Platinum Group Metals Ltd 6-K, filed Jul 15, 2020
Platinum Group Metals Ltd (PLG)
About this 6-K
Platinum Group Metals Ltd filed this 6-K on July 15, 2020.
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 6-K
Report of Foreign Private Issuer
Pursuant to Rule 13a-16 or 15d-16
under the Securities Exchange Act of 1934
For the month of: July 2020
Commission File Number: 001-33562
PLATINUM GROUP METALS LTD.
Suite 838 - 1100 Melville Street, Vancouver BC, V6E 4A6, CANADA
Address of Principal Executive Office
Indicate by check mark whether the registrant files or will file annual reports under cover:
Form 20-F [X] Form 40-F [ ]
Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(1): [ ]
Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(7): [ ]
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
| PLATINUM GROUP METALS LTD. | |
| Date: July 15, 2020 | /s/ Frank Hallam Frank Hallam Chief Financial Officer |
EXHIBIT INDEX
EXHIBITS 99.1 AND 99.2 INCLUDED WITH THIS REPORT ARE HEREBY INCORPORATED BY REFERENCE INTO THE REGISTRANT'S REGISTRATION STATEMENT ON FORM F-3 (FILE NO. 333-231964) (THE "REGISTRATION STATEMENT"), AND TO BE A PART THEREOF FROM THE DATE ON WHICH THIS REPORT IS SUBMITTED, TO THE EXTENT NOT SUPERSEDED BY DOCUMENTS OR REPORTS SUBSEQUENTLY FILED OR FURNISHED, AND EXHIBIT 99.3 IS HEREBY INCORPORATED BY REFERENCE AS EXHIBIT TO SUCH REGISTRATION STATEMENT. 101.INS, 101.SCH, 101.CAL, 101.DEF, 101.LAB AND 101.PRE ARE HEREBY INCORPORATED BY REFERENCE AS EXHIBITS TO THE REGISTRATION STATEMENT.
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Exhibit |
Description |
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Condensed Consolidated Interim Financial Statements for the Period Ended May 31, 2020 |
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Management's Discussion and Analysis for the Period Ended May 31, 2020 |
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Platinum Group Metals Ltd.
Interim Condensed Consolidated Financial Statements
(all amounts in thousands of United States Dollars unless otherwise noted)
For the period ended May 31, 2020
Filed: July 15, 2020
PLATINUM GROUP METALS LTD.
Condensed Consolidated Interim Statements of Financial Position
(in thousands of United States Dollars)
| May 31, 2020 |
August 31, 2019 |
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| ASSETS | ||||||||
| Current | ||||||||
| Cash | $ | 1,330 | $ | 5,550 | ||||
| Amounts receivable | 123 | 507 | ||||||
| Prepaid expenses and other | 188 | 298 | ||||||
| Total current assets | 1,641 | 6,355 | ||||||
| Performance bonds and other assets | 111 | 65 | ||||||
| Exploration and evaluation assets (Note 3) | 34,061 | 36,792 | ||||||
| Right to use asset (leased corporate offices) | 182 | - | ||||||
| Property, plant and equipment | 295 | 451 | ||||||
| Total assets | $ | 36,290 | $ | 43,663 | ||||
| LIABILITIES | ||||||||
| Current | ||||||||
| Accounts payable and other liabilities | $ | 659 | $ | 4,022 | ||||
| Brokerage fees payable (Note 10) | 2,824 | 2,775 | ||||||
| Total current liabilities | 3,483 | 6,797 | ||||||
| Loan payable (Note 5) | 19,202 | 18,785 | ||||||
| Convertible notes (Note 6) | 17,320 | 16,075 | ||||||
| Share based liabilities | 339 | 112 | ||||||
| Lease liability | 201 | - | ||||||
| Warrant derivative (Note 8) | - | 3,051 | ||||||
| Total liabilities | $ | 40,545 | $ | 44,820 | ||||
| SHAREHOLDERS' EQUITY | ||||||||
| Share capital (Note 7) | $ | 859,728 | $ | 855,270 | ||||
| Contributed surplus | 27,920 | 26,777 | ||||||
| Accumulated other comprehensive loss | (163,671 | ) | (159,637 | ) | ||||
| Deficit | (745,130 | ) | (739,018 | ) | ||||
| Total shareholders' deficit attributable to | ||||||||
| shareholders of Platinum Group Metals Ltd. | (21,153 | ) | (16,608 | ) | ||||
| Non-controlling interest | 16,898 | 15,451 | ||||||
| Total shareholders' equity / (deficit) | (4,255 | ) | (1,157 | ) | ||||
| Total liabilities and shareholders' equity / (deficit) | $ | 36,290 | $ | 43,663 | ||||
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Going Concern (Note 1) Contingencies and Commitments (Note 10) Subsequent events (Note 13) |
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Approved by the Board of Directors and authorized for issue on July 15, 2020 |
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/s/ Stuart Harshaw |
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/s/ Diana Walters |
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Stuart Harshaw, Director |
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Diana Walters, Director |
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The accompanying notes are an integral part of the consolidated financial statements.
2
PLATINUM GROUP METALS LTD.
Condensed Consolidated Interim Statements of Loss and Comprehensive Loss
(in thousands of United States Dollars except share and per share data)
| Three months ended | Nine months ended | ||||||||||||
| May 31, 2020 |
May 31, 2019 |
May 31, 2020 |
May 31, 2019 |
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| Expenses | |||||||||||||
| General and administrative | $ | 803 | $ | 884 | $ | 2,712 | $ | 3,793 | |||||
| Interest | 1,376 | 2,349 | 4,084 | 7,331 | |||||||||
| Foreign exchange loss (gain) | 842 | 1,551 | 1,204 | 2,109 | |||||||||
| Stock compensation expense (Note 7) | 408 | 505 | 1,144 | 521 | |||||||||
| Closure, care and maintenance | - | - | - | (509 | ) | ||||||||
| $ | 3,429 | $ | 5,289 | $ | 9,144 | $ | 13,245 | ||||||
| Other Income | |||||||||||||
| (Gain) Loss on fair value derivatives and warrants (Note 6,8) | (49 | ) | (1,589 | ) | (3,112 | ) | 839 | ||||||
| Gain on fair value of marketable securities | - | - | - | (609 | ) | ||||||||
| Net finance income | (28 | ) | (18 | ) | (134 | ) | (338 | ) | |||||
| Net loss for the period | $ | 3,352 | $ | 3,682 | $ | 5,898 | $ | 13,137 | |||||
| Items that may be subsequently reclassified to net (income) loss: | |||||||||||||
| Currency translation adjustment | 3,140 | (1,153 | ) | 4,034 | (2,361 | ) | |||||||
| Comprehensive loss for the period | $ | 6,492 | $ | 2,529 | $ | 9,932 | $ | 10,776 | |||||
| Loss attributable to: | |||||||||||||
| Shareholders of Platinum Group Metals Ltd. | 3,352 | 3,682 | 5,898 | 13,137 | |||||||||
| Non-controlling interests | - | - | - | - | |||||||||
| $ | 3,352 | $ | 3,682 | $ | 5,898 | $ | 13,137 | ||||||
| Comprehensive loss attributable to: | |||||||||||||
| Shareholders of Platinum Group Metals Ltd. | 6,492 | 2,529 | 9,932 | 10,776 | |||||||||
| Non-controlling interests | - | - | - | - | |||||||||
| $ | 6,492 | $ | 2,529 | $ | 9,932 | $ | 10,776 | ||||||
| Basic and diluted loss per common share | $ | 0.05 | $ | 0.11 | $ | 0.10 | $ | 0.42 | |||||
| Weighted average number of common shares outstanding: | |||||||||||||
| Basic and diluted | 62,347,102 | 33,480,901 | 60,815,363 | 30,980,173 | |||||||||
The accompanying notes are an integral part of the consolidated financial statements.
3
PLATINUM GROUP METALS LTD.
Condensed Consolidated Interim Statements of Changes in Equity
(in thousands of United States Dollars, except # of Common Shares)
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# of Common Shares |
Share Capital |
Contributed Surplus |
Accumulated Other Comprehensive Income (loss) |
Deficit | Attributable to Shareholders of the Parent Company |
Non- Controlling Interest |
Total | ||||||||||||||||
| Balance August 31, 2018 | 29,103,411 | $ | 818,454 | $ | 25,950 | $ | (159,742 | ) | $ | (721,125 | ) | $ | (36,463 | ) | $ | 11,152 | $ | (25,311 | ) | |||||
| Stock based compensation | - | - | 571 | - | - | 571 | - | 571 | ||||||||||||||||
| Shares issued for interest on convertible note | 545,721 | 687 | - | - | - | 687 | - | 687 | ||||||||||||||||
| Shares issued - financing | 3,124,059 | 4,155 | - | - | 4,155 | 4,155 | ||||||||||||||||||
| Share issuance costs | - | (153 | ) | - | - | (153 | ) | (153 | ) | |||||||||||||||
| Warrants exercised | 968,770 | 1,837 | - | - | - | 1,837 | - | 1,837 | ||||||||||||||||
| Transactions with non-controlling interest | - | - | - | - | (825 | ) | (825 | ) | 3,177 | 2,352 | ||||||||||||||
| Foreign currency translation adjustment | - | - | - | 2,361 | - | 2,361 | - | 2,361 | ||||||||||||||||
| Net loss for the period | - | - | - | - | (13,137 | ) | (13,137 | ) | - | (13,137 | ) | |||||||||||||
| Balance May 31, 2019 | 33,741,961 | $ | 824,980 | $ | 26,521 | $ | (157,381 | ) | $ | (735,087 | ) | $ | (40,967 | ) | $ | 14,329 | $ | (26,638 | ) | |||||
| Stock based compensation | - | - | 256 | - | - | 256 | - | 256 | ||||||||||||||||
| Warrants exercised | 80,000 | 144 | - | - | - | 144 | - | 144 | ||||||||||||||||
| Shares issued - financing | 23,953,826 | 30,869 | - | - | - | 30,869 | - | 30,869 | ||||||||||||||||
| Share issuance costs | - | (1,723 | ) | - | - | - | (1,723 | ) | - | (1,723 | ) | |||||||||||||
| Shares issued for loan facility | 800,000 | 1,000 | - | - | - | 1,000 | - | 1,000 | ||||||||||||||||
| Contributions of Waterberg JV Co | - | - | - | - | (292 | ) | (292 | ) | 1,122 | 830 | ||||||||||||||
| Foreign currency translation adjustment | - | - | - | (2,256 | ) | - | (2,256 | ) | - | (2,256 | ) | |||||||||||||
| Net loss for the period | - | - | - | - | (3,639 | ) | (3,639 | ) | - | (3,639 | ) | |||||||||||||
| Balance August 31, 2019 | 58,575,787 | $ | 855,270 | $ | 26,777 | $ | (159,637 | ) | $ | (739,018 | ) | $ | (16,608 | ) | $ | 15,451 | $ | (1,157 | ) | |||||
| Stock based compensation | - | - | 1,143 | - | - | 1,143 | - | 1,143 | ||||||||||||||||
| Shares issued for interest on convertible note | 517,468 | 687 | - | - | - | 687 | 687 | |||||||||||||||||
| Shares issued - financing | 3,225,807 | 4,000 | - | - | - | 4,000 | 4,000 | |||||||||||||||||
| Share issuance costs | - | (284 | ) | - | - | - | (284 | ) | - | (284 | ) | |||||||||||||
| Warrants exercised | 28,040 | 55 | - | - | - | 55 | - | 55 | ||||||||||||||||
| Contributions of Waterberg JV Co | - | - | - | - | (214 | ) | (214 | ) | 1,447 | 1,233 | ||||||||||||||
| Foreign currency translation adjustment | - | - | - | (4,034 | ) | - | (4,034 | ) | - | (4,034 | ) | |||||||||||||
| Net loss for the period | - | - | - | - | (5,898 | ) | (5,898 | ) | - | (5,898 | ) | |||||||||||||
| Balance May 31, 2020 | 62,347,102 | $ | 859,728 | $ | 27,920 | $ | (163,671 | ) | $ | (745,130 | ) | $ | (21,153 | ) | $ | 16,898 | $ | (4,255 | ) |
The accompanying notes are an integral part of the consolidated financial statements.
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PLATINUM GROUP METALS LTD.
Condensed Consolidated Interim Statements of Cash Flows
(in thousands of United States Dollars)
| For the nine months ended | |||||||
| May 31, 2020 | May 31, 2019 | ||||||
| OPERATING ACTIVITIES | |||||||
| Income (Loss) for the period | $ | (5,898 | ) | $ | (13,137 | ) | |
| Add items not affecting cash: | |||||||
| Depreciation | 146 | 187 | |||||
| Interest expense | 4,091 | 7,331 | |||||
| Unrealized foreign exchange loss | 419 | 99 | |||||
| (Gain) Loss on fair value of convertible debt derivatives and warrants | (3,112 | ) | 839 | ||||
| (Gain) on marketable securities | - | (609 | ) | ||||
| Stock compensation expense | 1,144 | 521 | |||||
| Directors fees paid in deferred share units | 97 | - | |||||
| Net change in non-cash working capital (Note 11) | (256 | ) | 747 | ||||
| $ | (3,369 | ) | $ | (4,022 | ) | ||
| FINANCING ACTIVITIES | |||||||
| Share issuance - warrant exercise | $ | 48 | $ | 1,646 | |||
| Proceeds from the issuance of equity | 4,000 | 4,155 | |||||
| Equity issuance costs | (284 | ) | (156 | ) | |||
| Debt principal repayments | - | (8,023 | ) | ||||
| Sprott interest paid | (1,680 | ) | - | ||||
| Lease payments | (62 | ) | - | ||||
| Cash received from Waterberg partners (Note 3) | 945 | 2,367 | |||||
| $ | 2,967 | $ | (11 | ) | |||
| INVESTING ACTIVITIES | |||||||
| Expenditures from restricted cash (Waterberg) | $ | - | $ | 126 | |||
| Cash received from sale of marketable securities | - | 7,951 | |||||
| Performance bonds | (52 | ) | - | ||||
| Waterberg exploration expenditures | (4,492 | ) | (6,139 | ) | |||
| $ | (4,544 | ) | $ | 1,938 | |||
| Net decrease in cash | (4,946 | ) | (2,095 | ) | |||
| Effect of foreign exchange on cash | 726 | 330 | |||||
| Cash, beginning of period | 5,550 | 3,017 | |||||
| Cash, end of period | $ | 1,330 | $ | 1,252 | |||
The accompanying notes are an integral part of the consolidated financial statements.
5
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PLATINUM GROUP METALS LTD. |
1. NATURE OF OPERATIONS AND GOING CONCERN
Platinum Group Metals Ltd. (the "Company") is a British Columbia, Canada, company formed by amalgamation on February 18, 2002. The Company's shares are publicly listed on the Toronto Stock Exchange ("TSX") in Canada and the NYSE American LLC ("NYSE American") in the United States (formerly the NYSE MKT LLC). The Company's address is Suite 838-1100 Melville Street, Vancouver, British Columbia, V6E 4A6.
The Company is an exploration and development company conducting work on mineral properties it has staked or acquired by way of option agreements in the Republic of South Africa.
These financial statements consolidate the accounts of the Company and its subsidiaries. The Company's subsidiaries, associates and joint ventures (collectively with the Company, the "Group") as at May 31, 2020 are as follows:
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Place of |
Percentage ownership and |
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Name of subsidiary |
Principal activity |
May 31, |
August 31, |
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Platinum Group Metals (RSA) (Pty) Ltd.1 |
Exploration |
South Africa |
100.0% |
100.0% |
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Mnombo Wethu Consultants (Pty) Limited.1 |
Exploration |
South Africa |
49.9% |
49.9% |
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Waterberg JV Resources (Pty) Ltd.1, 2 |
Development |
South Africa |
37.05% |
37.05% |
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Lion Battery Technologies Inc.3 |
Research |
Canada |
57.69% |
57.69% |
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1The Company controls and consolidates Platinum Group Metals (RSA) (Pty) Ltd. ("PTM RSA"), Mnombo Wethu Consultants (Pty) Limited ("Mnombo") and Waterberg JV Resources (Pty) Ltd. ("Waterberg JV Co.") for accounting purposes. 2Effective ownership of Waterberg JV Resources (Pty) Ltd. Is 63.05% when Mnombo's ownership portion is combined with Platinum Group Metals (RSA) (Pty) Ltd ownership portion. 3Lion Battery Technologies Inc. ("Lion") is accounted for using the equity method as the Company jointly controls the investee despite having the majority of the shares. |
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These condensed consolidated interim financial statements have been prepared in accordance with the International Financial Reporting Standards ("IFRS") applicable to a going concern which contemplates that the Company will be able to realize its assets and settle its liabilities in the normal course as they come due for the foreseeable future. In the current nine-month period, the Company generated a net loss of $5.9 million (May 31, 2019 $13.1 million) and used cash in operating activities of $3.4 million (May 31, 2019 $4.0 million). The Company had a working capital deficit of $1.8 million at May 31, 2020. At May 31, 2020, the Company was also indebted $20 million pursuant to the Sprott Loan Facility (as defined below). This debt is due August 14, 2021 with the Company holding the option to extend the maturity date by one year in exchange for a payment in common shares or cash of three percent of the outstanding principal amount. Additional payments/interest are also due on the convertible debt (which can be paid with shares of the Company). The Company currently has limited financial resources and has no sources of operating income at present.
In March 2020 the World Health Organization declared coronavirus COVID-19 a global pandemic. The contagious disease outbreak, which has continued to spread, and any related adverse public health developments, has adversely affected workforces, economies and financial markets globally, potentially leading to an economic downturn. It is not possible for the Company to predict the duration or magnitude of the adverse results of the outbreak and its effects on the Company's business or ability to raise funds.
The Company's ability to continue operations in the normal course of business will therefore depend upon its ability to secure additional funding by methods that could include debt refinancing, equity financing, the sale of assets and strategic partnerships. Management believes the Company will be able to secure further funding as required although there can be no assurance that these efforts will be successful. Nonetheless, there exist material uncertainties resulting in substantial doubt as to the ability of the Company to continue to meet its obligations as they come due and hence, the appropriateness of the use of accounting standards applicable to a going concern.
These condensed consolidated interim financial statements do not include adjustments or disclosures that may result should the Company not be able to continue as a going concern. If the going concern assumption were not appropriate for these consolidated financial statements, then adjustments would be required to the carrying value of assets and liabilities, the expenses, the reported comprehensive loss and balance sheet classifications used that would be necessary if the Company were unable to realize its assets and settle its liabilities as a going concern in the normal course of operations. These adjustments could be material.
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PLATINUM GROUP METALS LTD. |
2. BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES
These condensed consolidated interim financial statements have been prepared in accordance with the International Accounting Standard 34, Interim Financial Reporting ("IAS 34") using accounting policies consistent with International Financial Reporting Standards ("IFRS") as issued by the International Accounting Standards Board ("IASB") and interpretations of the International Financial Reporting Interpretations Committee ("IFRIC").
The Company' significant accounting policies and critical accounting estimates applied in these interim financial statements are the same as those applied in Note 2 of the Company's annual consolidated financial statements as at and for the year ended August 31, 2019, except for the adoption of IFRS 16 Leases, ("IFRS 16") which was effective September 1, 2019.
