Platinum Group Metals Ltd. — FY2020 Form 20-F
Reporting period: Fiscal year ended August 31, 2020; the annual report was filed November 25, 2020. This is an annual filing, not a standalone fourth-quarter report. Financial statements are prepared under IFRS and presented in U.S. dollars unless otherwise indicated. The company is an exploration and development-stage PGM company, with the Waterberg Project as its sole material mineral property and no operating revenue.
Key financial metrics
| Metric | FY2020 / August 31, 2020 | Prior comparable period |
|---|---|---|
| Revenue | No operating revenue; interest income was $158,000 | Interest income was $364,000 in FY2019 |
| Net loss | $7.1 million; $0.11 per share | $16.8 million; $0.52 per share in FY2019 |
| Comprehensive loss | $11.6 million, including a $4.5 million currency translation loss | $16.7 million in FY2019 |
| Operating cash flow | $(3.1) million | $(5.0) million in FY2019 |
| Cash and cash equivalents | $1.3 million | $5.6 million at August 31, 2019 |
| Working capital | $(2.4) million | $(0.6) million at August 31, 2019 |
| Total assets / liabilities | $37.4 million / $41.6 million | $43.7 million / $44.8 million |
| Debt carrying amounts | $19.3 million loan payable and $17.2 million convertible notes | $18.8 million loan payable and $16.1 million convertible notes |
FY2020 expenses included $3.7 million in general and administrative costs and $5.5 million in interest. The reported loss was lower year over year mainly because of reduced G&A and interest expense and a $3.2 million gain on derivatives and expired warrants. No dividends were paid. The filing does not provide a meaningful operating margin because the company had no operating revenue.
Investing cash outflow was $5.4 million, principally including $5.0 million of Waterberg expenditures; financing activities provided $4.6 million. The company reported a total shareholders’ deficit of $4.1 million.
Material changes and project developments
- Net loss narrowed from $16.8 million to $7.1 million; operating cash use also declined, while cash fell from $5.6 million to $1.3 million and the working-capital deficit widened.
- The 2019 Waterberg definitive feasibility study (DFS) was approved by the joint-venture shareholders in December 2019. At a 2.5 g/t 4E cutoff, the report estimated 26.35 million ounces of measured and indicated resources and 19.48 million ounces of proven and probable reserves, on a 100% project basis.
- Implats elected not to exercise its option to increase its Waterberg interest in June 2020. It retained a 15% project interest and an offtake right of first refusal. Exclusive offtake negotiations ended without an agreement; the company may also negotiate with other potential buyers, subject to Implats’ right to match.
- The Waterberg environmental authorization was finalized November 10, 2020. The mining-right application remained under consideration at the filing date. The company continued pre-production and permitting work and was discussing potential project financing and concentrate offtake arrangements.
- After year-end, the company raised $10 million gross through its at-the-market offering by November 24, and $2.5 million in an October private placement. The filing also reports a subsequent $1.9 million principal repayment to Sprott, reducing its principal balance to $18.1 million.
Outlook, risks and contingencies
The company has no current source of operating income and says it will need further financing to fund operations, debt service and Waterberg development. Management expects it can secure funding but gives no assurance. The audited financial statements and auditor’s report highlight substantial doubt about the company’s ability to continue as a going concern; the statements contain no adjustments that might result if the going-concern basis were inappropriate.
The $20 million Sprott facility carried 11% annual interest, compounded monthly, and was due August 14, 2021, with a one-year extension option subject to a 3% payment. It is secured by company assets and pledged subsidiary/project interests; default could put the Waterberg interest at risk. Convertible notes had approximately $20 million principal outstanding, carried a 6⅞% coupon, and mature July 1, 2022. The company also reported $2.89 million of brokerage fees payable at year-end; a subsequent payment of $1.4 million reduced the reported balance to approximately $1.5 million.
The DFS is a project study, not company guidance. It estimated project capital of about R13.1 billion excluding capitalized operating costs, or R16.6 billion including them, and a roughly 45-year mine life. Its after-tax NPV at an 8% discount rate ranged from $333 million using three-year trailing prices to $982 million using September 2019 spot prices; estimated cash costs were $554 and $640 per 4E ounce, respectively. These estimates depend on assumptions, including metal prices, exchange rates, costs, recoveries, permits, financing and smelting terms; no offtake agreement was in place.
Principal risks include ongoing financing needs and debt covenants, project permitting and construction uncertainty, commodity-price and currency volatility, COVID-19 impacts, water and power infrastructure, South African regulatory and BEE requirements, joint-venture funding and partner relations, and the unresolved Africa Wide litigation seeking to set aside or otherwise challenge the Maseve sale. The company says the litigation is defective but cannot assure a favorable outcome. The South African tax audit for 2014–2016 concluded with no reassessment. Management reported effective disclosure controls and internal control over financial reporting; the company, as a non-accelerated filer, did not provide an auditor attestation on internal controls.
Important facts for investors to verify
- Current cash, working capital, debt balances, covenant compliance and financing needs after the reported post-year-end equity raises and Sprott repayment.
- Status and conditions of the Waterberg mining right, water-use and waste permits, surface access, and the project’s required infrastructure.
- Whether Waterberg secures construction funding, pro-rata partner contributions and commercially acceptable concentrate offtake and smelting terms.
- Updated project economics and sensitivity to metal prices, exchange rates, capital costs, operating costs and recoveries; confirm assumptions against the full technical report.
- Progress and potential financial impact of the Africa Wide litigation and the remaining brokerage-fee obligations.
- Potential dilution from future equity issuance, convertible-note conversion, options and share-based compensation; U.S. investors should also assess the disclosed potential PFIC tax implications.