PANXF: Platinex (TSXV:PTX) Analysis and Research Report
2018-03-16 - by Asif , Contributing Analyst - 102 views
The Company was incorporated on August 12, 1998 under the laws of the Province of Ontario and trades on the Canadian Securities Exchange under the symbol “PTX”. The Company is at the exploration and evaluation stage and is engaged in the acquisition, exploration and development of properties for the mining of precious and base metals. The Company is in the process of exploring its resource properties for mineral resources and has not determined whether the properties contain economically recoverable reserves. Recovery of amounts reported for mineral properties and related deferred expenditures is dependent upon the existence of economically recoverable reserves, confirmation of the Company’s interest in the underlying mineral claims, the ability of the Company to obtain necessary financing to conduct exploration and the ability of the Company to recover value for its properties and/or upon future profitable production.
The business of mining and exploring for minerals involves a high degree of risk and there can be no assurance that current exploration programs will result in profitable mining operations. Recoverability of the carrying value of exploration properties and the Company’s continued existence are dependent upon the preservation of its interest in the underlying properties, the discovery of economically recoverable reserves and the development and/or sale of such properties at a profit.
The Company has limited financial resources and no operating cash flow. Until profitable production can be reached, the Company is dependent on debt or equity financings and/or the sale, lease or farm-out of assets to provide the funds necessary for the Company’s operating and capital expenditures. Although the Company has been successful in the past in obtaining requisite funding, there can be no assurance that additional funding in amounts and on terms satisfactory to the Company will be available on a timely basis to fund the further exploration and development of its properties or to fulfill its obligations under applicable agreements. Failure to obtain such funding has resulted in delays and could in the future result in the delay or indefinite postponement of further exploration and development of the Company’s properties and in the possible dilution or loss of interests in such properties. If the Company raises additional funding through the issue of equity securities, such financings may dilute the holdings of the Company’s existing shareholders.
Although the Company has taken steps to verify title to the properties on which it is conducting exploration and in which it has an interest, in accordance with industry standards for the current stage of development of such properties these procedures do not guarantee the Company’s title. Property title may be subject to government licensing requirements or regulations, unregistered prior agreements, unregistered claims, aboriginal claims, breakdown in law and order, arbitrary and punitive actions of governments and their failure to comply with their own laws and regulations.
In order to sustain its operations, the Company requires additional funds to discharge its liabilities, conduct work programs and meet overhead expenses. The Company continues to seek capital through various means including farm-out / joint venture partnerships and the issuance of equity or debt.
Overall Performance and Market
The Company is in the exploration stage on its various properties and therefore it has no revenues to fund such activities. The Company accesses the public markets to finance exploration activity; the ability to raise additional capital is subject to prevailing market conditions. The projects do not have a defined mineral resource in place whereby the Company can establish a measured asset value. However, based on independent NI 43-101 technical reports and / or internal summary reports prepared on Company properties and adjacent properties, further exploration work is warranted.
The market decline in 2008 and then 2011 has made it very difficult to finance property exploration through issuance of equity. Many junior mining companies trade at a significant discount to the underlying book value of their net assets. In order to attract investment, it is necessary for a company to distinguish itself from its competitors. Therefore, the Company is focusing on completing a financing to continue exploration of the Shining Tree Gold property (described under Properties), which has significant exploration potential.
The Company maintains an interest in several gold and PGE properties. Each property requires assessment work to keep it in good standing. Work may involve airborne geophysical surveys, ground geological, geophysical, and geochemical surveys with line-cutting and drilling.
The properties are described below:
a) Shining Tree Gold Property
In 2011, the Company vested an option agreement with Skead Holdings Ltd., with respect to 139 claim nits (5,680 acres or 2,299 ha), situated in Churchill, MacMurchy and Asquith Townships in Ontario (the “Shining Tree property”). The Company now holds a 100% interest in the claims subject to a 3% NSR and advance royalty payments of $73,000 on April 11, 2018 and $10,000 per year commencing on April 2019.