Change in Accounting Policy - IFRS 16 Leases
On September 1, 2019, the Company adopted IFRS 16. IFRS 16 sets out the principles for the recognition, measurement, presentation and disclosure of leases for both parties to a contract, which is the customer ("lessee") and the supplier ("lessor"). IFRS 16 replaces IAS 17, Leases, and related interpretations. All leases result in the lessee obtaining the right to use an asset at the start of the lease and, if lease payments are made over time, also obtaining financing. Accordingly, IFRS 16 will eliminate the classification of leases as either operating leases or finance leases as is required by IAS 17 and, instead, introduces a single lessee accounting model. Applying that model, a lessee is required to recognize:
i. The right of use assets and related lease liabilities for any lease with a term of more than 12 months, unless the underlying assets are of low value; and
ii. Depreciation of the right of use assets separately from the interest related to the lease liabilities in the consolidated statement of income.
The Company adopted IFRS 16 using the simplified transition approach and consequently did not restate comparative figures for fiscal 2019.
On adoption of IFRS 16, the Company recognized lease liabilities in relation to leases which had previously been classified as 'operating leases' under the principles of IAS 17. All leases lasting longer than one year were measured at the present value of the remaining lease payments, discounted using the lessee's incremental borrowing rate as of September 1, 2019. The weighted average lessee's incremental borrowing rate applied to the lease liabilities on September 1, 2019 was 11%. The lease liability and corresponding right to use asset as at September 1, 2019 was measured at $314.
Leases
As a result of the adoption of IFRS 16, the accounting policy for leases applied starting from September 1, 2019 as follows:
At inception of a contract, the Company assesses whether a contract is, or contains, a lease. A contract is, or contains, a lease if the contract conveys the right to control the use of an identified asset for a period of time in exchange for consideration. To assess whether a contract conveys the right to control the use of an identified asset, the Company assesses whether:
i. the contract involves the use of an identified asset
ii. the Company has the right to obtain substantially all of the economic benefits from use of the asset throughout the period of use; and
iii. the Company has the right to direct the use of the asset.
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PLATINUM GROUP METALS LTD. |
The Company recognizes a right-of-use asset and a lease liability at the lease commencement date. The right-of-use asset is initially measured at cost, which comprises the initial amount of the lease liability adjusted for any lease payments made at or before the commencement date, plus any initial direct costs incurred and an estimate of costs to dismantle and remove the underlying asset or to restore the underlying asset or the site on which it is located, less any lease incentives received.
The right-of-use asset is subsequently depreciated using the straight-line method from the commencement date to the earlier of the end of the useful life of the right-of-use asset or the end of the lease term. The estimated useful lives of right-of-use assets are determined on the same basis as those of property and equipment. In addition, the right-of-use asset is periodically reduced by impairment losses, if any, and adjusted for certain remeasurements of the lease liability.
The lease liability is initially measured at the present value of the lease payments that are not paid at the commencement date, discounted using the interest rate implicit in the lease or, if that rate cannot be readily determined, the Company's incremental borrowing rate. Generally, the Company uses its incremental borrowing rate as the discount rate.
Payments associated with short-term leases and leases of low-value assets are recognised on a straight-line basis as an expense in profit or loss. Short-term leases are leases with a lease term of 12 months or less.
Presentation Currency
The Company's presentation currency is the United States Dollar ("USD")
Foreign Exchange Rates Used
The following exchange rates were used when preparing these consolidated financial statements:
Rand/USD at May 31, 2020
Period-end rate: R17.5631 (August 31, 2019 - R14.3314)
9-month period average rate: R15.7345 (May 31, 2019 - R14.2436)
CAD/USD at May 31, 2020
Period-end rate: C$1.3787 (August 31, 2019 - C$1.3295)
9-month period average rate: C$1.3468 (May 31, 2019 - C$1.3267)
3. EXPLORATION AND EVALUATION ASSETS
Since mid-2015, the Company's only active exploration project has been the Waterberg Project located on the North Limb of the Western Bushveld Complex. Total capitalized exploration and evaluation expenditures for all exploration properties held by the Company are as follows:
| Balance, August 31, 2018 | $ | 29,406 | |
| Additions | 8,362 | ||
| Foreign exchange movement | (976 | ) | |
| Balance, August 31, 2019 | $ | 36,792 | |
| Additions | 2,116 | ||
| Foreign exchange movement | (4,847 | ) | |
| Balance, May 31, 2020 | $ | 34,061 | |
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PLATINUM GROUP METALS LTD. |
Waterberg Project
The Waterberg Project consists of adjacent, granted and applied-for prospecting rights and applied for mining rights with a combined active project area of 81,329.60 ha, located on the Northern Limb of the Bushveld Complex, approximately 85 km north of the town of Mokopane (formerly Potgietersrus). The Waterberg Project comprises the former Waterberg JV Property and the Waterberg Extension Property.
On August 21, 2017, PTM RSA completed the cession of legal title for all Waterberg Project prospecting rights into Waterberg JV Co. after earlier receiving Section 11 approval of the 2nd Amendment (defined below). On September 21, 2017, Waterberg JV Co. also issued shares to all existing Waterberg partners pro rata to their joint venture interests, resulting in the Company holding a 45.65% direct interest in Waterberg JV Co., the Japan Oil, Gas and Metals National Corporation ("JOGMEC") holding a 28.35% interest and Mnombo, as the Company's Black Economic Empowerment ("BEE") partner, holding 26%.
Implats Transaction
On November 6, 2017, the Company closed a transaction (the "Implats Transaction"), originally announced on October 16, 2017, whereby Impala Platinum Holdings Ltd. ("Implats"):
a) Purchased an aggregate 15.0% equity interest in Waterberg JV Co (the "Initial Purchase") for $30 million. The Company sold an 8.6% interest for $17.2 million and JOGMEC sold a 6.4% interest for $12.8 million. From its $17.2 million in proceeds, the Company committed $5.0 million towards its pro rata share of remaining Definitive Feasibility Study ("DFS") costs, which was held as restricted cash until it was fully spent in October 2018. Implats contributed its 15.0% pro rata share of DFS costs incurred subsequent to the Initial Purchase. Following the Initial Purchase, the Company held a direct 37.05% equity interest, JOGMEC held a 21.95% equity interest and Black Economic Empowerment partner Mnombo maintained a 26.0% equity interest. The Company holds a 49.9% interest in Mnombo, bringing its overall direct and indirect ownership in Waterberg JV Co. to 50.02%.
b) Acquired a right of first refusal to enter into an offtake agreement, on commercial arms-length terms, for the smelting and refining of mineral products from the Waterberg Project ("Offtake ROFR"). JOGMEC will retain a right to receive, at market prices, platinum, palladium, rhodium, gold, ruthenium, iridium, copper and nickel in refined mineral products at the volumes produced from the Waterberg Project.
c) Acquired an option (the "Purchase and Development Option") whereby Implats would have had the right within 90 business days to exercise an option to increase its interest to up to 50.01% in Waterberg JV Co by committing to purchase an additional 12.195% equity interest in Waterberg JV Co. from JOGMEC for $34.8 million and commit to an expenditure of $130.2 million in development work. As per the February 27, 2020 amendment (see below) this deadline was to occur 90 days following the receipt of the executed Mining Right on the Waterberg Project.
d) On February 27, 2020 the Company announced that shareholders of Waterberg JV Co had agreed to amend the Purchase and Development Option effective at February 1, 2020. The end date of the Impala option was amended to expire 90 calendar days following the receipt of an executed Mining Right on the Waterberg Project. In exchange for this extension Impala agreed to fund 100% of a new implementation budget and work program, effective February 1, 2020, aimed at increasing confidence in specific areas of the DFS. This work program is estimated to cost approximately R55 million ($3.1 million).
Subsequent to period end, on June 15, 2020, Implats provided notice to the shareholders of Waterberg JV Co. that they do not intend to exercise the Purchase and Development Option, (see Subsequent Events for further details). Implats will retain a 15.0% participating project interest and the Offtake ROFR and the Company will retain a controlling 50.02% direct and indirect interest in the project. The Purchase and Development Option may still legally be exercised by Implats until a 90-day notice period expires on September 13, 2020. Implats will continue to be responsible for the costs of the ongoing implementation budget and work program until September 13, 2020. The Company continues to be the Manager of the Waterberg Project, as directed by the technical committee of the Waterberg JV Co.
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PLATINUM GROUP METALS LTD. |
Acquisition and Development of the Property
In October 2009, PTM RSA, JOGMEC and Mnombo entered into a joint venture agreement with regard to the Waterberg Project (the "JOGMEC Agreement"). Under the terms of the JOGMEC Agreement, in April 2012, JOGMEC completed a $3.2 million work requirement to earn a 37% interest in the Waterberg JV property, leaving the Company with a 37% interest and Mnombo with a 26% interest. Following JOGMEC's earn-in, the Company funded Mnombo's 26% share of costs, totalling $1.12 million, until the earn-in phase of the joint venture ended in May 2012.
On November 7, 2011, the Company entered an agreement with Mnombo to acquire 49.9% of the issued and outstanding shares of Mnombo in exchange for a cash payment of R1.2 million and the Company's agreement to pay for Mnombo's 26% share of costs on the Waterberg JV property until the completion of a feasibility study. Mnombo's share of expenditures prior to this agreement were covered by the Company and subsequent expenditures on the non-JV property are still owed to the Company ($4.1 million at May 31, 2020). The portion of Mnombo not owned by the Company is accounted for as a non-controlling interest, calculated at $7.1 million at May 31, 2020 ($6.9 million - August 31, 2019).
On May 26, 2015, the Company announced a second amendment (the "2nd Amendment") to the existing JOGMEC Agreement. Under the terms of the 2nd Amendment the Waterberg JV and Waterberg Extension properties are to be combined and contributed into the newly created operating company Waterberg JV Co. On August 3, 2017, the Company received Section 11 transfer approval from the South African Department of Mineral Resources ("DMR") and title to all of the Waterberg prospecting rights held by the Company were ceded into Waterberg JV Co. on September 21, 2017.
Under the 2nd Amendment, JOGMEC committed to fund $20 million in expenditures over a three-year period ending March 31, 2018. This requirement was completed by $8 million in funding from JOGMEC to March 31, 2016, followed by two $6 million tranches funded by JOGMEC in each of the following two 12-month periods ending March 31, 2018.
To May 31, 2020 an aggregate total of $74.7 million has been funded by all parties on exploration and engineering on the Waterberg Project. Up until the Waterberg property was transferred to Waterberg JV Company, all costs incurred by other parties were treated as cost recoveries by the Company.
4. LION BATTERY
On July 15, 2019 the Company announced that Anglo American Platinum Limited ("Amplats") and itself had launched a new company named Lion Battery Technologies Inc. ("Lion"). Lion was incorporated on June 17, 2019 to research new lithium battery technology utilizing platinum and palladium. The Company invested $4 as the original founder of Lion in exchange for 400,000 common shares of Lion at a price of $0.01 per share. On July 12, 2019 the Company and Amplats each invested $550 as a first tranche of funding into Lion in exchange for 1,100,000 Lion preferred shares each at a price of $0.50 per share. On July 12, 2019 Lion entered into a sponsored research agreement with Florida International University ("FIU") to fund a $3.0 million research program over approximately three years. Both the Company and Amplats have agreed to equally invest up to an aggregate of $4.0 million into Lion, of which approximately $1.0 million would be for general and administrative expenses and the commercialization of the technology developed, subject to certain conditions. All funding into Lion by the Company or Amplats is to be in exchange for preferred shares of Lion at a price of $0.50 per share over an approximate three to four year period. The Company accounts for Lion using equity accounting as Lion is jointly controlled with Amplats. Lion pays a fee of $3 per month to the Company for general and administrative services.
Research work commenced at FIU during September 2019. FIU has completed milestone one research requirements, triggering a second tranche funding from Lion in the amount of US $667, which was sent to FIU by Lion subsequent to period end. Lion was funded in the amount of $700 equally by Amplats and the Company by way of subscription for shares on terms as described above.
Under the agreement with FIU, Lion will have exclusive rights to all intellectual property developed and will lead all commercialization efforts. Lion is also currently reviewing several additional and complementary opportunities focused on developing next-generation battery technology using platinum and palladium.
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PLATINUM GROUP METALS LTD. |
5. SPROTT LOAN
On August 15, 2019 the Company announced it had entered into a credit agreement with Sprott Private Resource Lending II (Collector), LP ("Sprott") and other lenders party thereto (the "Sprott Lenders") pursuant to which the Sprott Lenders advanced $20.0 million principal senior secured credit facility ("Sprott Facility"). The loan was drawn August 21, 2019 and is due August 14, 2021 with the Company holding the option to extend the maturity date by one year in exchange for a payment in common shares or cash of three percent of the outstanding principal amount. All amounts outstanding will be charged interest of 11% per annum compounded monthly. Interest payments will be made monthly with interest of $1,674 having been paid to Sprott during the nine-month period (May 31, 2019 - $Nil).
The Company is required to maintain certain minimum working capital and cash balances under the Sprott loan and are in compliance with these covenants at period end.
All fees directly attributable to the Sprott Facility are recorded against the loan balance and amortized using the effective interest method over the life of the loan. In connection with the advance the Company issued Sprott 800,000 common shares worth $1,000. Effective interest of $2,096 was recognized during the nine-month period (May 31, 2019 - $Nil).
6. CONVERTIBLE NOTES
On June 30, 2017, the Company closed a private placement of $20 million aggregate principal amount of convertible senior subordinated notes ("Convertible Notes") due 2022. The Convertible Notes 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. Interest may be paid in cash or at the election of the Company, in common shares of the Company or a combination of cash and common shares, to a maximum of 2,954,278 common shares, and will mature on July 1, 2022, unless earlier repurchased, redeemed or converted.
Upon maturity the Convertible Notes are to be settled by the Company in cash. The Convertible Notes are convertible at any time prior to maturity at the option of the holder, and conversion may be settled, at the Company's election, in cash, common shares, or a combination of cash and common shares. If any Convertible Notes are converted on or prior to the three and one half year anniversary of the issuance date, the holder of the Convertible 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. The initial conversion rate of the Convertible Notes will be 1,001.1112 common shares per $1,000 principal amount of Convertible Notes, which is equivalent to an initial conversion price of approximately $0.9989 per common share, representing a conversion premium of approximately 15% above the NYSE American closing sale price for the Company's Common Shares of $0.8686 per share on June 27, 2017. After giving effect to the December 13, 2018 share consolidation, the conversion rate is 100.1111 per US$1,000 which is equivalent to a conversion price of approximately $9.989 per common share.
The Convertible Notes contain multiple embedded derivatives (the "Convertible Note Derivatives") relating to the conversion and redemption options. The Convertible Note Derivatives were valued upon initial recognition at fair value using partial differential equation methods at $5,381 (see below). At inception, the debt portion of the Convertible Notes were reduced by the estimated fair value of the Convertible Note Derivatives of $5,381 and transaction costs relating to the Convertible Notes of $1,049 resulting in an opening balance of $13,570. The Convertible Notes are measured at amortized cost and will be accreted to maturity over the term using the effective interest method.
On January 2, 2018, the Company issued 244,063 common shares in settlement of $691 of bi-annual interest payable on $19.99 million of outstanding Convertible Notes.
On July 3, 2018, the Company issued 757,924 common shares in settlement of $724 of bi-annual interest payable on $19.99 million of outstanding Convertible Notes.
On January 2, 2019 the Company issued 545,721 common shares in settlement of $687 of bi-annual interest payable on $19.99 million of outstanding Convertible Notes.
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PLATINUM GROUP METALS LTD. |
On July 1, 2019 the Company paid cash of $687 for bi-annual interest payable on outstanding Convertible Notes.
On January 2, 2020 the Company issued 517,468 common shares in settlement of $687 of bi-annual interest payable on $19.99 million of outstanding Convertible Notes.
On July 2, 2020 the Company issued 526,471 common shares in settlement of $687 of bi-annual interest payable on $19.99 million of outstanding Convertible Notes.
The components of the Convertible Notes are as follows:
| Convertible Note balance August 31, 2018 | $ | 14,853 | |
| Transactions costs incurred | (79 | ) | |
| Interest payments | (1,374 | ) | |
| Accretion and interest incurred during the year | 2,487 | ||
| Loss on embedded derivatives during the year ended August 31, 2019 (see below) | 188 | ||
| Convertible Note balance August 31, 2019 | $ | 16,075 | |
| Interest payments | (687 | ) | |
| Accretion and interest incurred during the period | 1,995 | ||
| Gain on embedded derivatives during the period ended May 31, 2020 (see below) | (63 | ) | |
| Convertible Note balance May 31, 2020 | $ | 17,320 |
Embedded Derivatives
The Convertible Note Derivatives were valued upon initial recognition at a fair value of $5,381 using partial differential equation methods and is subsequently re-measured at fair value at each period-end through the consolidated statement of net loss and comprehensive loss. The fair value of the Convertible Note Derivatives was measured at $125 at May 31, 2020 resulting in a gain of $63 for the nine-month period (May 31, 2019 - $101 loss). Combined with the gain on the warrant derivative (Note 8) of $3,048, this results in a gain of $3,112.
The assumptions used in the valuation model used at May 31, 2020 and August 31, 2019 include:
|
Valuation Date |
May 31, 2020 |
August 31, 2019 |
|
Share Price (USD) |
$1.50 |
$1.99 |
|
Volatility |
80.90% |
80.90% |
|
Risk free rate |
1.55% |
1.55% |
|
Credit spread |
15.11% |
15.11% |
|
All-in rate |
16.66% |
16.66% |
The Convertible Note derivative is valued using level 2 inputs.
7. SHARE CAPITAL
(a) Authorized
Unlimited common shares without par value.
(b) Issued and outstanding
On November 20, 2018 the Company completed a consolidation of its common shares on the basis of one new share for ten old shares (1:10). The purpose of the consolidation was to increase the Company's common share price to be in compliance with the NYSE American's low selling price requirement. All share numbers in these financial statements are presented on a post consolidation basis.
At May 31, 2020, the Company had 62,347,102 shares outstanding.
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PLATINUM GROUP METALS LTD. |
Fiscal 2020
On December 19, 2019 the Company closed a non-brokered private placement (the "Private Placement") where it issued 3,225,807 common shares at a price of US$1.24 each for gross proceeds of $4.0 million. A 6% finders fee in the amount of $54 was paid on a portion of the Private Placement.
During fiscal 2020 the Company issued 28,040 shares upon the exercise of 28,040 warrants.
On January 2, 2020, the Company issued 517,468 shares in settlement of $687.16 of bi-annual interest payable on $19.99 million outstanding on the Convertible Notes.
Fiscal 2019
On August 21, 2019, the Company closed a bought deal financing of 8,326,957 common shares at a price of US$1.25 per share for gross proceeds of $10.4 million. Also, on August 21, 2019 the Company completed the sale of 7,575,758 common shares to existing shareholder Liberty Metals & Mining Holdings, LLC ("LMM"), a subsidiary of Liberty Mutual Insurance, and 6,940,000 common shares to Deepkloof Limited ("Deepkloof"), a subsidiary of existing shareholder Hosken Consolidated Investments Limited ("HCI"), both at price of US$1.32 per share for gross proceeds of $10.0 million and $9.1 million respectively. Total fees of $1,769 were paid on the August 21, 2019 transactions including a 6% finders fee of $624.
On June 28, 2019 the Company closed a non-brokered private placement with Deepkloof for gross proceeds of $1.3 million. The Company issued an aggregate of 1,111,111 common shares to Deepkloof at a price of US$1.17 per common share. On a non-diluted basis and after giving effect to the private placement, HCI's ownership in the Company (through subsidiary Deepkloof) was increased from 20.05% to 22.60% of the Company's then issued and outstanding common shares. The Company did not pay any finder's fees in connection with the private placement.
On February 4, 2019, the Company completed a non-brokered private placement of 3,124,059 shares at a price of US$1.33 per share for gross proceeds of $4.16 million. A 6% finders fee of $72 was paid on a portion of the private placement, with total issuance costs (including the finders fee) totalling $107.
