Mitsubishi takes stake in Marathon

Mitsubishi Corp. of Japan will invest US$94.9 million for a 25% stake in Stillwater Mining’s (SWC.U-T, SWC-N) Marathon project, a platinum group metals and copper deposit near the north shore of Lake Superior about 10 km north of the town of Marathon, Ontario.

Japan’s largest trading company will acquire the 25% interest for about US$81.25 million and meet the venture’s first cash call of US$13.6 million.

Mitsubishi will have an option to purchase up to 100% of the PGM production under a related supply agreement. In the meantime it is responsible for funding its 25% share of operating, capital and exploration expenditures as well as helping Stillwater secure project financing.

Since acquiring Marathon in November 2010, Stillwater has invested about US$159 million in the project.

Frank McAllister, Stillwater’s chairman and chief executive, described the project “as one of the few PGM plays in North America,” and said in a prepared statement that the deal enables the company “to be prudent in balancing the company’s cash requirements for its various projects.”

The project is currently in the environmental assessment and permitting stage and once approved will be developed as an open-pit mine and milling operation with one primary pit and several smaller satellite pits.

Concentrates produced at Marathon would be taken off-site to a third-party smelter and refinery for final processing.

Initial projections indicate that the mine would produce about 200,000 ounces of PGMs, mostly palladium, and 37 million pounds of copper a year over a mine life of about 11.5 years.

Stillwater will retain 75% of the project and will oversee its development, financing and operations, while Mitsubishi will help Stillwater seek project financing.

Preproduction capital costs are projected to be between US$550 and US$650 million with first production of PGMS likely in 2016.

Stillwater Mining produces platinum and associated metals from a geological formation in southern Montana called the J-M Reef, which hosts the Stillwater Mine near Nye, Montana and the East Boulder mine south of McLeod, Montana, and claims to be the largest primary producer of PGMs outside of South Africa and the Russian Federation. Management also says it is the only known significant source of PGMs in the United States.

The company operates concentrating plants at both mines to upgrade ore to a concentrate, and also runs a smelter, refinery and laboratory at Columbus Montana to further upgrade the concentrate to a PGM-rich filter cake. Spent catalyst material is also recycled at the smelter and refinery to recover platinum group metals.  

In mid-morning trading Stillwater’s shares were down 0.86% or 11¢ at $12.65 per share. The company has traded within a 52-week band of $7.37-16.23 per share. The company has about 115 million shares outstanding.