Further Platinex may after making the $73,000 payment eliminate the requirement for future advance royalty payments by making a one-time advance royalty payment of $100,000. The 144 claim units have been placed in a trust and will revert to Skead Holdings Ltd. should the Company fail to make the $73,000 advance royalty payment due in April 2018. Conversely, upon the Company making the $73,000 payment the claims will be released from trust to the Company. Two thirds of the 3% NSR may be reduced by payment of: $75,000 for each one-quarter percent for the first one-half percent; $150,000 for each onequarter percent for the second one-half percent; $250,000 for each one-quarter percent for the third onehalf per cent, and; $400,000 for each one-quarter percent for the final one-half percent ($1.75 million in aggregate). If Skead Holdings Ltd wishes to sell the residual royalty interest the Company retains a right of first refusal to purchase the NSR. On May 10, 2012, the Company acquired a lease (40 acres, 16 ha) from Gary John McBride for 200,000 shares of the Company. The lease is central to the Shining Tree roperty.
The Company entered into two agreements in August 2016 and 5 agreements in November, 2016, January, 2017, March, 2017, April, 2017 and June 2017 and staked claims in December, 2016 which significantly expand the size and potential of its Shining Tree gold property. Platinex has entered into an option agreement with Skead Holdings Ltd. and Ashley Gold Mines Limited, with respect to certain claims situated in Churchill, MacMurchy and Asquith Townships, in Ontario. Platinex has the right to acquire a 100%-interest in the 54 claim units and 50% interest in a further 8 claim units (991 ha or 2,480 acres), subject to a 2% NSR, by issuing 200,000 shares of Platinex, and by making cash payments (or share quivalent) of $95,000 and by incurring property expenditures of $500,000 during the ensuing four-year eriod to August 17, 2020. Platinex also entered into an agreement with two prospectors to purchase 100% interest in four claims comprising 20 claim units (320 ha or 800 acres) in Churchill, MacMurchy and Asquith Townships, in Ontario by issuing 400,000 shares of Platinex. Platinex subsequently entered into five agreements with one prospector to purchase 100% interest in: ten claims comprising 70 claim units 1,120 ha or 2,800 acres) for 398,000 shares on Nov. 3, 2016; four claims comprising 43 claim units (688 ha. Or 1,720 acres) for 71,429 shares on January 25, 2017; eight claims comprising 96 claim units (1,536 a or 3,840acres) for 86,705 shares on March 30, 2017; 21 claims comprising 267 claim units (4,272 ha or 10,680 acres) for 391,250 shares on April 20, 2017 and 9 claims comprising 127 claim units (2,032 ha or 5,080 acres) for $5,000 and 436,190 shares on June 20, 2017. Platinex also staked claims comprising 45 claim units (720 ha or 1,800 acres). Six claim units were subsequently included in the Skead Agreement.
The property acquisition has encircled the former producing Ronda Gold Mine including the southern half of the workings and enhances the Shining Tree property exposure to the intersection of a major east-west old bearing structure, the Tyrrell-Ridout Deformation Zone and a north-south fault. In particular, Platinex has focussed on acquisition of the recently mapped expression of the Tyrrell-Ridout Deformation Zone as t represents a possible source of the significant gold in till anomalies. The combined property created by the acquisitions comprises 875 claim units (14,000 ha or 35,000 acres).
The Company SEDAR-filed a NI 43-101 technical report dated October 2, 2008, by J.G. Bryant and D. Jamieson (the “Report”) which examines the Herrick gold deposit on the Shining Tree property and seven other known gold prospects, some of which have been explored underground. The Report qualifies he sampling and drilling work by Unocal (1989) and Fort Knox (1990) compliant with NI 43-101 standards. An updated NI 43-101 technical qualifying report is currently being prepared.