During fiscal 2019, the Company issued 1,048,770 shares upon the exercise of 1,048,770 warrants.
On January 2, 2019 the Company issued 545,721 shares in settlement of $687.16 of bi-annual interest payable on $19.99 million of outstanding Convertible Notes.
(c) Incentive stock options
The Company has entered into Incentive Stock Option Agreements under the terms of its share compensation plan with directors, officers, consultants and employees. Under the terms of the Agreements, the exercise price of each option is set, at a minimum, at the fair value of the common shares at the date of grant. Stock options of the Company are subject to vesting provisions. All exercise prices are denominated in Canadian Dollars.
The following tables summarize the Company's outstanding stock options:
| Number of Shares | Average Exercise Price CAD$ |
||||||
| Options outstanding at August 31, 2018 | 308,550 | 45.20 | |||||
| Forfeited/Cancelled | (308,550 | ) | 45.20 | ||||
| Granted | 1,554,000 | 2.61 | |||||
| Options outstanding at August 31, 2019 | 1,554,000 | 2.61 | |||||
| Granted | 1,628,500 | 1.81 | |||||
| Options outstanding at May 31, 2020 | 3,182,500 | 2.20 | |||||
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PLATINUM GROUP METALS LTD. |
During the nine-month period ended May 31, 2020 the Company granted 1,628,500 stock options exercisable at a price of CAD$1.81 per share. These stock options will vest in three equal annual tranches, with the first tranche of one third vesting on December 3, 2020, being the day after the first anniversary of the grant. The Company recorded $383 ($350 expensed and $33 capitalized to mineral properties) of compensation expense related to these options during the period ended May 31, 2020.
During the year ended August 31, 2019 the Company granted 1,554,000 stock options exercisable at a price of CAD$2.61 per share. These stock options will vest in three equal annual tranches, with the first tranche of one third vesting on April 10, 2020, being the day after the first anniversary of the grant. The Company recorded $495 ($431 expensed and $64 capitalized to mineral properties) of compensation expense during the period ended May 31, 2020 (May 31, 2019 - $Nil).
|
Stock options |
Stock options |
Average |
Average Remaining |
|
3,182,500 |
Nil |
2.20 |
4.19 |
(d) Deferred Share Units
The Company has a DSU plan for non-executive directors. Each DSU has the same value as one of the Company's common share. DSUs must be retained until the director leaves the Board of Directors, at which time the DSUs are to be paid.
The DSU liability at May 31, 2020 is $339. During the nine-month period ended May 31, 2020 an expense of $323 was recorded in relation to the outstanding DSUs (May 31, 2019 - $17), with $137 recorded as share-based compensation and $186 recorded as director fees.
On January 27, 2020, 240,000 DSUs were granted to directors. These DSUs vest in three equal tranches on the first, second and third anniversaries of the original grant date.
During the nine-month period, 33,928 unvested DSUs were cancelled and the related expenses were reversed.
As of May 31, 2020, 454,244 DSUs have been issued with 136,323 fully vested.
(e) Restricted Share Units
The Company has an RSU plan for certain employees of the Company. Each RSU has the same value as one Company common share. RSU's vest over a three year period.
The RSU liability at May 31, 2020 was $265. During the nine-month period ended May 31, 2020 an expense of $266 was recorded ($226 expensed and $40 capitalized) in relation to the outstanding RSUs, (May 31, 2019 $36, $30 expensed, $6 capitalized). At May 31, 2020, 468,370 RSU's had been awarded and 74,481 RSUs had vested but had not yet been settled by way of share issuances.
8. WARRANT DERIVATIVE
The exercise price of the Company's outstanding warrants was denominated in US Dollars; however, the functional currency of PTM Canada (the warrant issuer) is the Canadian Dollar. The warrants were required to be recognized and measured at fair value at each reporting period. Any changes in fair value from period to period were recorded as non-cash gain or loss in the consolidated statement of loss and comprehensive loss.
The warrants were issued May 15, 2018 and were initially valued using the residual value method. An initial valuation of $1,171 was attributed to the warrants, which included $157 of unit issuance costs being attributed to the value of the warrants. As the warrants were publicly traded on the TSX, the value of the warrants at each period was estimated by using the warrant TSX closing price on the last day of trading in the applicable period. The warrants expired November 22, 2019 with a $Nil value. The $3,048 value attributed to the remaining warrants, which expired, was recognized as a gain in the nine-month period, (May 31, 2019 - $738 loss). When combined with the gain on the embedded derivatives in the Convertible Notes (see Note 6) this results in a gain of $3,112 on derivatives.
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PLATINUM GROUP METALS LTD. |
9. RELATED PARTY TRANSACTIONS
All amounts receivable and amounts payable owing to or from related parties are non-interest bearing with no specific terms of repayment. Transactions with related parties are in the normal course of business and are recorded at consideration established and agreed to by the parties. Transactions with related parties are as follows:
(a) During the nine-month period ended May 31, 2020 $353 ($155 - May 31, 2019) was paid or accrued to independent directors for directors' fees and services.
(b) During the nine-month period ended May 31, 2020, the Company accrued payments of $40 ($41 - May 31, 2019) from West Vault Mining Inc. (formerly West Kirkland Mining Inc.), a company with two directors in common, for accounting and administrative services.
(c) In fiscal 2018, the Company closed a private placement with Deepkloof whereby HCI acquired a right to nominate one person to the board of directors of the Company and a right to participate in future equity financings of the Company to maintain its pro-rata interest. HCI exercised its right to nominate one person to the board of directors. On February 4, 2019 Deepkloof subscribed in a private placement for 2,141,942 common shares and on August 21, 2019 Deepkloof subscribed in a private placement for a further 6,940,000 common shares as component of concurrent transactions completed by the Company. In the Company's December 2019 private placement financing Deepkloof purchased 612,931 shares. In the private placement financing completed on June 17, 2020, subsequent to the end of the period, Deepkloof purchased a further 500,000 shares in the Company, bringing their total ownership interest to approximately 31.59%
10. CONTINGENCIES AND COMMITMENTS
The Company's remaining minimum payments under its office and equipment lease agreements in Canada and South Africa total approximately $310 to March 2022.
From year end the Company's aggregate commitments are as follows:
| Payments Due By Year | |||||||||||||||
| < 1 Year | 1 - 3 Years | 4 - 5 Years | > 5 Years | Total | |||||||||||
| Lease Obligations | $ | 80 | $ | 167 | $ | 63 | $ | - | $ | 310 | |||||
| Convertible Note | 1,374 | 22,051 | - | - | 23,425 | ||||||||||
| Sprott Facility (Note 5) | 2,231 | 20,495 | - | - | 22,726 | ||||||||||
| Totals | $ | 3,685 | $ | 42,713 | $ | 63 | $ | - | $ | 46,461 | |||||
Africa Wide Legal Action
In April 2018 the Company completed a transaction whereby Maseve Investments 11 (Pty) Ltd. ("Maseve") was acquired (the "Maseve Sale Transaction") by Royal Bafokeng Platinum Ltd. ("RBPlats"). Maseve owned and operated the Maseve Mine. In September 2018 the Company reported receipt of a summons issued by Africa Wide Mineral Prospecting and Exploration Proprietary Limited ("Africa Wide") whereby Africa Wide instituted legal proceedings in South Africa against PTM RSA, RBPlats and Maseve in relation to the Maseve Sale Transaction. Africa Wide held 17.1% of the shares in Maseve prior to completion of the Maseve Sale Transaction. Africa Wide is seeking, at this late date, to set aside or be paid increased value for, the closed Maseve Sale Transaction. RBPlats consulted with senior counsel, both during the negotiation of the Maseve Sale Transaction and in regard to the current Africa Wide legal proceedings. The Company has received legal advice to the effect that the Africa Wide action, as issued, is ill-conceived and is factually and legally defective.
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PLATINUM GROUP METALS LTD. |
Tax Audit South Africa
For the 2014, 2015 and 2016 fiscal years, PTM RSA claimed unrealized foreign exchange losses as income tax deductions in its South African corporate tax returns in the amount of Rand 1.4 billion. The exchange losses emanate from a Canadian dollar denominated shareholder loan advanced to PTM RSA. Under applicable South African tax legislation, exchange losses can be claimed if the shareholder loan is a current liability as determined by IFRS.
For the years in question, the intercompany debt was classified as current in PTM RSA's stand alone audited financial statements.
During 2018, the South African Revenue Service ("SARS") conducted an income tax audit of the 2014 to 2016 years of assessment and issued PTM RSA with a letter of audit findings on November 5, 2018 proposing that the exchange losses be disallowed on the basis that the shareholder loan was not a current liability.
The Company and its advisors responded to SARS during 2019 and refuted the issues raised.
On June 30, 2020 the Company received a letter from SARS reporting the finalization of the above income tax audit with no reassessment or adjustment to the Company's tax returns for the three years audited.
Brokerage Fees Payable
There were certain deferred brokerage fees related to the Maseve Sale Transaction and the Implats Transaction that became payable as soon as practicable after the Company repaid a $40 million secured loan facility due to LMM (the "LMM Facility"). The outstanding fee amount payable of $2,824 has been reclassified to current liabilities subsequent to the repayment of the LMM Facility on August 21, 2019.
11. SUPPLEMENTARY CASH FLOW INFORMATION
Net change in non-cash working capital:
| Period ended | May 31, 2020 | May 31, 2019 | ||||
| Amounts receivable, prepaid expenses and other assets | $ | 617 | $ | 500 | ||
| Accounts payable and other liabilities | (873 | ) | 247 | |||
| $ | (256 | ) | $ | 747 |
12. SEGMENTED REPORTING
Segmented information is provided on the basis of geographical segments as the Company manages its business and exploration activities through geographical regions - Canada and South Africa. The Chief Operating Decision Makers ("CODM") reviews information from the below segments separately so the below segments are separated. This represents a change from prior years and comparative information has been represented to reflect the way the CODM currently reviews the information
The Company evaluates performance of its operating and reportable segments as noted in the following table:
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PLATINUM GROUP METALS LTD. |
| At May 31, 2020 | Assets | Liabilities | ||||
| Canada | $ | 1,783 | $ | 40,218 | ||
| South Africa | 34,507 | 327 | ||||
| $ | 36,290 | $ | 40,545 | |||
| At August 31, 2019 | Assets | Liabilities | ||||
| Canada | $ | 4,983 | $ | 39,278 | ||
| South Africa | 38,680 | 5,542 | ||||
| $ | 43,663 | $ | 44,820 | |||
| Comprehensive Loss for the period ended | May 31, 2020 | May 31, 2019 | ||||
| Canada | $ | 9,932 | $ | 10,197 | ||
| South Africa | 679 | 579 | ||||
| $ | 9,932 | $ | 10,776 | |||
13. SUBSEQUENT EVENTS
- On June 15, 2020 Implats delivered a formal notice that they do not intend to exercise their Purchase and Development Option to acquire and earn into a 50.01% interest in the Waterberg Project due to increased economic uncertainty and reduced risk appetite in the short, medium and long-term as a result of the COVID-19 pandemic. Implats will retain a 15.0% participating project interest and their Offtake ROFR and the Company will retain a controlling 50.02% direct and indirect interest in the project. The Purchase and Development Option may still legally be exercised by Implats until a 90-day notice period expires on September 13, 2020. Impala will continue to be responsible for the costs of an ongoing implementation budget and work program until September 13, 2020. The Company remains the Manager of the Waterberg Project, as directed by the technical committee of the Waterberg JV Co.
- On June 17, 2020 the Company closed a previously announced private placement for 1,221,500 common shares, resulting in gross proceeds of $1,710. Finders fees of $38 were paid on a portion of the private placement, which was otherwise arranged by the Company's management.
- On June 30, 2020 the Company received a letter from SARS reporting the finalization of an income tax audit of the Company's South African 100% subsidiary PTM RSA for tax years 2014, 2015 and 2016 with no reassessment or adjustment to the Company's tax returns for the years audited.
Platinum Group Metals Ltd.
(An Exploration and Development Stage Company)
Supplementary Information and Management's Discussion and Analysis
For the nine-month period ended May 31, 2020
This Management's Discussion and Analysis is prepared as of July 15, 2020
A copy of this report will be provided to any shareholder who requests it.
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PLATINUM GROUP METALS LTD. |
MANAGEMENT'S DISCUSSION AND ANALYSIS
This management's discussion and analysis ("MD&A") of Platinum Group Metals Ltd. ("Platinum Group", the "Company" or "PTM") is dated as of July 15, 2020 and focuses on the Company's financial condition and results of operations at and for the period ended May 31, 2020. This MD&A should be read in conjunction with the Company's condensed consolidated interim financial statements for the period ended May 31, 2020 together with the notes thereto (the "Financial Statements").
The Company prepares its financial statements in accordance with International Financial Reporting Standards ("IFRS"), including IAS 34, Interim Financial Reporting as issued by the International Accounting Standards Board. All dollar figures included therein and in the following MD&A are quoted in United States Dollars unless otherwise noted. All references to "U.S. Dollars", "$" or to "US$" are to United States Dollars. All references to "C$" are to Canadian Dollars. All references to "R" or to "Rand" are to South African Rand. The Company uses the U.S. dollar as its presentation currency.
PRELIMINARY NOTES
NOTE REGARDING FORWARD-LOOKING STATEMENTS:
This MD&A and the documents incorporated by reference herein contain "forward-looking statements" within the meaning of the United States Private Securities Litigation Reform Act of 1995 and "forward-looking information" within the meaning of applicable Canadian securities legislation (collectively, "Forward-Looking Statements"). All statements, other than statements of historical fact, that address activities, events or developments that the Company believes, expects or anticipates will, may, could or might occur in the future are Forward-Looking Statements. The words "expect", "anticipate", "estimate", "may", "could", "might", "will", "would", "should", "intend", "believe", "target", "budget", "plan", "strategy", "goals", "objectives", "projection" or the negative of any of these words and similar expressions are intended to identify Forward-Looking Statements, although these words may not be present in all Forward-Looking Statements. Forward-Looking Statements included or incorporated by reference in this MD&A may include, without limitation, statements related to:
• the timely completion of additional required financings and potential terms thereof;
• the repayment, and compliance with the terms of, indebtedness;
• the projections for the Waterberg Project set forth or incorporated into, or derived from, the DFS Technical Report (as defined below), including, without limitation, estimates of mineral resources and mineral reserves, and projections relating to future prices of metals, commodities and supplies, currency rates, capital and operating expenses, production rate, grade, recovery and return, and other technical, operational and financial forecasts;
• the success of the Work Program (defined below);
• the approval of a Mining Right for, and other developments related to, the Waterberg Project (defined below);
• the adequacy of capital, financing needs and the availability of and potential for obtaining further capital;
• cash flow estimates and assumptions;
• future events or future performance;
• development of next generation battery technology by the Company's battery technology joint venture (described below);
• governmental and securities exchange laws, rules, regulations, orders, consents, decrees, provisions, charters, frameworks, schemes and regimes, including interpretations of and compliance with the same;
• developments in South African politics and laws relating to the mining industry;
• anticipated exploration, development, construction, production, permitting and other activities on the Company's properties;
• project economics;
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PLATINUM GROUP METALS LTD. |
• the identification of several large scale water basins that could provide mine process and potable water for the Waterberg Project and local communities;
• the Company's expectations with respect to the outcomes of litigation; and
• potential changes in the ownership structures of the Company's projects.
Forward-Looking Statements are subject to a number of risks and uncertainties that may cause the actual events or results to differ materially from those discussed in the Forward-Looking Statements, and even if events or results discussed in the Forward-Looking Statements are realized or substantially realized, there can be no assurance that they will have the expected consequences to, or effects on, the Company. Factors that could cause actual results or events to differ materially from current expectations include, among other things:
• the Company's additional financing requirements;
• the Company's history of losses;
• the inability of the Company to generate sufficient additional cash flow to make payment on its indebtedness under the Sprott Facility (defined below) and the Company's convertible notes, and to comply with the terms of such indebtedness, and the restrictions imposed by such indebtedness;
• the Company's $20.0 million principal senior credit facility (the "Sprott Facility") with Sprott Private Resource Lending II, ("Sprott") is secured and the Company has pledged its shares of Platinum Group Metals (RSA) Proprietary Limited, the Company's wholly owned subsidiary located in South Africa ("PTM RSA"), and PTM RSA has pledged its shares of Waterberg JV Resources Proprietary Limited ("Waterberg JV Co.") to Sprott under the Sprott Facility, which potentially could result in the loss of the Company's interest in PTM RSA and the Waterberg Project (defined below) in the event of a default under the Sprott Facility or any new secured indebtedness;
• the Company's negative cash flow;
• the Company's ability to continue as a going concern;
• uncertainty of estimated production, development plans and cost estimates for the Waterberg Project;
• discrepancies between actual and estimated mineral reserves and mineral resources, between actual and estimated development and operating costs, between actual and estimated metallurgical recoveries and between estimated and actual production;
• the Company's ability to maintain compliance with NYSE American and Toronto Stock Exchange continued listing requirements;
• fluctuations in the relative values of the U.S. Dollar, the Rand and the Canadian Dollar;
• volatility in metals prices;
• the possibility that the Company may become subject to the Investment Company Act of 1940, as amended (the "Investment Company Act");
• the failure of the Company or the other shareholders of Waterberg JV Co. to fund their pro rata share of funding obligations for the Waterberg Project;
• any disputes or disagreements with the Company's other shareholders of Waterberg JV Co. or Mnombo Wethu Consultants (Pty) Ltd., a South African Broad-Based Black Economic Empowerment company ("Mnombo");
• risks relating to possible litigation arising from the sale of Maseve Investments 11 Proprietary Limited ("Maseve");
• the Company is subject to assessment by various taxation authorities, who may interpret tax legislation in a manner different from the Company, which may negatively affect the final amount or the timing of the payment or refund of taxes;
• the inability of Waterberg JV Co. to obtain a Mining Right for the Waterberg Project for which it has applied;
• the ability of the Company to retain its key management employees and skilled and experienced personnel;
|
PLATINUM GROUP METALS LTD. |
• contractor performance and delivery of services, changes in contractors or their scope of work or any disputes with contractors;
• conflicts of interest among the Company's officers and directors;
• any designation of the Company as a "passive foreign investment company" and potential adverse U.S. federal income tax consequences for U.S. shareholders;
• a finding by any federal, provincial, local or foreign tax authority resulting in an assessment, reassessment, fine or penalty levied against the Company;
• litigation or other legal or administrative proceedings brought against the Company, including the current litigation brought by Africa Wide Mineral Prospecting and Exploration (Pty) Limited ("Africa Wide"), the former 17.1% shareholder of Maseve;
• actual or alleged breaches of governance processes or instances of fraud, bribery or corruption;
• exploration, development and mining risks and the inherently dangerous nature of the mining industry, including environmental hazards, industrial accidents, unusual or unexpected formations, safety stoppages (whether voluntary or regulatory), pressures, mine collapses, cave ins or flooding and the risk of inadequate insurance or inability to obtain insurance to cover these risks and other risks and uncertainties;
• property and mineral title risks including defective title to mineral claims or property;
• changes in national and local government legislation, taxation, controls, regulations and political or economic developments in Canada, South Africa or other countries in which the Company does or may carry out business in the future;
• equipment shortages and the ability of the Company to acquire the necessary access rights and infrastructure for its mineral properties;
• environmental regulations and the ability to obtain and maintain necessary permits, including environmental authorizations and water use licences;
• extreme competition in the mineral exploration industry;
• delays in obtaining, or a failure to obtain, permits necessary for current or future operations or failures to comply with the terms of such permits;
• any adverse decision in respect of the Company's mineral rights and projects in South Africa under the Mineral and Petroleum Resources Development Act of 2020 (the "MRPDA");
• risks of doing business in South Africa, including but not limited to, labour, economic and political instability and potential changes to and failures to comply with legislation;
• the failure to maintain or increase equity participation by historically disadvantaged South Africans in the Company's prospecting and mining operations and to otherwise comply with the Broad Based Socio-Economic Empowerment Charter for the South African Mining Industry, 2018 ("Mining Charter 2018");
• certain potential adverse Canadian tax consequences for foreign-controlled Canadian companies that acquire common shares of the Company;
• volatility in the price of the common shares;
• possible dilution to holders of common shares upon the exercise or conversion of any outstanding stock options, warrants or convertible notes, as applicable; and
• other risks disclosed under the heading "Risk Factors" in this MD&A.
