but its final ownership of the mine may be reduced from its current 83% to 75% due to Black Empowerment Laws in South Africa. On the other hand, if Platinum Group Metals is forced to reduce its interest in WBJV, it could receive a sig- nificant financial injection in return. If we assume the com- pany completes the mine on its current budget, it would draw about $20 million on its operat- ing line and would have 83% of a US $514-million cost asset – an attributed cost base of US $427 million. This means that the stock, if it were to trade at cost, should trade at a mar- ket value of US $407 million. Current market capitalization is US $345 million, with a current share trading price of US $0.45. And the market is giving no value to the company's other assets, which include a world-class discovery: the North Limb Project, part of the Waterberg JV. To appreciate the significance of the North Limb discovery, one simply has to compare the thickness of a typical plati- num/palladium ore layer (about one metre) to the thickness of the North Limb (40-60 metres). (See illustration) Platinum Group Metals is currently expanding its 29-mil- lion-ounce inferred resource in the North Limb area, in two separate land holdings. In one area it has a 49.9% interest, and in the second area it holds an 87% interest. However, the project gets no value in the current market valuation. So where are the Discoveries? Sometimes they are buried in plain sight. n Information in this article is from sources believed to be reliable; however, we cannot represent that it is accurate or complete. It is provided as a general source of informa- tion and should not be considered personal investment advice or solicitation to buy or sell securities. The views are those of the author, Alf Stewart, and not necessarily those of Raymond James Ltd. Investors consider- ing any investment should consult with their Investment Advisor to ensure that it is suit- able for the investor's circumstances and risk tolerance before making any investment decision. Raymond James Ltd. is a Member Canadian Investor Protection Fund. b r o k e r ' s p i c k s A l f S t e w a r t Where are the discoveries? Illustration courtesy Platinum Group Metals Ltd.