The property is underlain by a northwest trending, steeply dipping, sequence of felsic to mafic metavolcanic rocks overlain by Temiskaming or Porcupine aged metasedimentary rocks and intruded by irregular trachyte porphyries and syenite stocks of Early Precambrian age.
b) Herrick Deposit
Shining Tree’s Herrick deposit was discovered in 1918 and subsequently was developed by a 94 m shaft with 345 m of lateral development on two veins. In 1989 Unocal Ltd. evaluated the historic data and, based on that, stated a potential for the system to carry 5,716 tonnes per vertical metre at 7.2 g/t Au over a width of 1.8 m (400 ounces per vertical foot), Unocal carried out diamond drilling of 11 holes for 1,473m and collected 201 channel samples and 35 composite grab samples on the Herrick vein. In 1990 Fort Knox Gold Inc. followed this work with 45 further channel samples and confirmed the presence of gold mineralization over a 385m strike length, obtaining samples grading up to 56.5 g/t Au over 1.0 m. The Report states that, ‘judging from evidence of previous results on the Herrick deposit there is a potential to outline a small commercial gold deposit. On a larger scale the bulk of the property may be at the low temperature top of an epithermal system that could well be associated with a world-class gold deposit at depth.’
Gold geologists recognize that the Shining Tree property is located on the westward extension of the Cadillac Malartic/Larder fault systems or a parallel fault system, which is locally named the Tyrrell-Ridout Deformation Zone, that are associated with several gold deposits that contained between 10 and 30 million ounces of gold. Moreover, the least explored southwestern Abitibi has received additional attention in recent years resulting in the discovery of some of the larger gold deposits in the Abitibi region on three sides of the Shining Tree property. (The Cote Lake deposit (10,500,000 ounces Au); the Borden Lake deposit; the Juby deposit 4,000,000 ounces and the West Timmins Mine).
The central zone of the Herrick deposit outcrops for most of its length and is a continuously readily definable body. Thicker gold zones have been identified between intersecting veins in some holes and in outcrops. These structures plunge vertically providing a prospective target for deeper exploration. More sampling of existing core and stripping of identified thicker mineralized zones where these project to surface, is warranted and could increase the potential within the exploration envelope.
Along the 380m length of the Herrick Central Zone 72 channel and composite grab sample sections have averaged 6.99 g/t Au / 1.9m true width. Drilling of the same zone to a depth of 300m below surface in 59 drill holes has averaged 2.16 g/t Au / 2.9 m true width. The mineralized zone appears to be thickening at depth with zone widths of up to 46.1 m recorded in drilling.
Platinex has commissioned an independent review of the Herrick deposit. Authors of this study recommended that more drilling and sampling is required to establish a resource within the area that has been drilled. This assessment will be considered in light of the additional opportunities recently acquired on the property in order to revise priorities for future exploration. A new NI 43-101 technical report is being prepared in order to provide focus to future exploration.
c) Gold in Glacial Till
From October 2008 to March 2012, then from August 2016 to present, the Company has carried out an exploration program on the property. Particular interest is focused on 446 samples recovered from basal till that have been processed by Overburden Drilling Management. Many of the samples contain pristine gold grains indicating a nearby bedrock source. In addition, 169 samples each returned more than ten gold grains (up to 144 gold grains in one sample) that suggest several nearby previously unexplored gold occurrences in the bedrock.
Noticeably a line of the highest counts was obtained along 9 km easterly trend zone correlating with XDS ORTHO anomalies and circumscribing a syenite stock. In fact a pattern that has resulted from recognition of the syenite stock is that the better gold grain counts tend to correlate with the observed margins of the syenite stock. The occurrence, distribution and density of high gold counts are similar to such patterns over the Timmins and Matachewan gold camps. The Company views this result as the initial step in locating and identifying one or more major gold deposits, potentially leading to a new major gold camp.