These factors should be considered carefully, and investors should not place undue reliance on the Company's Forward-Looking Statements. In addition, although the Company has attempted to identify important factors that could cause actual actions or results to differ materially from those described in Forward-Looking Statements, there may be other factors that cause actions or results not to be as anticipated, estimated or intended.
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PLATINUM GROUP METALS LTD. |
Any Forward-Looking Statement speaks only as of the date on which it is made and, except as may be required by applicable securities laws, the Company disclaims any intent or obligation to update any Forward-Looking Statement, whether as a result of new information, future events or results or otherwise.
LEGISLATION AND MINING CHARTER
On September 27, 2018, the Minister of Mineral Resources announced the implementation of the Broad Based Socio-Economic Empowerment Charter for the South African Mining Industry, 2018 ("Mining Charter 2018") which sets out new and revised targets to be achieved by mining companies, the most pertinent of these being the revised Black Economic Empowerment ("BEE") ownership shareholding requirements for Mining Rights holders. 'Implementation Guidelines' to Mining Charter 2018 were published on December 19, 2018. Some uncertainty exists in measuring a Mining Right holder's progress towards, and compliance with, its commitments under Mining Charter 2018.
Under Mining Charter 2018, new Mining Right holders will be required to have a minimum 30% BEE shareholding (a 4% increase from the required 26% under the Mining Charter 2010) which shall include economic interest plus a corresponding percentage of voting rights, per right or in the mining company which holds the right. Waterberg JV Co. filed a mining right application ("MRA") on August 30, 2018 which was accepted before Mining Charter 2018 became effective and therefore a Mining Right issued pursuant to Waterberg JV Co.'s application need only comply with the BEE shareholding requirements of Mining Charter 2010. Once the Waterberg Project Mining Right is granted, Waterberg JV Co. will have a period of 5 years within which to increase its BEE shareholding to 30%. Mining Charter 2018 remains unclear as to whether such shareholding will be required to be distributed amongst employees, communities and black entrepreneurs, and if so, in what percentages.
For a comprehensive discussion of Mining Charter 2018, please refer to the section entitled "Risk Factors" in the Company's annual report on Form 20-F for the year ended August 31, 2019 ("the 2019 20-F"), which was also filed as the Company's form of AIF for 2019, as well as in the documents incorporated by reference therein. The 2019 20-F may be found on EDGAR at www.sec.gov and the AIF may be found on SEDAR at www.sedar.com.
MINERAL RESERVES AND RESOURCES
The mineral resource and mineral reserve figures referred to in this MD&A and the documents incorporated herein by reference are estimates and no assurances can be given that the indicated levels of platinum ("Pt"), palladium ("Pd"), rhodium ("Rh") and gold ("Au") (collectively referred to as "4E") will be produced. Such estimates are expressions of judgment based on knowledge, mining experience, analysis of drilling results and industry practices. Valid estimates made at a given time may significantly change when new information becomes available. By their nature, mineral resource and mineral reserve estimates are imprecise and depend, to a certain extent, upon statistical inferences which may ultimately prove unreliable. Any inaccuracy or future reduction in such estimates could have a material adverse impact on the Company.
NOTE TO U.S. INVESTORS REGARDING RESERVE AND RESOURCE ESTIMATES:
Estimates of mineralization and other technical information included or incorporated by reference herein have been prepared in accordance with National Instrument 43-101 - Standards of Disclosure for Mineral Projects ("NI 43-101"). The definitions of proven and probable reserves used in NI 43-101 differ from the definitions in SEC Industry Guide 7 ("Guide 7") of the U.S. Securities and Exchange Commission (the "SEC"). Under 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 the 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 Guide 7 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 Guide 7 and have not historically been permitted to be used in reports and registration statements filed with the SEC subject to Guide 7. 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 of 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 prefeasibility studies, except in rare cases. Additionally, disclosure of "contained ounces" in a resource is permitted disclosure under Canadian securities laws; however, Guide 7 normally only permits issuers to report mineralization that does not constitute "reserves" by SEC standards as in place tonnage and grade without reference to unit measurements. Accordingly, information contained in this MD&A and the documents incorporated by reference herein containing descriptions of the Company's mineral deposits may not be comparable to similar information made public by U.S. companies subject to Guide 7. The Company has not disclosed or determined any mineral reserves under the current SEC Industry Guide 7 standards in respect of any of its properties.
|
PLATINUM GROUP METALS LTD. |
On October 31, 2018, the SEC adopted a final rule ("New Final Rule") that will replace Industry Guide 7 with new disclosure requirements that are more closely aligned with current industry and global regulatory practices and standards, including NI 43-101. Companies must comply with the New Final Rule for the company's first fiscal year beginning on or after January 1, 2021, which for Platinum Group would be the fiscal year beginning September 1, 2021. While early voluntary compliance with the New Final Rule will be permitted, Platinum Group has not elected to comply with the New Final Rule at this time.
TECHNICAL AND SCIENTIFIC INFORMATION:
The technical and scientific information contained in this MD&A, including, but not limited to, all references to and descriptions of technical reports and studies included in this MD&A, has been reviewed and approved by R. Michael Jones, P.Eng, President and Chief Executive Officer and a director of the Company. Mr. Jones is a non-independent "qualified person" as defined in NI 43-101 (a "Qualified Person").
NON-GAAP MEASURES:
This MD&A may include certain terms or performance measures commonly used in the mining industry that are not defined under IFRS as issued by the International Accounting Standards Board, which is incorporated in the CPA Canada Handbook. We believe that, in addition to conventional measures prepared in accordance with IFRS, certain investors use this information to evaluate our performance. The data presented is intended to provide additional information and should not be considered in isolation or as a substitute for measures of performance prepared in accordance with IFRS. Any such non-GAAP measures should be read in conjunction with our financial statements.
1. DESCRIPTION OF BUSINESS
OVERVIEW
Platinum Group Metals Ltd. is a British Columbia, Canada, company formed on February 18, 2002 pursuant to an order of the Supreme Court of British Columbia approving an amalgamation between Platinum Group Metals Ltd. and New Millennium Metals Corporation. The Company is a palladium and platinum focused exploration and development company conducting work primarily on mineral properties it has staked or acquired by way of option agreements or applications in the Republic of South Africa.
The Company's main business is currently focused on the exploration and development engineering of a deposit area on the Waterberg property (the "Waterberg Project") located on the Northern Limb of the Bushveld Complex, approximately 70 km north of the town of Mokopane (formerly Potgietersrus). The Waterberg Project was discovered as the result of a regional exploration initiative by the Company targeting a previously unknown extension to the Northern Limb of the Bushveld Complex in South Africa. The project area is now comprised of two adjacent property areas formerly known as the Waterberg joint venture project (the "Waterberg JV Project") and the Waterberg extension project (the "Waterberg Extension Project").
On November 6, 2017, the Company, along with Japan Oil, Gas and Metals National Corporation ("JOGMEC") and Mnombo closed a transaction to sell Impala Platinum Holdings Ltd. ("Implats") 15% of the Waterberg Project for $30 million (the "Implats Transaction"). Implats was also granted an option (the "Purchase and Development Option") to increase its stake to 50.01% through additional share purchases from JOGMEC for an amount of $34.8 million and earn-in arrangements for $130 million paid to Waterberg JV Co. (defined below) to fund development work on the Waterberg Project, as well as a right of first refusal to smelt and refine Waterberg concentrate (the "Offtake ROFR"). JOGMEC or their nominee retained a right to receive platinum, palladium, rhodium, gold, ruthenium, iridium, copper and nickel refined mineral products at the volumes produced from the Waterberg Project. The Company received $17.2 million for its sale of an 8.6% project interest to Implats. See details below.
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PLATINUM GROUP METALS LTD. |
On November 23, 2017, the Company entered into definitive agreements to sell its rights and interests in Maseve to Royal Bafokeng Platinum Limited ("RBPlat") in a transaction valued at approximately $74.0 million, payable as $62.0 million in cash and $12.0 million in RBPlat common shares (the "Maseve Sale Transaction"). The transaction was fully completed on April 26, 2018.
On September 24, 2019 the Company published the results of the Definitive Feasibility Study for the Waterberg Project (the "Waterberg DFS"). The Waterberg DFS was formally delivered to the Waterberg JV Co. shareholders on October 4, 2019 and approved by all shareholders on December 5, 2019. On October 7, 2019 the Waterberg DFS technical report entitled "Independent Technical Report, Waterberg Project Definitive Feasibility Study and Mineral Resource Update, Bushveld Complex, South Africa" (the "DFS Technical Report") was filed on SEDAR at www.sedar.com and on EDGAR at www.sec.gov. The DFS Technical Report is dated October 3, 2019 and was prepared by Michael Murphy, P. Eng. of Stantec Consulting Ltd., Charles J Muller, B. Sc. (Hons) Geology, Pri. Sci. Nat. of CJM Consulting (Pty) Ltd., and Gordon I Cunningham, B. Eng. (Chemical), Pr. Eng., FSAIMM of Turnberry Projects (Pty) Ltd. DRA Projects SA (Pty) Ltd., an experienced South African engineering and EPCM firm, provided the plant design and compiled the capital cost estimates for the project qualified persons. The DFS Technical Report also supports the disclosure of an updated independent mineral resource estimate effective September 4, 2019.
After the approval of the Waterberg DFS by Waterberg JV Co. shareholders on December 5, 2019, Implats had 90 business days (until April 17, 2020) to elect whether to exercise the Purchase and Development Option. The Purchase and Development Option was formally modified by the execution of an amending agreement on March 31, 2020 (the "Implats Option Amendment") wherein the deadline for Implats to exercise the Purchase and Development Option was extended to 90 days after the grant of a Mining Right. In exchange for the extension Implats agreed to fund 100% of an optimization budget and work program (the "Work Program") beginning February 1, 2020. The Work Program, as approved by Waterberg JV Co., is aimed at increasing confidence in specific areas of the Waterberg DFS while awaiting the expected grant of a Mining Right and Environmental Authorization and is budgeted to cost approximately R55 million (US$4 million when announced). The Work Program is currently being carried out remotely and in the field in compliance with current South African regulations aimed at halting the spread of the COVID-19 virus.
On June 15, 2020 Implats delivered a formal notice that they do not intend to exercise their Purchase and Development Option to acquire and earn into a 50.01% interest in the Waterberg Project due to increased economic uncertainty and reduced risk appetite in the short, medium and long-term as a result of the COVID-19 pandemic. Implats will retain a 15.0% participating project interest and their Offtake ROFR and the Company will retain a controlling 50.02% direct and indirect interest in the project. The Purchase and Development Option may still legally be exercised by Implats until a 90-day notice period expires on September 13, 2020. Implats will continue to be responsible for the costs of an ongoing implementation budget and work program until September 13, 2020. The Company remains the Manager of the Waterberg Project, as directed by the technical committee of the Waterberg JV Co.
LION BATTERY TECHNOLOGIES INC.
On July 11, 2019, the Company, together with an affiliate of Anglo American Platinum Limited ("AAP"), launched a new venture through a jointly owned company, Lion Battery Technologies Inc. ("Lion") to accelerate the development of next generation battery technology using platinum and palladium. AAP and the Company have agreed together to invest up to a total of $4.0 million, subject to certain conditions, in exchange for preferred shares of Lion at a price of $0.50 per share over approximately a three to four year period. AAP and the Company have each invested an initial $550,000 into Lion in exchange for 1,100,000 preferred shares, while in June 2020 the Company and AAP invested a further $350,000 each into Lion in exchange for 700,000 preferred shares. The Company also invested $4,000 as the original founder's round into Lion in exchange for 400,000 common shares at a price of $0.01 per share.
Lion entered into an agreement with Florida International University ("FIU") to fund a $3.0 million research program over approximately a three year period utilizing platinum and palladium to unlock the potential of Lithium Air and Lithium Sulphur battery chemistries to increase their discharge capacities and cyclability. Under the agreement with FIU, Lion will have exclusive rights to all intellectual property developed and will lead all commercialization efforts. Lion is to advance funding to FIU in four tranches. The first tranche totaling $1.0 million was funded by Lion in mid July 2019, with a second tranche of $666,667 having been funded in June 2020 once FIU had reasonably completed a first set of specific research milestones. Lion also paid FIU a one-time fee of $50,000 in July 2019. Two subsequent tranches of $666,667 each will be funded approximately every six months based on the attainment of research milestones by FIU. Research work commenced at FIU during September 2019. Investment into Lion by AAP and the Company in excess of the $3.05 million earmarked for FIU is to be utilized by Lion for general and administrative costs and for future commercialization efforts by Lion. If the Company should fail to contribute its share of a required subscription to Lion, it would be in breach of its agreement with Lion and its interest in Lion may be subject to dilution.
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PLATINUM GROUP METALS LTD. |
PERSONNEL
The Company's current complement of managers, staff and consultants in Canada consists of 6 individuals. The Company's complement of managers, staff, consultants, security and casual workers in South Africa currently consists of 7 individuals, as further described below:
• Including managers and staff there are five employees at the Company's Johannesburg office.
• There is one senior consultant acting as financial manager at the Company's Johannesburg office.
• There are two individuals active at the Waterberg Project conducting engineering and geotechnical activities related to the Work Program.
The Waterberg Project is currently operated by the Company utilizing its own staff, consultants and personnel. Contract drilling, geotechnical, engineering and support services are utilized as required.
In addition to the above personnel, there are two persons whose employment with the Company ended by mutual agreement on May 31, 2020 that are temporarily serving as consultants at the Johannesburg office until December 31, 2020.
2. PROPERTIES
Under IFRS, the Company defers all acquisition, exploration and development costs related to mineral properties. The recoverability of these amounts is dependent upon the existence of economically recoverable mineral reserves, the ability of the Company to obtain the necessary financing to complete the development of the property, and any future profitable production, or alternatively upon the Company's ability to dispose of its interests on an advantageous basis. The Company evaluates the carrying value of its property interests on a regular basis. Management is required to make significant judgements to identify potential impairment indicators. Any properties management deems to be impaired are written down to their estimated net recoverable amount.
For more information on mineral properties, see below and Note 3 of the Company's May 31, 2020 interim condensed consolidated financial statements.
MATERIAL MINERAL PROPERTY INTERESTS
Waterberg Project
Waterberg Project - Implats Strategic Investment
On November 6, 2017, the Company closed the Implats Transaction. Details are as follows:
• Implats purchased an aggregate 15.0% equity interest in Waterberg JV Co. (the "Initial Purchase") for $30 million. Implats also acquired the Offtake ROFR as a component of the Initial Purchase. The Company sold an 8.6% interest for $17.2 million and JOGMEC sold a 6.4% interest for $12.8 million. From its sale proceeds, the Company funded $5.0 million towards its pro rata share of remaining Waterberg DFS costs.
• Implats acquired the Purchase and Development Option whereby upon completion and approval by Waterberg JV Co. of the Waterberg DFS, Implats had a right within 90 business days to increase its interest to up to 50.01% in Waterberg JV Co. The Waterberg DFS was formally delivered to the Waterberg JV Co. shareholders on October 4, 2019 and approved by all shareholders on December 5, 2019.
On February 27, 2020 the Company announced that shareholders of Waterberg JV Co had agreed to amend the Purchase and Development Option effective as at February 1, 2020. On March 31, 2020 the Implats Option Amendment was executed by the shareholders of Waterberg JV Co. extending the termination date of the Purchase and Development Option to expire 90 calendar days following the receipt of an executed Mining Right for the Waterberg Project. In exchange for this extension Implats agreed to fund the Work Program described above, which is aimed at increasing confidence in specific areas of the DFS. The Work Program is estimated to cost R55 million. The Company continues to be the Manager of the Waterberg Project, as directed by the technical committee of the Waterberg JV Co., and Implats will direct the Work Program.
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PLATINUM GROUP METALS LTD. |
On June 15, 2020 Implats delivered a formal notice that they do not intend to exercise their Purchase and Development Option to acquire and earn into a 50.01% interest in the Waterberg Project due to increased economic uncertainty and reduced risk appetite in the short, medium and long-term as a result of the COVID-19 pandemic. Implats will retain a 15.0% participating project interest and their Offtake ROFR and the Company will retain a controlling 50.02% direct and indirect interest in the project. The Purchase and Development Option may still legally be exercised by Implats until a 90-day notice period expires on September 13, 2020. Impala will continue to be responsible for the costs of an ongoing implementation budget and work program until September 13, 2020. The Company remains the Manager of the Waterberg Project, as directed by the technical committee of the Waterberg JV Co.
Waterberg Project - Recent Activities
During the nine-month period ended May 31, 2020, approximately $2.1 million was spent at the Waterberg Project for engineering and exploration activities. At period end, $34.0 million in accumulated net costs had been capitalized to the Waterberg Project. Total expenditures on the property since inception from all investor sources are approximately $74.6 million. From inception to date, the Company has funded both the Company's and Mnombo's share of expenditures on the Waterberg Project. At May 31, 2020 Mnombo owed the Company approximately $4.1 million for funding provided.
On September 24, 2019 the Company published the results of the Waterberg DFS. Waterberg JV Co. shareholders approved the Waterberg DFS on December 5, 2019. Highlights of the Waterberg DFS include:
-
A significant increase in Mineral Reserves from the Project's 2016 Pre-Feasibility Study ("PFS") for a large-scale, shallow, decline-accessible, mechanised, palladium, platinum, gold and rhodium mine. Use of backfill in the Waterberg DFS design lowers risk and increases mined ore extraction rates.
-
Annual Steady State production rate of 420,000 4E ounces. Estimated mine life of 45 years on current reserves. The planned production rate is by careful design in order to reduce capital costs and simplify construction and ramp-up.
-
After-tax Net Present Value ("NPV") of $982 million, at an 8% real discount rate, using spot metal prices as at September 4, 2019 (Incl. $1,546 Pd/oz) ("Spot Prices").
-
After-tax NPV of US$ 333 million, at an 8% real discount rate, using three-year trailing average metal prices up until September 4, 2019 (Incl. $1,055 Pd/oz) ("Three Year Trailing Prices").
-
After-tax Internal Rate of Return ("IRR") of 20.7% at Spot Prices and 13.3% at Three Year Trailing Prices.
-
Estimated project capital of approximately $874 million, including $87 million in contingencies. Peak project funding estimated at $617 million.
-
On site Life of Mine average cash cost (inclusive of by-product credits and smelter discounts) for the Spot Metal Price scenario equates to $640 per 4E ounce.
-
Updated measured and indicated mineral resources of 242 million tonnes at 3.38g/t 4E for 26.4 million 4E ounces (using 2.5 g/t 4E cut-off) and the deposit remains open on strike to the north and below an arbitrary depth cut-off of 1,250-meters.
-
Proven and probable mineral reserves of 187 million tonnes at 3.24 g/t 4E for 19.5 million 4E ounces (using 2.5 g/t 4E cut-off).
