Platinum in play

The equity market isn’t biting, the government is uncooperative, and it hasn’t found what it’s looking for — platinum. Regardless, Northern Shield Resources Inc. president Ian Bliss said the future looks bright for his Canadian junior mining company.

“We’re banking that if South Africa continues to politically disintegrate, the price of platinum goes up, and platinum properties outside of South Africa will hold a higher value,” he said.

Bliss said the investment climate surrounding the world’s largest platinum producing region is full of “unrest and uncertainty.”

To catch the fallout, he said Northern Shield is making moves to focus operations and attract foreign investment for its platinum exploration plans in Ontario.
“We’re slowly backing out of [copper-zinc] and trying to focus strictly on platinum group elements,” he said.

Copper-zinc was being explored for at two of the company’s eight properties as of Sept. 30, while platinum group elements were being explored for at six, representing about two-thirds of Northern’s land portfolio.

Leaving copper

A new agreement would pull Northern even further out of copper-zinc.

On Nov. 13 the company optioned a 24 per cent stake in its northern Ontario copper-zinc project. Exercised, the option would yield $1 million for Northern and cover $1.5 million in exploration costs.

Agreements like this, consequently, mean low exploration costs for Northern.

Exploration costs represented $140,000 of $1.12 million in losses for the nine-month period ended Sept. 30, 2013, and only $20,000 of $1.17 million for the same period in 2012.

The remainder of Northern’s losses are in general and administrative expenses.

The company has not generated any revenue from its explorations. It expects for the next year to year-and-a-half its general and administrative costs will be covered through government refunds, options money, and property management fees, which it receives from investors for continuing to manage its sold properties.

Its North American properties are a bit of an oddity in the industry, Bliss said, with most junior mining companies exploring for platinum in South Africa.

Lonely in platinum

He estimates that of the world’s 2,000 junior mining companies, only three focus on platinum in North America.

“It’s very much a niche market that we’re in,” he said.

By focusing on platinum, Bliss said the company is positioning itself as an investment option for mining and drilling companies expanding out of South Africa.

“We have the expertise. As soon as we start finding good indications, we can go get a partner,” he said.

Impala Platinum Holdings Ltd, based in Johannesburg, has already invested in Northern Shield. The $7.5 billion platinum mining, producing, and marketing company gave $3.2 million to Northern in May 2012 to explore a northern Quebec property in exchange for a 50 per cent stake.

This type of deal is symbolic of what large South African mining companies are looking to do, Bliss said: diversify.

“They need people on the ground here. We do the early stage work. If it’s attractive enough for them, they come and invest,” he said.

Partnerships have become essential for Northern and junior mining companies as their equity market bottoms, Bliss said.

“Our share price is just depressed beyond real value,” he said.

No market enthusiasim

The $5.2 million company has had a 52-week stock price range of between $0.04 and $0.35. It now sits near the bottom of that range, closing at $0.05 on Nov. 27.

He said market sentiment for junior mining companies bottomed in 2008, recovered somewhat in 2011, but remains low today.

“No one is looking for high risk right now,” Bliss said. “The first thing investors stop investing in is junior mining.”

He said metal prices are good now, but investors want cash, dividends, and not high-risk stock. He said the market attitude creates “incredibly deflated” share prices.

“If the world is in a slowdown, metals are demanded less. The prices of metals tend to drop and people say ‘Well, if metal prices are dropping . . .’ They’re getting out of the resource industry,” he said.

However, the future demand for platinum is high, he said.

Rising demand for platinum

For the last 10 years the platinum market has seen rising demand as governments tighten environmental rules. Bliss said platinum is demanded for catalytic converters, devices that clean vehicle exhaust.

“The only way for car manufacturers to meet those stricter requirements is to put more platinum in the catalytic converter,” he said.

But before Northern can capitalize on trends in the platinum market, it must first find enough platinum to make it worthwhile to develop a mine — something it has been unable to do since the company’s 1999 inception.

Most junior mining companies never find a mine, Bliss said.

What he’s more concerned with are government regulations making it difficult to continue exploring.

Ontario’s mining act requires companies to submit an exploration plan before exploring. Companies operating within Aboriginal land claims must prove that those communities have been consulted.

Northern Shield’s properties in northern Ontario and Quebec are nearby Aboriginal communities, such as the Marten Falls First Nations near Northern’s Highbank Lake property.

“Every time you want to go and explore in an area you have to file a plan or permit, and the [communities] have to sign off on it,” Bliss said.

Aboriginal groups have not protested his company’s exploration, but Bliss said mandatory consultation with these groups “leaves the door open for extortion.”

“[Communities] say ‘We don’t mind you going in and exploring, but you gotta pay us,'” he said.

Duty to consult

Further, he said the obligation to consult, a duty which the Supreme Court of Canada gave the government in 1997, has been shouldered by mining companies forced to do the job or risk legal action from Aboriginal groups.

“They’ve thrown it in our court where we now have to go and consult,” he said. “We’re
forced to do the government’s job at both a time and a financial cost to us.”

If appropriate measures are taken, agreements with mining communities may begin to benefit the mining companies as well, according to northern policy researcher Stephan Schott.

“[Companies] are hot for a few years, then they drop and the mining immediately stops,” said Schott, an associate professor of Public Policy and Administration at Carleton University.

He said if mining companies invest in communities where they operate, the federal government would follow suit, creating better infrastructure and less logistical hassle in what can be an out-of-the-way location for most companies.

“The community then can see that [companies] are in there for the long run,” he said, and in the mining agreements they “might give more profit to the company.”

Bliss said relationships with Aboriginal and northern communities are just one part of a challenging industry.

“Ten years ago the hard part of junior exploration was actually finding what you’re looking for. Now it’s almost the easy part.”

Bliss said Northern’s next moves are to keep doing what it is doing: buy land, explore, and wait for the bigger fish.

“Our shareholders want us to find something and sell out,” he said.