The mineral resources for the Waterberg Project have been updated and have increased slightly based on in-fill drilling done during preparation of the DFS. The mineral resources have been estimated based on 441 diamond drill holes and 583 deflections and has been stated at a 2.5 g/t 4E cut-off (the base-case). In the Waterberg DFS, a 2.5 g/t 4E cut-off grade has been applied to the mineral resource model as an input into the mine design. At the 2.5 g/t 4E cut-off grade, the total measured and indicated mineral resources are estimated at 242 million tonnes grading 3.38 g/t 4E for an estimated 26.4 million ounces 4E. Total mineral reserves at a 2.5 g/t 4E grade cut-off are estimated at 187 million tonnes for 19.5 million ounces 4E.
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PLATINUM GROUP METALS LTD. |
The mineral reserves are a subset of the mineral resource envelope at a 2.5 g/t 4E cut-off and they include only measured and indicated mineral resources with dilution and stope shapes considered. A minimum mining thickness of 2.4 meters and sublevel planning of 20 meters to 40 meters was considered in the mine plan for mineral reserves.
The mineral resources for the Waterberg Project are categorized and reported in terms of NI 43-101 and are tabulated below.
Mineral Resource Estimate at 2.5 g/t 4E cut-off, effective September 4, 2019 on 100% Project basis:
|
T Zone at 2.5 g/t (4E) Cut-off |
|||||||||||
|
Mineral Resource Category |
Cut-off |
Tonnage |
Grade |
Metal |
|||||||
|
4E |
Pt |
Pd |
Rh |
Au |
4E |
Cu |
Ni |
4E |
|||
|
g/t |
Tonnes |
g/t |
g/t |
g/t |
g/t |
g/t |
% |
% |
kg |
Moz |
|
|
Measured |
2.5 |
4,443,483 |
1.17 |
2.12 |
0.05 |
0.87 |
4.20 |
0.150 |
0.080 |
18,663 |
0.600 |
|
Indicated |
2.5 |
17,026,142 |
1.37 |
2.34 |
0.03 |
0.88 |
4.61 |
0.200 |
0.094 |
78,491 |
2.524 |
|
M+I |
2.5 |
21,469,625 |
1.34 |
2.29 |
0.03 |
0.88 |
4.53 |
0.189 |
0.091 |
97,154 |
3.124 |
|
Inferred |
2.5 |
21,829,698 |
1.15 |
1.92 |
0.03 |
0.76 |
3.86 |
0.198 |
0.098 |
84,263 |
2.709 |
|
F Zone at 2.5 g/t (4E) Cut-off |
|||||||||||
|
Mineral Resource Category |
Cut-off |
Tonnage |
Grade |
Metal |
|||||||
|
4E |
Pt |
Pd |
Rh |
Au |
4E |
Cu |
Ni |
4E |
|||
|
g/t |
Tonnes |
g/t |
g/t |
g/t |
g/t |
g/t |
% |
% |
kg |
Moz |
|
|
Measured |
2.5 |
54,072,600 |
0.95 |
2.20 |
0.05 |
0.16 |
3.36 |
0.087 |
0.202 |
181,704 |
5.842 |
|
Indicated |
2.5 |
166,895,635 |
0.95 |
2.09 |
0.05 |
0.15 |
3.24 |
0.090 |
0.186 |
540,691 |
17.384 |
|
M+I |
2.5 |
220,968,235 |
0.95 |
2.12 |
0.05 |
0.15 |
3.27 |
0.089 |
0.190 |
722,395 |
23.226 |
|
Inferred |
2.5 |
44,836,851 |
0.87 |
1.92 |
0.05 |
0.14 |
2.98 |
0.064 |
0.169 |
133,705 |
4.299 |
|
Waterberg Aggregate Total 2.5 g/t (4E) Cut-off |
|||||||||||
|
Mineral Resource Category |
Cut-off |
Tonnage |
Grade |
Metal |
|||||||
|
4E |
Pt |
Pd |
Rh |
Au |
4E |
Cu |
Ni |
4E |
|||
|
g/t |
Tonnes |
g/t |
g/t |
g/t |
g/t |
g/t |
% |
% |
kg |
Moz |
|
|
Measured |
2.5 |
58,516,083 |
0.97 |
2.19 |
0.05 |
0.21 |
3.42 |
0.092 |
0.193 |
200,367 |
6.442 |
|
Indicated |
2.5 |
183,921,777 |
0.99 |
2.11 |
0.05 |
0.22 |
3.37 |
0.100 |
0.177 |
619,182 |
19.908 |
|
M+I |
2.5 |
242,437,860 |
0.98 |
2.13 |
0.05 |
0.22 |
3.38 |
0.098 |
0.181 |
819,549 |
26.350 |
|
Inferred |
2.5 |
66,666,549 |
0.96 |
1.92 |
0.04 |
0.34 |
3.27 |
0.108 |
0.146 |
217,968 |
7.008 |
|
Mineral Resource Category |
Prill Split Waterberg Project Aggregate |
|||
|
Pt |
Pd |
Rh |
Au |
|
|
% |
% |
% |
% |
|
|
Measured |
28.2 |
64.4 |
1.5 |
5.9 |
|
Indicated |
29.4 |
62.6 |
1.5 |
6.5 |
|
M+I |
29.1 |
63.0 |
1.5 |
6.4 |
|
Inferred |
29.5 |
58.9 |
1.2 |
10.4 |
Notes:
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PLATINUM GROUP METALS LTD. |
1. 4E elements are platinum, palladium, rhodium and gold.
2. Cut-offs for mineral resources were established by a QP after a review of potential operating costs and other factors.
3. Conversion factor used for kilograms ("kg") to ounces ("oz") is 32.15076
4. A 5% and 7% geological loss was applied to the measured/indicated and inferred mineral resources categories, respectively.
5. The mineral resources are classified in accordance with NI 43-101. Mineral resources that are not mineral reserves do not have demonstrated economic viability and inferred mineral resources have a high degree of uncertainty.
6. The mineral resources are provided on a 100% Project basis, inferred and indicated categories are separate and the estimates have an effective date of 4 September 2019.
7. Mineral resources were completed by Mr. CJ Muller of CJM Consulting.
8. Mineral resources were estimated using kriging methods for geological domains created in Datamine from 441 mother holes and 583 deflections. A process of geological modelling and creation of grade shells using indicating kriging was completed in the estimation process.
9. The mineral resources may be materially affected by metal prices, exchange rates, labour costs, electricity supply issues or many other factors detailed in the Company's 2018 Annual Information Form.
10. The data that formed the basis of the mineral resources estimate are the drill holes drilled by Platinum Group as project operator, which consist of geological logs, drill hole collars surveys, downhole surveys and assay data. The area where each layer was present was delineated after examination of the intersections in the various drill holes.
11. Numbers may not add due to rounding.
Proven Mineral Reserve Estimate at 2.5 g/t 4E cut-off, effective September 4, 2019 on 100% Project basis:
|
Proven Mineral Reserve Estimate at 2.5 g/t 4E cut-off |
||||||||||
|
|
|
Pt |
Pd |
Rh |
Au |
4E |
Cu |
Ni |
4E Metal |
|
|
Zone |
Tonnes |
(g/t) |
(g/t) |
(g/t) |
(g/t) |
(g/t) |
(%) |
(%) |
Kg |
Moz |
|
T Zone |
3,963,694 |
1.02 |
1.84 |
0.04 |
0.73 |
3.63 |
0.13 |
0.07 |
14,404 |
0.463 |
|
F Central |
17,411,606 |
0.94 |
2.18 |
0.05 |
0.14 |
3.31 |
0.07 |
0.18 |
57,738 |
1.856 |
|
F South |
- |
- |
- |
- |
- |
- |
- |
- |
- |
- |
|
F North |
16,637,670 |
0.85 |
2.03 |
0.05 |
0.16 |
3.09 |
0.10 |
0.20 |
51,378 |
1.652 |
|
F Boundary North |
4,975,853 |
0.97 |
2.00 |
0.05 |
0.16 |
3.18 |
0.10 |
0.22 |
15,847 |
0.509 |
|
F Boundary South |
5,294,116 |
1.04 |
2.32 |
0.05 |
0.18 |
3.59 |
0.08 |
0.19 |
19,020 |
0.611 |
|
F Zone Total |
44,319,244 |
0.92 |
2.12 |
0.05 |
0.16 |
3.25 |
0.09 |
0.20 |
143,982 |
4.629 |
|
Waterberg Project Total |
48,282,938 |
0.93 |
2.10 |
0.05 |
0.20 |
3.28 |
0.09 |
0.19 |
158,387 |
5.092 |
Probable Mineral Reserve Estimate at 2.5 g/t 4E cut-off, effective September 4, 2019 on 100% Project basis:
|
Probable Mineral Reserve Estimate at 2.5 g/t 4E cut-off |
||||||||||
|
|
|
Pt |
Pd |
Rh |
Au |
4E |
Cu |
Ni |
4E Metal |
|
|
Zone |
Tonnes |
(g/t) |
(g/t) |
(g/t) |
(g/t) |
(g/t) |
(%) |
(%) |
Kg |
Moz |
|
T Zone |
12,936,870 |
1.23 |
2.10 |
0.02 |
0.82 |
4.17 |
0.19 |
0.09 |
53,987 |
1.736 |
|
F Central |
52,719,731 |
0.86 |
1.97 |
0.05 |
0.14 |
3.02 |
0.07 |
0.18 |
158,611 |
5.099 |
|
F South |
15,653 ,961 |
1.06 |
2.03 |
0.05 |
0.15 |
3.29 |
0.04 |
0.13 |
51,411 |
1.653 |
|
F North |
36,984,230 |
0.90 |
2.12 |
0.05 |
0.16 |
3.23 |
0.09 |
0.20 |
119,450 |
3.840 |
|
F Boundary North |
13,312,581 |
0.98 |
1.91 |
0.05 |
0.17 |
3.11 |
0.10 |
0.23 |
41,369 |
1.330 |
|
F Boundary South |
7,616,744 |
0.92 |
1.89 |
0.04 |
0.13 |
2.98 |
0.06 |
0.18 |
22,737 |
0.731 |
|
F Zone Total |
126,287,248 |
0.91 |
2.01 |
0.05 |
0.15 |
3.12 |
0.08 |
0.18 |
393,578 |
12.654 |
|
Waterberg Project Total |
139,224,118 |
0.94 |
2.02 |
0.05 |
0.21 |
3.22 |
0.09 |
0.18 |
447,564 |
14.390 |
|
PLATINUM GROUP METALS LTD. |
Proven & Probable Mineral Reserve Estimate at 2.5 g/t 4E cut-off, effective September 4, 2019 on 100% Project basis:
|
Total Estimated Mineral Reserve at 2.5 g/t 4E cut-off |
||||||||||
|
|
|
Pt |
Pd |
Rh |
Au |
4E |
Cu |
Ni |
4E Metal |
|
|
Zone |
Tonnes |
(g/t) |
(g/t) |
(g/t) |
(g/t) |
(g/t) |
(%) |
(%) |
Kg |
Moz |
|
T Zone |
16,900,564 |
1.18 |
2.04 |
0.03 |
0.80 |
4.05 |
0.18 |
0.09 |
68,391 |
2.199 |
|
F Central |
70,131,337 |
0.88 |
2.02 |
0.05 |
0.14 |
3.09 |
0.07 |
0.18 |
216,349 |
6.956 |
|
F South |
15,653,961 |
1.06 |
2.03 |
0.05 |
0.15 |
3.29 |
0.04 |
0.13 |
51,411 |
1.653 |
|
F North |
53,621,900 |
0.88 |
2.09 |
0.05 |
0.16 |
3.18 |
0.10 |
0.20 |
170,828 |
5.492 |
|
F Boundary North |
18,288,434 |
0.98 |
1.93 |
0.05 |
0.17 |
3.13 |
0.10 |
0.23 |
57,216 |
1.840 |
|
F Boundary South |
12,910,859 |
0.97 |
2.06 |
0.05 |
0.15 |
3.23 |
0.07 |
0.19 |
41,756 |
1.342 |
|
F Zone Total |
170,606,492 |
0.91 |
2.04 |
0.05 |
0.15 |
3.15 |
0.08 |
0.19 |
537,560 |
17.283 |
|
Waterberg Project Total |
187,507,056 |
0.94 |
2.04 |
0.05 |
0.21 |
3.24 |
0.09 |
0.18 |
605,951 |
19.482 |
Notes:
1. The estimated mineral reserves have an effective date of September 4, 2019.
2. A 2.5 g/t 4E stope cut-off grade was used for mine planning for the T Zone and the F Zone mineral reserves estimate. The cut-off grade considered April 2018 metal spot prices.
3. Tonnes and grade estimates include planned dilution, geological losses, external overbreak dilution, and mining losses.
4. 4E elements are platinum, palladium, rhodium and gold.
5. Numbers may not add due to rounding.
The Project financial performance has been estimated both at Spot Prices and at Three Year Trailing Average Prices as set out in the table below. The long-term real US$/Rand exchange rate for the Spot Price scenario is set at 15.00, which is based on an intra-day traded spot rate as of September 4, 2019. The US$/Rand exchange rates for the Three Year Trailing Price scenario, is based on Bloomberg's nominal consensus forward-curve as at June 2019, which translates into a long-term real US$/Rand rate of 15.95. The price deck assumptions for each scenario are tabled below.
DFS Technical Report Price Deck Assumptions in $US
|
Parameter |
Unit |
Spot Prices |
Three Year |
|
US$ / Rand (Long-term Real) |
US$/Rand (Real July 2019) |
15.00 |
15.95 |
|
Platinum Palladium Gold Rhodium Basket Price (4E) Copper Nickel |
US$/oz (Real July 2019) US$/oz (Real July 2019) US$/oz (Real July 2019) US$/oz (Real July 2019) US$/oz (Real July 2019) US$/lb (Real July 2019) US$/lb (Real July 2019) |
980 1,546 1,548 5,036 1,425 2.56 8.10 |
931 1,055 1,318 1,930 1,045 2.87 5.56 |
|
Smelter Payability: 4E Metal Smelter Payability: Copper Smelter Payability: Nickel |
% Gross Sale Value % Gross Sale Value % Gross Sale Value |
85% 73% 68% |
85% 73% 68% |
|
PLATINUM GROUP METALS LTD. |
Readers are directed to review the full text of the DFS Technical Report, available for review under the Company's profile on SEDAR at www.sedar.com and on EDGAR at www.sec.gov for additional information.
The known deposit strike length on the Waterberg Project is 13 km long so far, remains open along strike and begins from a depth of 140 meters vertical. The Waterberg DFS mine plan covers a strike length of approximately 8.5 km. The deposit is known to continue down dip below the arbitrary 1,250 meter cut off depth applied to the deposit for resource estimation purposes. The Waterberg Project and the deposit is still open for expansion. Based on airborne gravity surveys and drilling completed to date, additional drilling northward along strike is recommended for the future.
The Waterberg DFS owner's team, including representatives from Implats, visited Canadian bulk underground mining operations in late 2018 and have worked closely with the independent mining engineering team at Stantec. Maximizing the extraction ratio and safety of the large-scale Waterberg resource in a similar manner as other large world class mines were positive outcomes for the final Waterberg DFS design. Detailed work by Implats technical team was instrumental in the design optimization process for the Waterberg DFS.
As a result of its shallow depth, good grade and a fully mechanized mining approach, the Waterberg Project can be a safe mine within the lowest quartile of the Southern Africa PGE industry cost curve.
The Waterberg DFS mine plan models production at 4.8 million tonnes of ore per annum and 420,000 4E ounces per year in concentrate. The mine initially accesses the orebody using two sets of twin decline tunnels with mining by fully mechanised long hole stoping methods with paste backfill. Paste backfill allows for a high mining extraction ratio as mining can be completed next to backfilled stopes without leaving internal pillars. Maintaining safety and reliability were key mine design criteria. As a result of the scale of the orebody, bulk mining on 20 to 40 meter sublevels with large underground equipment and conveyors for ore and waste transport provides high efficiency. Many of the larger successful underground mines in the world use the same method of mining with backfill and estimated costs were benchmarked against many of these operations.
A formal MRA, including a Social and Labour Plan ("SLP"), was accepted by the South African Department of Mineral Resources and Energy ("DMR") on September 14, 2018. The Company held local public meetings on numerous occasions in advance of the MRA. A program of public consultation as part of the formal MRA and Environmental Authorisation applications for the Project was completed in August 2019. The Environmental Impact Assessment and Environmental Management Program were filed with the DMR on August 15, 2019. Training for a new mechanised mining workforce is an important part of the Waterberg DFS and the MRA. Planning has been undertaken with the assistance of global mine training leader, Norcat, of Sudbury, Ontario. The Waterberg DFS modelled a significant investment in training, focussed on the immediate area of the Project, working in co-operation with local colleges and facilities. All the above work forms a part of the MRA and a decision by the DMR is expected in mid 2020. The expected grant of a Mining Right may be delayed from previous guidance as a result of the current South African stay at home order aimed at halting the spread of the COVID-19 virus, and possible future restrictions. Recent DMR feedback regarding the MRA, SLP, Environmental Impact Assessment and Environmental Management Program has not raised any negative issues.
Infrastructure planning and option assessments are underway for the Waterberg Project under the current Work Program. Detailed hydrological work studying the utilization of known sources for significant volumes of ground water has been conducted. A co-operation agreement has been entered between Waterberg JV Co. and the local Capricorn Municipality for the development of water resources to the benefit of local communities and the mine. Hydrological work so far has also identified several large-scale water basins that are likely able to provide mine process and potable water for the Waterberg Project and local communities. Test drilling of these water basins has been completed resulting in the identification of sufficient water supply for the mine. An earlier drilling program conducted by the Capricorn District Municipality identified both potable and high mineral unpotable water resources in the district. Drilling by Waterberg JV Co. has identified some potable water resources. Several boreholes proximal to the Waterberg Project identified large volumes of high mineral unpotable water not suitable for agriculture. Hydrological and mill process specialists have tested the use of this water as mine process water. In general, ground water resources identified proximal to the Waterberg Project have the potential for usage for both mining and local communities. Further water definition work is planned and drilling to test and assess certain aquifers is now underway under the current Work Program.
|
PLATINUM GROUP METALS LTD. |
The establishment of servitudes for power line routes and detailed planning and permitting for an Eskom electrical service to the project are also advancing well. Power line environmental and servitude work is being completed by TDxPower in coordination with Eskom. TDxPower has progressed electrical power connection planning for approximately a 70 km, 137MvA line to the project. Engineering refinement of steady state power requirements has resulted in a reduced demand of approximately 90MvA at steady state. Bulk power design and costing work for steady state requirements has commenced. Eskom is engaged with project engineers to determine electrical power sources and availability. A temporary power line for the construction period from the nearby grid at Bochum is being designed and costed. Community engagement regarding power line routes and completion of an environmental impact assessment is in process.
The positive long-term market outlook for platinum group elements and the value increase created by higher extraction per mining level supports the Waterberg DFS design to utilize backfill. The mining extraction of pillars in the Waterberg DFS versus the PFS design will has a positive effect on tonnes and ounces for reserves. Ancillary benefits include a reduced tailings footprint, as tailings are put underground in backfill, and increased safety and certainty on the production profile. Two twin declines are now planned in the Waterberg DFS design rather than three in the PFS design.
Subsequent to Implats June 15, 2020 formal notice that they do not intend to exercise their Purchase and Development Option, the Company and Waterberg JV Co. have begun a process to assess commercial alternatives for mine development financing and concentrate offtake. Several parties are currently in discussions with the Company. The Implats Offtake ROFR requires that any offtake arrangement with Implats at least match any bona fide third party commercial offtake terms offered.
Waterberg Projects - History of Acquisition
The Waterberg JV Project is comprised of adjacent, granted and applied for prospecting rights and applied for Mining Rights with a combined active project area of approximately 81,329.60 ha, located on the Northern Limb of the Bushveld Complex, approximately 85 km north of the town of Mokopane (formerly Potgietersrus). The Waterberg Project is comprised of the former Waterberg JV Property and the Waterberg Extension Property.
Prospecting rights in South Africa are valid for a period of five years, with one renewal of up to three years. Furthermore, the MPRDA provides for a retention period after prospecting of up to three years with one renewal of up to two years, subject to certain conditions. The holder of a prospecting right granted under the MPRDA has the exclusive right to apply for and, subject to compliance with the requirements of the MPRDA, to be granted, a Mining Right in respect of the prospecting area in question.
On September 28, 2009, PTM RSA, JOGMEC and Mnombo entered into a joint venture agreement, as later amended on May 20, 2013 (the "JOGMEC Agreement") whereby JOGMEC could earn up to a 37% participating interest in the Waterberg JV Project for an optional work commitment of $3.2 million over four years, while at the same time Mnombo could earn a 26% participating interest in exchange for matching JOGMEC's expenditures on a 26/74 basis ($1.12 million).
On November 7, 2011, the Company executed an agreement with Mnombo to acquire 49.9% of the issued and outstanding shares of Mnombo in exchange for cash payments totaling R1.2 million and an agreement that the Company would pay for Mnombo's 26% share of costs on the Waterberg JV Project until the completion of the Waterberg DFS.
On May 26, 2015, the Company announced a second amendment to the JOGMEC Agreement (the "2nd Amendment") whereby the Waterberg JV Project and the Waterberg Extension Project were to be consolidated and contributed into operating company, Waterberg JV Co. The transfer of Waterberg prospecting rights into Waterberg JV Co pursuant to the 2nd Amendment was given section 11 approval by the DMR in August 2017 and the transfer was completed on September 21, 2017. This transaction was considered a taxable item in South Africa, that was offset with other tax-deductible losses and utilization of unrecognized taxable losses. Under the 2nd Amendment, JOGMEC committed to fund $20 million in expenditures over a three-year period ending March 31, 2018. The Company remained the Project operator under the 2nd Amendment.
On March 8, 2018, JOGMEC announced that it had signed a memorandum of understanding with HANWA Co., Ltd ("HANWA") to transfer 9.755% of its 21.95% interest in Waterberg JV Co. to HANWA, which was the result of HANWA winning JOGMEC's public tender held on February 23, 2018. In March 2019, the South African government approved this transaction and the entire transfer process has been completed. Under the terms of the transaction, Hanwa has also acquired the marketing right to solely purchase all the metals produced from the Waterberg Project at market prices.
|
PLATINUM GROUP METALS LTD. |
3. DISCUSSION OF OPERATIONS AND FINANCIAL CONDITION
A) Liquidity, Capital Resources and Going Concern
Share Consolidation
On November 20, 2018 the Company announced a consolidation of its common shares based on one new share for ten old shares (1:10), effective at 9:00 a.m. (New York time) on December 13, 2018 (the "2018 Share Consolidation").
The Company's consolidated common shares began trading on the Toronto Stock Exchange and NYSE American when the markets opened on December 17, 2018. The purpose of the consolidation was to increase the Company's common share price to be in compliance with the NYSE American's low selling price requirement. All share, stock option, warrant and per share numbers reported in this MD&A are on a post-consolidation basis unless otherwise noted.
Recent Equity Financings
On June 17, 2020 the closed a non-brokered private placement of 1,221,500 shares at a price of US$1.40 for gross proceeds of $1.7 million. A 6% finders fee of $37,926 was paid in cash on a portion of the private placement.
On December 19, 2019, the Company closed a non-brokered private placement of 3,225,807 shares at a price of US$1.24 for gross proceeds of $4.0 million. A 6% finders fee of $54,232 was paid on a portion of the private placement.
On August 21, 2019, the Company closed a bought deal financing of 8,326,957 common shares at a price of US$1.25 per share for gross proceeds of $10.4 million. Also, on August 21, 2019 the Company announced the sale of 7,575,758 common shares to LMM and 6,940,000 common shares to Deepkloof Limited ("Deepkloof"), a subsidiary of Hosken Consolidated Investments Limited ("HCI") both at price of US$1.32 per share for gross proceeds of $10.0 million and $9.2 million respectively. Total fees of $1,769 were paid on the August 21, 2019 transactions including a 6% finders fee of $624.
On June 28, 2019 the Company closed a non-brokered private placement with HCI for gross proceeds of $1.3 million. In connection with the private placement, the Company issued an aggregate of 1,111,111 common shares to Deepkloof at a price of US$1.17 per common share. On a non-diluted basis and after giving effect to the private placement, HCI's ownership in the Company was increased from 20.05% to 22.60% of the Company's issued and outstanding common shares. The Company did not pay any finder's fees in connection with the private placement.
On June 20, 2019 HCI increased its ownership interest in the Company as a result of the exercise of certain common share purchase warrants to purchase 80,000 common shares at US$1.70 per common share. Following the warrant exercise, HCI beneficially held 6,782,389 common shares of the Company, representing 20.05% of the Company's issued and outstanding common shares as of June 20, 2019.
During the year ended August 31, 2019 the Company received $1.7 million from the early exercise of common share purchase warrants and issued 1,026,270 common shares at a price of US$1.70 each. In the current period, the Company received $47,668 from the issue of 28,040 shares pursuant to the exercise of common share purchase warrants. All remaining $1.70 warrants have since expired on November 22, 2019.
On February 4, 2019, the Company announced it had closed a non-brokered private placement of 3,124,059 common shares at a price of $1.33 per share to raise gross proceeds of $4.16 million. A 6% finders fee of $72,000 was paid on a portion of the private placement, with total issuance costs (including the finders fee) totalling $107,000.
The following is a reconciliation for the use of proceeds from recent financings to May 31, 2020 (in thousands of dollars):
|
PLATINUM GROUP METALS LTD. |
|
Use of Proceeds |
February |
June 28, |
August |
August |
Dec 19, |
Aggregate |
Actual Use |
|
Repayment towards the LMM Facility and production payment termination fees due LMM |
$0 |
$0 |
$13,000 |
$10,000 |
$0 |
$23,000 |
$23,000 |
|
General corporate purposes |
$4,048 |
$1,300 |
$6,161 |
$409 |
$3,946 |
$15,864 |
$17,551 |
|
TOTAL |
$4,048 |
$1,300 |
$19,161 |
$10,409 |
$3,946 |
$38,864 |
$40,551 |
Convertible Senior Subordinated Notes
On June 30, 2017, the Company issued and sold to certain institutional investors $20 million aggregate principal amount of 6 7/8% convertible senior subordinated notes due 2022 (the "Notes"). The Notes 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. An additional interest charge of 0.25% for the period January 1, 2018 to March 31, 2018, plus a further 0.25% for the period April 1, 2018 to July 1, 2018, was added to the coupon rate of the Notes at the Company's election to not file a prospectus and a registration statement for the Notes with Canadian securities regulatory authorities and with the U.S. Securities and Exchange Commission. After July 1, 2018, at which time the Notes became freely tradable by holders other than affiliates, the Notes once again bear interest at the coupon rate of 6 7/8% per annum.
Subject to certain exceptions, 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. The initial conversion rate of the Notes was 1,001.1112 common shares (on a pre-consolidation basis) per $1,000 principal amount of Notes, which was equivalent to an initial conversion price of approximately $0.9989 per common share (on a pre-consolidation basis), representing a conversion premium of approximately 15% above the NYSE American closing sale price for the Company's common shares of $0.8686 per share on June 27, 2017. After giving effect to the 2018 Share Consolidation, the conversion rate is 100.1111 per $1,000 which is equivalent to a conversion price of approximately $9.989 per common share. The conversion rate will be subject to adjustment upon the occurrence of certain events. If the Company pays interest in common shares, such shares will be issued at a price equal to 92.5% of the simple average of the daily volume-weighted average price of the common shares for the 10 consecutive trading days ending on the second trading day immediately preceding the payment date, on the NYSE American exchange or, if the common shares are not then listed on the NYSE American exchange, on the principal U.S. national or other securities exchange or market on which the common shares are then listed.
Notwithstanding the foregoing, no holder will be entitled to receive common shares upon conversion of Notes to the extent that such receipt would cause the converting holder or persons acting as a "group" to become, directly or indirectly, a "beneficial owner" (as defined in the indenture governing the Notes (the "Indenture")) of more than 19.9% of the common shares outstanding at such time or, in the case of a certain note holder, if it or its affiliates would become a "beneficial owner" of more than 4.9% of the common shares outstanding at such time. In addition, the Company will not issue an aggregate number of common shares pursuant to the Notes that exceeds 19.9% of the total number of common shares outstanding on June 30, 2017, which was 14,845,619. As of the date of this MD&A, the Company has issued a total of 2,592,966 common shares pursuant to conversions of and interest payments on the Notes, leaving approximately 361,312 common shares eligible for issuance pursuant to further interest payments or conversions. Any payments in excess of such amounts must be made in cash, which will have an adverse effect on the Company's cash flows.
After July 1, 2019 and before July 1, 2020, the Company had the right to redeem all or part of the outstanding Notes at a price, payable in cash, of 105.15625% of the principal amount of the Notes to be redeemed, plus accrued and unpaid interest, if any, to but excluding, the redemption date; and after July 1, 2020, until the maturity date, the Company has the right to redeem all or part of the outstanding Notes at a price, payable in cash, of 100% of the principal amount of the Notes to be redeemed, plus accrued and unpaid interest, if any, to, but excluding, the redemption date.
|
PLATINUM GROUP METALS LTD. |
Upon the occurrence of a fundamental change as defined in the Indenture, the Company must offer to purchase the outstanding Notes at a price, payable in cash, equal to 100% of the principal amount of the Notes, plus accrued and unpaid interest, if any.
The Notes are unsecured senior subordinated obligations and are subordinated in right of payment to the prior payment in full of all the Company's existing and future senior indebtedness pursuant to the Indenture. The Company may issue additional Notes in accordance with the terms and conditions set forth in the Indenture. The Indenture contains certain additional covenants, including covenants restricting asset dispositions, issuances of capital stock by subsidiaries, incurrence of indebtedness, business combinations and share exchanges.
The net proceeds from the offering of Notes were used primarily to fund direct expenditures relating to the operation, closure and care and maintenance of the Maseve Mine until completion of the Maseve Sale Transaction.
Effective January 1, 2020 the Company issued 517,468 common shares in settlement of $687,156 of bi-annual interest payable on $19.99 million of outstanding Notes. The common shares were priced based on a simple average of their daily volume weighted average price for ten consecutive trading days, ending on the second trading day immediately preceding the payment date, multiplied by 92.5%.
Also, effective July 2, 2020 the Company issued 526,741 common shares in settlement of $687,156 of bi-annual interest payable on $19.99 million of outstanding Notes. The common shares were priced based on a simple average of their daily volume weighted average price for ten consecutive trading days, ending on the second trading day immediately preceding the payment date, multiplied by 92.5%.
Sprott Facility
On August 15, 2019 the Company announced it had entered into a credit agreement with Sprott pursuant to which the Sprott Lenders advanced the $20.0 million principal senior secured credit facility Sprott Facility. The loan was drawn August 21, 2019 and is due August 21, 2021 with the Company holding the option to extend the maturity date by one year in exchange for a payment in common shares or cash of three percent of the outstanding principal amount. All amounts outstanding will be charged interest of 11% per annum compounded monthly. Interest payments will be made monthly with interest of $1.9 million having been paid to Sprott up to June 30, 2020. The Company is required to maintain certain minimum working capital and cash balances under the Sprott loan. Notwithstanding a covenant stating that 50% the proceeds from any equity financing be paid to Sprott to partially settle the Sprott Facility, Sprott has advised us that it would not require full compliance with the covenant in the December 2019 private placement and that it would only require 50% of the net proceeds of the June 2020 private placement in excess of $4 million be used to partially settle the Sprott Facility.
LMM Facility
On November 20, 2015, the Company received $40 million pursuant to a second lien credit agreement dated November 2, 2015 (the "LMM Facility"), which was later amended and restated multiple times with the final amendment taking place January 31, 2019 (collectively, the "LMM Credit Agreement"), with LMM. The interest rate on the LMM Facility was LIBOR plus 9.5% and LMM Facility maturity date was October 31, 2019.
In April and May of 2018, a total of $23.1 million of the amount owed to Liberty was paid, consisting of $11.1 million from proceeds of the Maseve Sale Transaction and $12.0 million from the proceeds of equity financings (see "Recent Equity Financings" at item 3. A above for details). On January 11, 2019 the Company paid a further $8.0 million to Liberty from the proceeds of the sale of the RBPlat shares the Company was holding. On August 21, 2019 a final payment of $43.0 million was made to LMM resulting in the LMM Facility having been repaid in full.
Bank Advisory Fees
For several years BMO Nesbitt Burns Inc. ("BMO") and Macquarie Capital Markets Canada Ltd. ("Macquarie") provided strategic advisory services to the Company. Effective October 22, 2018 the formal agreement between the Company and Macquarie was terminated by mutual consent. Pursuant to the Maseve Sale Transaction and the Implats Transaction, BMO and Macquarie earned fees in aggregate of approximately $3.8 million. In October 2017, the Company paid BMO and Macquarie an aggregate of $1.0 million after the closing of the Initial Purchase of the Implats Transaction. In October 2017, the Company also agreed with BMO and Macquarie to pay them an aggregate balance of approximately $2.9 million for their strategic advisory fees earned, as soon as practicable following the final repayment of all secured debt. Macquarie's right to settlement of their share of earned and outstanding advisory fees survives the termination of their engagement.
|
PLATINUM GROUP METALS LTD. |
Going Concern
The Company currently has limited financial resources. The Company incurred a loss of $3.7 million during the nine-month period and used cash in operating activities of $3.4 million. The Company had a working capital deficit of $1.8 million at May 31, 2020 but did close a private placement for net proceeds of $1.7 million in June 2020. At May 31, 2020, the Company was also indebted $20 million pursuant to the Sprott Facility. This debt is due August 14, 2021 with the Company holding the option to extend the maturity date by one year in exchange for a payment in common shares or cash of three percent of the outstanding principal amount. The Company has no sources of operating income at present. The Company's ability to continue operations in the normal course of business will therefore depend upon its ability to secure additional funding by methods which could include debt refinancing, equity financing, sale of assets and strategic partnerships. The Company will continue to work closely with its major shareholders and lenders. Management believes the Company will be able to secure further funding as required although there can be no assurance that these efforts will be successful. Nonetheless, there exist material uncertainties resulting in substantial doubt as to the ability of the Company to continue to meet its obligations as they come due and hence, the ultimate appropriateness of the use of accounting principles applicable to a going concern.
Contractual Obligations
The following table discloses the Company's contractual obligations as at May 31, 2020 (in thousands of dollars):
|
Payments Due By Year |
|||||
|
|
< 1 Year |
1 - 3 Years |
4 - 5 Years |
> 5 Years |
Total |
|
Lease Obligations |
$ 80 |
$ 167 |
$ 63 |
$ - |
$ 310 |
|
Convertible Note1 |
1,374 |
22,051 |
- |
- |
23,425 |
|
Sprott Facility |
2,231 |
20,495 |
- |
- |
22,726 |
|
Totals |
$ 3,685 |
$ 42,713 |
$ 63 |
$ - |
$ 46,461 |
1Subject to certain limitations, the Convertible Note and related interest can be settled at the Company's discretion in cash or common shares of the Company.
Other contingencies: Refer to section 8 below - Risk factors
Accounts Receivable and Payable
Accounts receivable at May 31, 2020 totaled $0.1 million (August 31, 2019 - $0.5 million) being comprised mainly of South African value added taxes refundable.
During March 2020 the Company entered into an agreement to sell its remaining 281.14 ha portion of the Elandsfontein farm, located north of Rustenburg, for R 1.0 million (approximately $55,560 at the date of this MD&A). The sale proceeds were received subsequent to the end of the period, on June 6, 2020, after the registration of title transfer was recorded in the office of the Registrar of Deeds in Pretoria, South Africa.
Accounts payable and accrued liabilities at May 31, 2020, totaled $0.7 million (August 31, 2019 - $4.0 million) mainly comprising of payables related to the Waterberg Project.
|
PLATINUM GROUP METALS LTD. |
B) Results of Operations
Nine Month Period Ended May 31, 2020
For the nine-month period ended May 31, 2020, the Company incurred a net loss of $5.9 million (May 31, 2019 - net loss of $13.2 million). The loss in the current period is lower predominantly due to the gain recognized on the fair value movement of derivatives and warrants of $3.1 million in the current period (May 31, 2019 $0.8 million loss). The gain is due to warrants valued at $3.0 million at August 31, 2019 expiring in the current period. Interest in the current period ($4.1 million) dropped as compared to the previous comparable period (May 31, 2019 - $7.3 million) due to lower debt being outstanding. Also, in the previous comparable period a gain of $0.6 million was recognized on the value of marketable securities held by the Company, whereas no marketable securities were held in the current period. The currency translation adjustment recognized in the period was a loss of $4.0 million (May 31, 2019 - $2.4 million gain) due to the Rand decreasing in value in the current period relative to the US Dollar (while the Rand increased in value in the prior comparable period).
Three Month Period Ended May 31, 2020
For the three-month period ended May 31, 2020, the Company incurred a net loss of $3.4 million (May 31, 2019 - net loss of $3.7 million). General and administrative costs dropped from $0.9 million in the prior comparable period to $0.8 million in the current three-month period due to decreased staff levels and overall activity in the Company. Interest expense of $1.4 million in the current period (May 31, 2019 - $2.4 million) is lower due to lower levels of debt outstanding in the current period. A foreign exchange loss of $0.8 million was recognized in the current period (May 31, 2019 $1.6 million loss) due to a decrease in the value of the Canadian Dollar relative to the US Dollar in the current period. The currency translation adjustment recognized in the period is a loss of $3.1 million (May 31, 2019 - $1.2 million gain) due to the Rand decreasing in value relative to the U.S. Dollar.
Quarterly Financial Information
The following tables set forth selected quarterly financial data for each of the last eight quarters (In thousands of dollars, except for share data):
| Quarter ended | May 31, 2020 |
Feb. 29, 2020 |
Nov. 30, 2019 |
Aug. 31, 2019 |
||||||||
| Net finance income(1) | $ | 28 | $ | 43 | $ | 63 | $ | 26 | ||||
| Net (gain) loss(2) | 3,352 | 3,100 | (554 | ) | 3,639 | |||||||
| Basic (gain) loss per share(3) | 0.05 | 0.05 | (0.01 | ) | 0.10 | |||||||
| Total assets(2) | 40,545 | 41,140 | 41,769 | 43,706 | ||||||||
| Quarter ended | May 31, 2019 |
Feb. 28, 2019 |
Nov. 30, 2018 |
Aug. 31, 2018 |
||||||||
| Net finance income(1) | $ | 18 | $ | 43 | $ | 277 | $ | 234 | ||||
| Net loss(2) | 3,682 | 3,815 | 5,640 | 3,419 | ||||||||
| Basic loss per share(3) | 0.11 | 0.11 | 0.19 | 0.10 | ||||||||
| Total assets(2) | 38,321 | 40,038 | 46,225 | 41,849 |
Notes:
(1) The Company earns income from interest bearing accounts and deposits. Rand balances earn much higher rates of interest than can be earned at present in Canadian or U.S. Dollars. Interest income varies relative to cash on hand.
(2) Net loss by quarter and total assets are affected by the timing and recognition of one-off large transactions. In November 2019, the Company incurred a gain of $3.1 million on the cancellation of expired warrants. In November 2018 the Company recovered some care and maintenance costs relating to the closure of the Maseve Mine.
(3) Basic (gain) loss per share is calculated using the weighted average number of common shares outstanding. The Company uses the treasury stock method to calculate diluted earnings per share. Diluted per share amounts reflect the potential dilution that could occur if securities or other contracts to issue common shares were exercised or converted to common shares. In periods when a loss is incurred, the effect of share issuances under options would be anti-dilutive, resulting in basic and diluted loss per share being the same.
|
PLATINUM GROUP METALS LTD. |
4. Dividends
The Company has never declared nor paid dividends on its common shares. The Company has no present intention of paying dividends on its common shares, as it anticipates that in the foreseeable future all available funds will be invested to finance its business. The Company does intend to consider a dividend policy upon the successful establishment of positive cash flow.
5. Related Party Transactions
Transactions with related parties are as follows (in thousands of dollars):
i. During the period ended May 31, 2020 $353 ($155 - May 31, 2019) was paid or accrued to independent directors for directors' fees and services.
ii. During the period ended May 31, 2020, the Company accrued payments of $40 ($41 - May 31, 2019) from West Vault Mining Inc. ("West Vault", formerly West Kirkland Mining Inc.), a company with two directors in common, for accounting and administrative services. Subsequent to the end of the period, on July 2, 2020, West Vault completed an official change of name to become "West Vault Mining Inc.".
iii. In fiscal 2018, the Company closed a private placement with Deepkloof whereby HCI acquired a right to nominate one person to the board of directors of the Company and a right to participate in future equity financings of the Company to maintain its pro-rata interest. HCI exercised its right to nominate one person to the board of directors. On February 4, 2019 Deepkloof subscribed in a private placement for 2,141,942 common shares and on August 21, 2019 Deepkloof subscribed in a private placement for a further 6,940,000 common shares as a component of concurrent transactions completed by the Company. In the Company's December 2019 private placement financing Deepkloof purchased 612,931 shares. In the private placement financing completed on June 17, 2020, subsequent to the end of the period, Deepkloof purchased a further 500,000 shares in the Company, bringing their total ownership interest to approximately 31.59%
All amounts receivable and accounts payable owing to or from related parties are non-interest bearing with no specific terms of repayment. These transactions are in the normal course of business and are recorded at consideration established and agreed to by the parties.
6. Off-Balance Sheet Arrangements
The Company does not have any special purpose entities nor is it party to any off-balance sheet arrangements.
7. Outstanding Share Data
The Company has an unlimited number of common shares authorized for issuance without par value. At May 31, 2020, there were 62,347,102 common shares outstanding and 3,182,500 incentive stock options outstanding. At July 15, 2020 62,873,573 shares are outstanding.
Compliance with NYSE American Listing Requirements
On April 10, 2019 and May 23, 2018 the Company received letters from NYSE American stating that it was not in compliance with the continued listing standards as set forth in Sections 1003(a)(i), 1003(a)(ii) and 1003(a)(iii) of the NYSE American Company Guide (the "Company Guide") with respect to stockholders' equity, or in Section 1003(f)(v) of the Company Guide with respect to the selling price of the Company's Common Shares.
The Company regained compliance with Section 1003(f)(v) of the Company Guide subsequent to the 2018 Share Consolidation. On October 10, 2019, the NYSE American notified Platinum Group that the Company had resolved its listing deficiency with respect to Section 1003(a) and successfully regained compliance with the NYSE American's continued listing standards.
|
PLATINUM GROUP METALS LTD. |
All share, stock option, warrant and per share numbers reported in this MD&A are on a post 2018 Share Consolidation basis, unless otherwise noted.
8. Risk Factors
The Company is subject to a number or risks and uncertainties, each of which could have an adverse effect on results, business prospects or financial position. For a comprehensive list of the risks and uncertainties affecting our business, please refer to the section entitled "Risk Factors" in the Company's 20-F, which was also filed as the Company's form of AIF, and as well as in the documents incorporated by reference therein. The 2019 20F may be found on EDGAR at www.sec.gov and the AIF may be found on SEDAR at www.sedar.com. Certain risk factors are discussed below in more detail.
Impact of COVID-19
In December 2019, a novel strain of coronavirus known as SARS-CoV-2 which is responsible for the coronavirus disease known as COVID-19 surfaced in Wuhan, China and has spread around the world, with resulting business and social disruption. COVID-19 was declared a worldwide pandemic by the World Health Organization on March 11, 2020. The speed and extent of the spread of COVID-19, and the duration and intensity of resulting business disruption and related financial and social impact, are uncertain. Further, the extent and manner to which COVID-19, and measures taken by governments, the Company or others to attempt to reduce the spread of COVID-19, may affect the Company and cannot be predicted with certainty.
COVID-19 and the related measures taken by government have had and may continue to have an adverse impact on many aspects of the Company's business including, employee health, workforce productivity and availability, travel restrictions, contractor availability, supply availability, the Company's ability to maintain its controls and procedures regarding financial and disclosure matters and the availability of insurance and the costs thereof, some of which, individually or when aggregated with other impacts, may be material to the Company.
With effect from March 26, 2020 the Government of South Africa ordered a hard national lockdown until April 21, 2020, where all residents of South Africa could only leave their residence under strictly controlled circumstances (e.g. to buy food, seek medical assistance) in order to address the COVID-19 pandemic. The hard lockdown was thereafter extended to April 30, 2020. Currently, South Africa is under a phased risk-alert lockdown process, with Level 5 being the hard, drastic lockdown that was imposed during April 2020 and Level 1 being a return to normalcy, but retaining the use of masks, sanitisers and social distancing. Level 3 was implemented on June 1, 2020. The relaxation of the hard lockdown has seen the number of infections increasing and accelerating in South Africa. The Company cannot provide any assurances that governments in Canada or South Africa will not implement measures that result in suspension or reduction of development operations at Waterberg or other projects the Company is involved in.
In addition, the actual or threatened spread of COVID-19 globally, and responses of governments and others to such actual or threatened spread, could also have a material adverse effect on the global economy, could continue to negatively affect financial markets, including the price of palladium and platinum and the trading price of the Company's shares, could adversely affect the Company's ability to raise capital, and could cause continued interest rate volatility and movements that could make obtaining financing or refinancing debt obligations more challenging or more expensive. Furthermore, with regard to the Company, the COVID-19 pandemic and the measures implemented for the prevention, mitigation and management thereof may result in delays in the grant of the Waterberg mining right application or environmental authorisation, or any other authorisations and permits required for the Waterberg Project by reason of regulatory officials not being available, the restriction on the movement of persons to conduct inspections and site visits and the inability to meet with community consultative forums.
Africa Wide
On September 20, 2018, we reported the receipt of a summons issued by Africa Wide whereby Africa Wide, formerly the holder of a 17.1% interest in Maseve, had instituted legal proceedings in South Africa against our wholly owned subsidiary, PTM RSA, RBPlat and Maseve. Africa Wide is seeking to set aside the closed Maseve Sale Transaction, or to be paid increased value for their 17.1% interest in Maseve, which they owned prior to the completion of Maseve Sale Transaction. On an exception application, RBPlat successfully challenged, with costs, Africa Wide's claim on the grounds that its particulars of claim were vague and embarrassing and/or lacked averments necessary to sustain a cause of action. Africa Wide was given leave to amend its particulars of claim and filed amended particulars of claim on April 17, 2019.
|
PLATINUM GROUP METALS LTD. |
On May 9, 2019, PTM RSA filed notice in the High Court requiring Africa Wide to produce those agreements and documents upon which it has based its claim. Africa Wide responded to the effect that the requested documentation was either in our possession or not required for the defendants to plead. We filed a plea of our defences to Africa Wide's claims on July 19, 2019. RBPlat and Maseve likewise filed pleas of their defences on the same date. All of the defendants, when so doing, also raised a special plea of non-joinder, on the basis that Africa Wide has not, on its own version of the facts and events contended for, joined all parties to the proceedings who have a direct and substantial interest in the relief that Africa Wide seeks. After initially resisting these special pleas, Africa Wide has subsequently conceded the need to join additional defendants and is presently pursuing a joinder application that will ultimately require further amendments to its particulars of claim.
While both we and RBPlat believe, after receiving legal advice, that the Africa Wide action, as amended, remains procedurally, factually and legally defective in certain material respects, no assurance can be provided that we will prevail in this action. If Africa Wide were successful, it could have a material adverse effect on us.
Tax Audit South Africa
During the 2014, 2015 and 2016 fiscal years, PTM RSA claimed unrealized foreign exchange losses as income tax deductions in its South African corporate tax returns in the amount of Rand 1.4 billion. The exchange losses emanate from a Canadian dollar denominated shareholder loan advanced to PTM RSA. Under applicable South African tax legislation, exchange losses can be claimed if the shareholder loan is a current liability as determined by IFRS. For the years in question, the intercompany debt was classified as current in PTM RSA's stand alone audited financial statements.
During 2018, the South African Revenue Service ("SARS") conducted an income tax audit of the 2014 to 2016 years of assessment and issued PTM RSA with a letter of audit findings on November 5, 2018 proposing that the exchange losses be disallowed on the basis that the shareholder loan was not a current liability.
The Company and its advisors responded to SARS during 2019 and refuted the issues raised.
On June 30, 2020 the Company received a letter from SARS reporting the finalization of the above income tax audit with no reassessment or adjustment to the Company's tax returns for the three years audited.
9. Outlook
The Company's key business objective is to advance the palladium dominant Waterberg Project to a development and construction decision. The next major milestone for the Company is the grant of the Mining Right which is expected soon. We expect a strong market for palladium as some production has been cut and there is a trend of increasing car sales in China where the largest amount of palladium is used.
The Company continues to work on advancing project permitting, infrastructure servitudes and community relationships with its partners Implats, JOGMEC, Hanwa and Mnombo through a technical committee of Waterberg JV Co. The Work Program currently underway, as approved by Waterberg JV Co. and funded by Implats, is aimed at increasing confidence in specific areas of the Waterberg DFS while awaiting the expected grant of a Mining Right and Environmental Authorization. The Work Program was budgeted to cost approximately R55 million (US$4 million when announced). The Work Program is currently being carried out remotely and in the field in compliance with current South African regulations aimed at halting the spread of the COVID-19 virus. The Work Program addresses implementation and operational aspects as well. The impact of regulations implemented by the Government of South Africa to halt the spread of the COVID-19 virus may delay or prevent the completion of certain work items within the approved budget for the Work Program.
The Company will work towards its next major milestone of obtaining the Mining Right for the Waterberg Project. Subsequent to Implats June 15, 2020 formal notice that they do not intend to exercise their Purchase and Development Option, the Company and Waterberg JV Co. have begun a process to assess commercial alternatives for mine development financing and concentrate offtake. Several parties are currently in discussions with the Company. The Implats Offtake ROFR requires that any offtake arrangement with Implats at least match any bona fide third party commercial offtake terms offered. Concentrate offtake negotiations with Implats are also underway.
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PLATINUM GROUP METALS LTD. |
The Company's new battery technology initiative through Lion with AAP represents an exciting opportunity in the high-profile lithium battery research and innovation field. The investment in Lion creates a potential vertical integration with a broader industrial market development strategy to bring new technologies to market which use palladium and platinum.
The Company will continue to follow government health directives in the months ahead and will make the health and safety of employees its first priority. The Company plans to drive ahead with its core business objectives while reducing costs where possible in this period of market uncertainty. Key objectives in 2020 will be to receive a mining right and establish a mine construction and metal offtake path for the Waterberg Project's palladium dominant reserves.
As well as the discussions within this MD&A, the reader is encouraged to also see the Company's disclosure made under the heading "Risk Factors" in the Company's Form 20-F, which was also filed as the Company's AIF in Canada.
10. Critical Accounting Estimates and Judgements
The preparation of the Company's consolidated financial statements in conformity with IFRS required management to use estimates and assumptions that affect the reported amounts of assets and liabilities, as well as income and expenses. The Company's accounting policies are described in Note 3 of the Company's audited consolidated financial statements for the year ended August 31, 2019.
Fair value of embedded derivatives
Where the fair value of financial liabilities recorded in the financial statements cannot be derived from active markets, their fair value is determined using valuation techniques including the partial differential equation method. The inputs to this model are taken from observable markets where possible, but where this is not feasible, a degree of judgment is required in establishing fair values. The judgments include considerations of inputs such as liquidity risk, credit risk and volatility. Changes in assumptions about these factors could affect the reported fair value of financial instruments. When measuring the fair value of an asset or liability, the Company uses observable market data as far as possible.
Determination of ore reserve and mineral resource estimates
The Company estimates its ore reserves and mineral resources based on information compiled by Qualified Persons as defined by NI 43-101. Reserves determined in this way are used in the calculation of depreciation, amortization and impairment charges, and for forecasting the timing of the payment of closure and restoration costs. In assessing the life of a mine for accounting purposes, mineral resources are only taken into account where there is a high degree of confidence of economic extraction. There are numerous uncertainties inherent in estimating ore reserves, and assumptions that are valid at the time of estimation and they may change significantly when new information becomes available. Changes in the forecast prices of commodities, exchange rates, production costs or recovery rates may change the economic status of reserves and may, ultimately, result in reserves being restated. Such changes in reserves could impact depreciation and amortization rates, asset carrying values and provisions for close down and restoration costs.
Assumption of control of Mnombo and Waterberg JV Resources for accounting purposes
The Company has judged that it controls Mnombo for accounting purposes as it owns 49.9% of the outstanding shares of Mnombo and has contributed all material capital to Mnombo since acquiring its 49.9% share. Currently there are no other sources of funding known to be available to Mnombo. If in the future Mnombo is not deemed to be controlled by the Company, the assets and liabilities of Mnombo would be derecognized at their carrying amounts. Amounts recognized in other comprehensive income would be transferred directly to retained earnings. If a retained interest remained after the loss of control it would be recognized at its fair value on the date of loss of control. Although the Company controls Mnombo for accounting purposes, it does not have omnipotent knowledge of Mnombo's other shareholders activities. Mnombo's 50.01% shareholders are historically disadvantaged South Africans. The Company also determined that it controls Waterberg JV Resources given its control over Mnombo as well as its power over the investee.
Deferred tax assets and liabilities and resource taxes
The determination of our future tax liabilities and assets involves significant management estimation and judgment involving a number of assumptions. In determining these amounts the Company interprets tax legislation in a variety of jurisdictions and makes estimates of the expected timing of the reversal of future tax assets and liabilities. We also make estimates of our future earnings which affect the extent to which potential future tax benefits may be used. We are subject to assessment by various taxation authorities, which may interpret tax legislation in a manner different from our view. These differences may affect the final amount or the timing of the payment of taxes. When such differences arise, we make provision for such items based on our best estimate of the final outcome of these matters.
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PLATINUM GROUP METALS LTD. |
11. Change in Accounting Policies
On September 1, 2019, the Company adopted IFRS 16, Leases ("IFRS 16") which replaces IAS 17, Leases. IFRS 16 eliminates the classification as an operating lease and requires lessees to recognize a right-of-use asset and a lease liability in the statement of financial position for all leases, with exemptions permitted for short-term leases and leases of low value assets. In addition, IFRS 16 changes the definition of a lease and sets requirements on how to account for the asset and liability. Under IFRS 16, a lessee recognizes a right-of-use asset representing its right to use the underlying asset and a lease liability representing its obligation to make lease payments. The right-of-use asset is initially measured at cost, which comprises the initial amount of the lease liability adjusted for any lease payments made at or before the commencement date. Lease liabilities are initially measured at the present value of future lease payments and subsequently measured at amortized cost using the effective interest method.
The Company adopted IFRS 16 using the modified retrospective approach without restatement of comparative amounts. An assessment was made and the impact to the Company's consolidated financial statements was to set up a lease liability and a corresponding right-of-use asset of $0.2 million for its office lease as at September 1, 2019. Certain contracts qualify as short-term or low value leases and meet the scope exemption for disclosure only. No other significant differences have been identified in relation to the adoption of IFRS 16. See note 2 to the condensed consolidated interim financial statements as at May 31, 2020 for further information related to the adoption of IFRS 16.
12. Disclosure Controls and Internal Control Over Financial Reporting
The Company maintains a set of disclosure controls and procedures designed to ensure that information required to be disclosed in filings made pursuant to both SEC and Canadian Securities Administrators requirements are recorded, processed, summarized and reported in the manner specified by the relevant securities laws applicable to the Company. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by an issuer in the reports that it files or submits under the applicable securities legislation is accumulated and communicated to the issuer's management, including its principal executive and principal financial officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.
Changes in Internal Controls over Financial Reporting
No change in the Company's internal control over financial reporting occurred during the period ended May 31, 2020 that has materially affected, or is reasonably likely to materially affect, the Company's internal control over financial reporting.
13. Other Information
Additional information relating to the Company for the period ended May 31, 2020 may be found on SEDAR at www.sedar.com and on EDGAR at www.sec.gov. Readers are encouraged to review the Company's audited annual consolidated financial statements for the year ended August 31, 2019 together with the notes thereto as well as the Company's Form 20-F, which was also filed as the Company's form of AIF.
14. List of Directors and Officers
|
Directors |
|
Officers |
|
R. Michael Jones |
|
R. Michael Jones (CEO) |
|
Frank R. Hallam |
|
Frank R. Hallam (CFO & Corporate Secretary) |
|
Tim Marlow |
|
Kris Begic (VP, Corporate Development) |
|
Diana Walters John Copelyn Stuart Harshaw |
|
|
Exhibit 99.3
CONSENT OF EXPERT
The undersigned hereby consents to the inclusion in the Management's Discussion and Analysis (the "MD&A") of Platinum Group Metals Ltd. (the "Company") for the period ended May 31, 2020 of references to the undersigned as a non-independent qualified person and the undersigned's name with respect to the disclosure of technical and scientific information contained in the MD&A (the "Technical Information"). The undersigned further consents to the incorporation by reference in the Company's Registration Statement on Form F-3 (File No. 333-231964) filed with the United States Securities and Exchange Commission, of the references to the undersigned's name and the Technical Information in the MD&A.
/s/ R. Michael Jones
R. Michael Jones
Date: July 15, 2020
FORM 52-109F2
CERTIFICATION OF INTERIM FILINGS
FULL CERTIFICATE
I, R. Michael Jones, President and Chief Executive Officer of Platinum Group Metals Ltd., certify the following:
1. Review: I have reviewed the interim financial report and interim MD&A (together, the "interim filings") of Platinum Group Metals Ltd. (the "issuer") for the interim period ended May 31, 2020.
2. No misrepresentations: Based on my knowledge, having exercised reasonable diligence, the interim filings do not contain any untrue statement of a material fact or omit to state a material fact required to be stated or that is necessary to make a statement not misleading in light of the circumstances under which it was made, with respect to the period covered by the interim filings.
3. Fair presentation: Based on my knowledge, having exercised reasonable diligence, the interim financial report together with the other financial information included in the interim filings fairly present in all material respects the financial condition, financial performance and cash flows of the issuer, as of the date of and for the periods presented in the interim filings.
4. Responsibility: The issuer's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (DC&P) and internal control over financial reporting (ICFR), as those terms are defined in National Instrument 52-109 Certification of Disclosure in Issuers' Annual and Interim Filings, for the issuer.
5. Design: Subject to the limitations, if any, described in paragraphs 5.2 and 5.3, the issuer's other certifying officer(s) and I have, as at the end of the period covered by the interim filings
(a) designed DC&P, or caused it to be designed under our supervision, to provide reasonable assurance that
(i) material information relating to the issuer is made known to us by others, particularly during the period in which the interim filings are being prepared; and
(ii) information required to be disclosed by the issuer in its annual filings, interim filings or other reports filed or submitted by it under securities legislation is recorded, processed, summarized and reported within the time periods specified in securities legislation; and
(b) designed ICFR, or caused it to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with the issuer's GAAP.
5.1 Control framework: The control framework the issuer's other certifying officer(s) and I used to design the issuer's 1CFR is the Internal Control - Integrated Framework (COSO Framework) prepared by the Committee of Sponsoring Organizations of the Treadway Commission ("COSO").
- 2 -
5.2 ICFR - material weakness relating to design: N/A
5.3 Limitation on scope of design: N/A
6. Reporting changes in ICFR: The issuer has disclosed in its interim MD&A any change in the issuer's ICFR that occurred during the period beginning on March 1, 2020 and ended on May 31, 2020 that has materially affected, or is reasonably likely to materially affect, the issuer's ICFR.
Date: July 15, 2020
|
/s/ R. Michael Jones |
|
|
FORM 52-109F2
CERTIFICATION OF INTERIM FILINGS
FULL CERTIFICATE
I, Frank R. Hallam, Chief Financial Officer of Platinum Group Metals Ltd., certify the following:
1. Review: I have reviewed the interim financial report and interim MD&A (together, the "interim filings") of Platinum Group Metals Ltd. (the "issuer") for the interim period ended May 31, 2020.
2. No misrepresentations: Based on my knowledge, having exercised reasonable diligence, the interim filings do not contain any untrue statement of a material fact or omit to state a material fact required to be stated or that is necessary to make a statement not misleading in light of the circumstances under which it was made, with respect to the period covered by the interim filings.
3. Fair presentation: Based on my knowledge, having exercised reasonable diligence, the interim financial report together with the other financial information included in the interim filings fairly present in all material respects the financial condition, financial performance and cash flows of the issuer, as of the date of and for the periods presented in the interim filings.
4. Responsibility: The issuer's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (DC&P) and internal control over financial reporting (ICFR), as those terms are defined in National Instrument 52-109 Certification of Disclosure in Issuers' Annual and Interim Filings, for the issuer.
5. Design: Subject to the limitations, if any, described in paragraphs 5.2 and 5.3, the issuer's other certifying officer(s) and I have, as at the end of the period covered by the interim filings
(a) designed DC&P, or caused it to be designed under our supervision, to provide reasonable assurance that
(i) material information relating to the issuer is made known to us by others, particularly during the period in which the interim filings are being prepared; and
(ii) information required to be disclosed by the issuer in its annual filings, interim filings or other reports filed or submitted by it under securities legislation is recorded, processed, summarized and reported within the time periods specified in securities legislation; and
(b) designed ICFR, or caused it to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with the issuer's GAAP.
5.1 Control framework: The control framework the issuer's other certifying officer(s) and I used to design the issuer's 1CFR is the Internal Control - Integrated Framework (COSO Framework) prepared by the Committee of Sponsoring Organizations of the Treadway Commission ("COSO").
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5.2 ICFR - material weakness relating to design: N/A
5.3 Limitation on scope of design: N/A
6. Reporting changes in ICFR: The issuer has disclosed in its interim MD&A any change in the issuer's ICFR that occurred during the period beginning on March 1, 2020 and ended on May 31, 2020 that has materially affected, or is reasonably likely to materially affect, the issuer's ICFR.
Date: July 15, 2020
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/s/ Frank Hallam |
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838 – 1100 Melville Street |
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News Release |
No. 20-417 July 15, 2020 |
Platinum Group Metals Ltd. Reports Third Quarter Results
(Vancouver/Johannesburg) Platinum Group Metals Ltd. (PTM:TSX; PLG:NYSE American) ("Platinum Group" "PTM" or the "Company") reports the Company's financial results for the nine months ended May 31, 2020 and provides a summary of recent events and outlook.
For details of the condensed consolidated interim financial statements (the "Financial Statements") and Management's Discussion and Analysis for the nine months ended May 31, 2020 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. The Company holds cash in Canadian dollars, United States dollars and South African Rand. Changes in exchange rates may create variances in the cash holdings or results reported.
Recent Events
Following the September 2019 independent Definitive Feasibility Study (the "Waterberg DFS"), approved by the joint venture in December 2019, an implementation and optimization work program (the "Work Program") is underway on the Company's palladium dominant Waterberg project, located on the North Limb of the Bushveld Complex in South Africa (the "Waterberg Project"). Platinum Group owns the controlling stake in the Waterberg deposit, which hosts 19.5 million ounces of palladium, platinum, gold and rhodium proven and probable reserves. The Work Program is advancing, funded by Impala Platinum Holdings Ltd. ("Implats") while being managed by Waterberg JV Resources (Pty) Limited ("Waterberg JV Co.") on behalf of the joint venture owners, being Platinum Group, Implats, Japan Oil, Gas and Metals National Corporation ("JOGMEC"), Hanwa Co. Ltd. ("Hanwa") and Mnombo Wethu Consultants (Pty) Ltd. ("Mnombo").
On June 17, 2020 the Company closed a non-brokered private placement of 1,221,500 common shares at price of $1.40 each for gross proceeds of $1.71 million. Hosken Consolidated Investments Limited ("HCI"), an existing major shareholder of the Company, subscribed for 500,000 common shares through Deepkloof Limited ("Deepkloof"), a wholly owned subsidiary of HCI, maintaining HCI's effective ownership percentage in the Company at approximately 31.59%.
On June 15, 2020 Implats delivered formal notice stating their intention not to exercise their Purchase and Development Option (the "Purchase and Development Option") to acquire and earn into a 50.01% interest in the Waterberg Project. Implats stated that notwithstanding the positive progress achieved on the Work Program to date, and the strategic alignment between the Waterberg asset and Implats stated portfolio objectives, the unprecedented events brought about by the COVID-19 pandemic necessitated Implats to re-evaluate the impact of the increased economic uncertainty on Implats' strategy and risk appetite in the short, medium and long term. Pursuant to the terms of the Purchase and Development Option, although unlikely, Implats may still exercise the Purchase and Development Option for a period of ninety days subsequent to their formal notice. Implats has indicated they intend to continue discussions in good faith on potential smelter offtake arrangements for the Waterberg Project. Implats reiterated their support of both the Waterberg Project and the joint venture partners and plans to remain an active 15% participant, including funding of their share of costs, subject to future considerations.
| PLATINUM GROUP METALS LTD. | ...2 |
On March 31, 2020 the Implats' Purchase and Development Option was amended, by formal agreement, to extend the termination date from April 17, 2020 to ninety calendar days following receipt of an executed Mining Right for the Waterberg Project. In consideration, Implats agreed to fund 100% of the Work Program. The Work Program, budgeted to cost up to approximately Rand 55 million, is aimed at increasing confidence in specific areas of the Waterberg DFS while awaiting the grant of a Mining Right and Environmental Authorization. Under the Purchase and Development Option Implats may elect to increase its stake in Waterberg JV Co. from 15% to 50.01% by purchasing an additional 12.195% equity interest from JOGMEC for $34.8 million and earning a further 22.815% interest by making a firm commitment to an expenditure of $130.0 million in development work. Implats made a strategic investment of $30.0 million in November 2017 to purchase a 15% stake in the Waterberg Project.
On December 19, 2019 the Company closed a non-brokered private placement of 3,225,807 common shares at price of $1.24 each for gross proceeds of $4.0 million. HCI subscribed for 1,612,931 common shares through Deepkloof, increasing HCI's effective ownership percentage in the Company to approximately 31.67%.
On September 24, 2019 the Company published the results of the Waterberg DFS. Later, on December 5, 2019, the shareholders of Waterberg JV Co. formally approved the Waterberg DFS. The associated technical report entitled "Independent Technical Report, Waterberg Project Definitive Feasibility Study and Mineral Resource Update, Bushveld Complex, South Africa" dated October 4, 2019 was filed on SEDAR on October 7, 2019. Key findings of the Waterberg DFS include:
• The Waterberg DFS projects a fully mechanised, shallow, decline access palladium, platinum, gold and rhodium ("4E") mine at an annual steady state production rate of 420,000 4E ounces and a 45 year mine life on current reserves. Peak project funding is estimated at $617 million.
• After-tax Net Present Value ("NPV") of $982 million, at an 8% real discount rate, using spot metal prices as at September 4, 2019 (Incl. $1,546 Pd/oz) ("Spot Prices").
• After-tax NPV of $333 million, at an 8% real discount rate, using three-year trailing average metal prices up until September 4, 2019 (Incl. $1,055 Pd/oz) ("Three Year Trailing Prices").
• After-tax Internal Rate of Return ("IRR") of 20.7% at Spot Prices and 13.3% at Three Year Trailing Prices.
• On site life of mine average cash cost (inclusive of by-product credits and smelter discounts) for the spot price scenario equates to $640 per 4E ounce.
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• Updated measured and indicated mineral resources1 of 242.4 million tonnes at 3.38g/t 4E for 26.4 million 4E ounces (using 2.5 g/t 4E cut-off) and the deposit remains open on strike to the north and below a depth cut-off of 1,250-meters.
• Proven and probable mineral reserves2 of 187.5 million tonnes at 3.24 g/t 4E for 19.5 million 4E ounces (using 2.5 g/t 4E cut-off), a significant increase from the Waterberg Project's 2016 Pre-Feasibility Study.
The Waterberg DFS concludes that the Waterberg Project will be one of the largest and potentially lowest cash cost underground palladium, platinum, gold and rhodium ("PGM") mines globally.
Results For The Nine Months Ended May 31, 2020
The Company has taken steps to cut costs and reduce debt during the last twelve months. During the nine months ended May 31, 2020, the Company realized a net loss of $5.9 million (May 31, 2019 - net loss of $13.1 million). General and administrative expenses during the nine month period were $2.7 million (May 31, 2019 - $3.8 million). Losses on foreign exchange were $4.1 million (May 31, 2019 - $7.3 million), primarily due to variance in the US Dollar to Canadian Dollar exchange rate. Stock based compensation expense, a non-cash item, totalled $1.1 million (May 31, 2019 - $0.5 million). Interest costs of $4.1 million were lower in the current period (May 31, 2019 - $7.3 million) due to lower debt levels. A gain on fair value of financial instruments of $3.1 million was recognized in the current period (May 31, 2019 - $0.8 million loss) due predominantly to a decrease in the value of unexercised US$1.70 common share purchase warrants that expired on November 22, 2019. Basic and diluted loss per share for the nine months ended May 31, 2020 totalled $0.10 as compared to a loss of $0.42 per share for the nine months ended May 31, 2019.
Accounts receivable at May 31, 2020 totalled $0.1 million (May 31, 2019 - $0.5 million) while accounts payable and accrued liabilities amounted to $0.7 million (May 31, 2019 - $4.0 million). Accounts receivable were comprised of mainly of amounts receivable for value added taxes repayable to the Company in South Africa. Accounts payable consisted primarily of engineering and professional fees and regular trade payables.
Total expenditures on the Waterberg Project, before partner reimbursements, for the nine months ended May 31, 2020 were approximately $2.1 million (May 31, 2019 - $6.4 million). At period end, $34 million in accumulated net costs had been capitalized to the Waterberg Project. Total expenditures on the property since inception to May 31, 2020 are approximately $74.7 million. For more information on mineral properties, see Note 3 of the Financial Statements.
Subsequent to period end, on June 30, 2020, the Company received a letter from the South African Revenue Service advising that their audit of income tax returns for Platinum Group Metals (RSA) Proprietary Limited ("PTM RSA") for tax years 2014, 2015 and 2016 had been completed with no reassessment or adjustment to the Company's filed tax returns for the three years audited.
____________________________1 Measured 58.5 million tonnes at 3.42 g/t 4E and Indicated 183.9 million tonnes at 3.37 g/t 4E
2 Proven 48.3 million tonnes at 3.28 g/t 4E and Probable 139.2 million tonnes at 3.22 g/t 4E
| PLATINUM GROUP METALS LTD. | ...4 |
Outlook
The Company's key business objective is to advance the palladium dominant Waterberg Project to a development and construction decision. The positive results of the recent Waterberg DFS provide a solid value assessment for the Waterberg Project. The long-term market outlook for the metals to be produced at Waterberg remains positive. Following Implats' formal notice stating their intention not to exercise their Purchase and Development Option, the Company has received interest from other potential strategic partners in the Waterberg Project.
The Work Program now underway, paid for substantially by Implats, will focus on project optimization, operational readiness and risk mitigation. The Work Program is currently being carried out in compliance with South African health orders aimed at halting the spread of the COVID-19 virus.
The Company will continue working towards its next major milestone of obtaining the Mining Right for the Waterberg Project. The expected grant of a Mining Right may be delayed from previous guidance as a result of the current South African stay at home order and possible future restrictions. Contact with government and regulatory agencies has continued to date.
Concentrate offtake negotiations with Implats are currently in process. The Company and Waterberg JV Co. have begun a process to assess commercial alternatives for mine development financing and concentrate offtake, subject to Implats' right to match offtake proposals. Several parties are currently in discussions with the Company.
The Company's battery technology initiative through Lion Battery Technologies Inc. (''Lion''), a new venture launched in July 2019 with an affiliate of Anglo American Platinum Limited, represents an exciting research, innovation and commercialization opportunity in the high-profile lithium battery field using palladium and platinum. Recent laboratory work by Lion has discovered innovations that are in line with our technical objectives and are now covered in patent applications filed by Lion. The investment in Lion creates a potential vertical integration with electric vehicles, which may otherwise be a potential threat to the platinum and palladium market.
The Company will follow government health directives in the months ahead. The health and safety of employees is a priority. The Company plans to drive ahead with its core business objectives while reducing costs where possible in this period of market uncertainty.
As well as the discussions within this press release, the reader is encouraged to also see the Company's disclosure made under the heading "Risk Factors" in the Company's 2019 annual report on Form 20-F, which was also filed as the Company's annual information form in Canada.
Qualified Person
R. Michael Jones, P.Eng., the Company's President, Chief Executive Officer and a 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 scientific and technical information contained in this news release. He has verified the data by reviewing the detailed information of the geological and engineering staff and independent qualified person reports as well as visiting the Waterberg Project site regularly.
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About Platinum Group Metals Ltd. and Waterberg Project
Platinum Group Metals Ltd. is the operator and majority owner of the Waterberg Project, a palladium dominant bulk underground PGM deposit located in South Africa. The Waterberg DFS was approved by Waterberg JV Co., the project joint venture company, on December 5, 2019. The Waterberg Project was discovered by Platinum Group and is being jointly advanced with the shareholders of Waterberg JV Co., being Platinum Group, Implats, JOGMEC, Hanwa and Mnombo.
On behalf of the Board of
Platinum Group Metals Ltd.
Frank R. Hallam
CFO, Corporate Secretary 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
Disclosure
The Toronto Stock Exchange and the NYSE American have not reviewed and do not accept responsibility for the accuracy or adequacy of this news release, which has been prepared by management.
The recent COVID-19 pandemic and related measures taken by government create uncertainty and have had, and may continue to have, an adverse impact on many aspects of the Company's business, including employee health, workforce productivity and availability, travel restrictions, contractor availability, supply availability, the Company's ability to maintain its controls and procedures regarding financial and disclosure matters and the availability of capital and insurance and the costs thereof, some of which, individually or when aggregated with other impacts, may be material to the Company.
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, but are not limited to, statements regarding Implats' continuation of discussions of potential smelter offtake arrangements and continued participation in the Waterberg Project, the market for PGM metals, the results of the Waterberg DFS, the Waterberg Project becoming one of the largest and potentially lowest cash cost underground PGM mines globally, the completion of the Work Program, financing and mine development of the Waterberg Project and the grant of the Mining Right. Estimates of mineral reserves and mineral resources are also forward-looking statements. Although the Company believes any 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.
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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 possible adverse impacts due the global outbreak of COVID-19 (as described above), the Company's inability to generate sufficient cash flow or raise sufficient additional capital to make payment on its indebtedness, and to comply with the terms of such indebtedness; additional financing requirements; the US $20 million senior secured facility with the Sprott Private Resource Lending II (Collector), LP ("Sprott") entered into August 21, 2019 (the "2019 Sprott Facility") is, and any new indebtedness may be, secured and the Company has pledged its shares of PTM RSA, and PTM RSA has pledged its shares of Waterberg JV Co. to Sprott, under the 2019 Sprott Facility, which potentially could result in the loss of the Company's interest in PTM RSA and the Waterberg Project in the event of a default under the 2019 Sprott Facility or any new secured indebtedness; the Company's history of losses and negative cash flow; the Company's ability to continue as a going concern; the Company's properties may not be brought into a state of commercial production; uncertainty of estimated production, development plans and cost estimates for the Waterberg Project; discrepancies between actual and estimated mineral reserves and mineral resources, between actual and estimated development and operating costs, between actual and estimated metallurgical recoveries and between estimated and actual production; fluctuations in the relative values of the U.S. Dollar, the Rand and the Canadian Dollar; volatility in metals prices; the uncertainty of alternative funding sources for Waterberg JV Co.; the Company may become subject to the U.S. Investment Company Act; the failure of the Company or the other shareholders to fund their pro rata share of funding obligations for the Waterberg Project; any disputes or disagreements with the other shareholders of Waterberg JV Co. or Mnombo; the ability of the Company to retain its key management employees and skilled and experienced personnel; conflicts of interest; litigation or other administrative proceedings brought against the Company; actual or alleged breaches of governance processes or instances of fraud, bribery or corruption; exploration, development and mining risks and the inherently dangerous nature of the mining industry, and the risk of inadequate insurance or inability to obtain insurance to cover these risks and other risks and uncertainties; property and mineral title risks including defective title to mineral claims or property; changes in national and local government legislation, taxation, controls, regulations and political or economic developments in Canada and South Africa; equipment shortages and the ability of the Company to acquire necessary access rights and infrastructure for its mineral properties; environmental regulations and the ability to obtain and maintain necessary permits, including environmental authorizations and water use licences; extreme competition in the mineral exploration industry; delays in obtaining, or a failure to obtain, permits necessary for current or future operations or failures to comply with the terms of such permits; risks of doing business in South Africa, including but not limited to, labour, economic and political instability and potential changes to and failures to comply with legislation; the Company's common shares may be delisted from the NYSE American or the Toronto Stock Exchange if it cannot maintain compliance with the applicable listing requirements; and other risk factors described in the Company's most recent Form 20-F annual report, annual information form and other filings with the U.S Securities and Exchange Commission ("SEC") and Canadian securities regulators, which may be viewed at www.sec.gov and www.sedar.com, respectively. Proposed changes in the mineral law in South Africa if implemented as proposed would have a material adverse effect on the Company's business and potential interest in projects. Any forward-looking statement speaks only as of the date on which it is made and, except as may be required by applicable securities laws, the Company disclaims any intent or obligation to update any forward-looking statement, whether as a result of new information, future events or results or otherwise.
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Estimates of mineralization and other technical information referred to or included herein 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, mineralization may not be classified as a "reserve" unless the mineralization can be economically and legally extracted or produced at the time the "reserve" determination is made. As a result, the reserves reported by the Company in accordance with NI 43-101 may not qualify as "reserves" under SEC Industry Guide 7. 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 historically have not been permitted to be used in reports and registration statements filed with the SEC pursuant to SEC Industry Guide 7. 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. In particular, "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 of an "inferred mineral resource" will ever be upgraded to a higher category. Disclosure of "contained ounces" in a resource is permitted disclosure under NI 43-101; however, SEC Industry Guide 7 normally only permits issuers to report mineralization that does not constitute "reserves" by SEC Industry Guide 7 standards as in-place tonnage and grade without reference to unit measures. Accordingly, descriptions of the Company's mineral deposits in this press release may not be comparable to similar information made public by U.S. companies subject to the reporting and disclosure requirements of SEC Industry Guide 7.