Acquisition of a significant strike extent along the Tyrrell-Ridout Deformation Zone will give Platinex access to a very prospective source for the gold in till anomalies. Ironically the deformation zone is along a largely underexplored deformation zone.
d) Exploration by the Company
Gold is the best pathfinder to gold, intuitively providing the most direct path to a significant discovery. Less direct indicators of gold including other geochemical, geophysical and geological expressions are less reliable indicators of gold in the ground. Not all major gold deposits in glaciated terrains provide evidence of their existence through gold dispersion trains. However, gold dispersion trains are always pathfinders to sources of gold in place and major gold dispersion trains are either associated with major gold deposits or multiple spatially concentrated gold deposits. This is the promise of the Shining Tree property.
The exploration program in 2008 and 2009 included an airborne geophysical survey, till sampling, and 26 drill holes for a total of 1,270 m of diamond drilling. In 2010, a comprehensive program of drilling on the Herrick deposit (23 holes for 4,253m) till sampling, and stripping was carried out to further evaluate the potential of the property. A substantial program of channel sampling was carried out on the Caswell prospect. In 2011 three holes for 930m were drilled on the Herrick deposit and seven holes for 1,070m was carried out to test the Caswell trenches. Several good results were obtained including an assay of 18.75g/Au over 0.5m within a broader zone assaying 4.5g/t over 2.52m.
In 2010, the Company retrieved documents revealing results of testing near the old Westree or Caswell mine workings of its Shining Tree claim group in which a trench was bulk sampled in 1975 with 551 lbs 250.5kg) of vein material returning 2.960 oz/ton gold (101.3 g/t) and 1206.41 oz/ton silver (41,271.3 g/t) and 572 lbs (260.0 kg) of wall rock material returning 0.224 oz/ton Au (7.7 g/t) and 368.9 oz/ton silver (12,620.1 g/t). A second bulk sample consisting of 1742 pounds (791.8 kg) of vein material taken approximately 125 feet (38.1m) west of the first sample returned 32.77oz./ton silver (1120.7g/t) and trace gold. A 100 lb (45.45kg) grab sample of muck and rock taken from the trench between these samples returned 2.033 oz./ton gold (69.53g/t) and 1.08 oz./ton silver (36.94g/t). These results have been verified but require qualification. Stripping was carried out in the autumn of 2010 and drilling of seven holes was completed for 1,070m in April 2011. All of the holes intersected gold mineralization with one hole intersecting a potentially commercial value. A nine km Pole-dipole IP survey was completed in March 2012 by JVX Ltd. Following the IP survey, a five hole 870m drilling program was carried out on previously undrilled portions of the property to test five very strong IP anomalies spatially associated with gold in till nomalies. All of the holes intersected thick zones of mineralization and/or alteration. One hole intersected un-mineralized, chloritized syenite with a few randomly selected character samples returning anomalous values up to 327 ppb Au. The strong IP response was unexplained. This area and its strike projections are a high priority for follow up exploration.
The Ontario Department of Mines reported in 1934 that visible gold and significant gold values over 0.5 opt were returned from channel samples on the principal N60E trending Churchill veins in the southeast part of the zone, where secondary veins in the area also showed gold values of up to 6.96 g/t. Select grab samples from the old Pet Vein on the Churchill Mining property, taken by Vernon Drylie (P.Eng.) for Creso Exploration in 2009, responded well to initial enhanced gravity concentration testing undertaken by the Knelson Research and Technology Centre, with feed material grading 14.7 g/tonne Au gave a Knelson oncentrate grading 724.1 g/tonne Au at 39% Au recovery, in a mass pull of 0.8%, indicating good grade enhancement by gravity concentration techniques. The drilling and surface sampling conducted in 2010 exposed a broad zone of low grade gold mineralization in a formational zone of jasper iron formation and carbonates. Sampling by The Company in the summer of 2011 returned values in grab samples up to 181 g/t Au from the Pet Vein.
e) Memorandum of Understanding
In July 2013, the 2009 exploration agreement with Mattagami First Nation was amended to include the Matachewan First Nation. A mineral exploration plan under the New Ontario Mining Act was submitted and approved in 2013. A revised 3 year plan has been submitted in 2017 and is now effective. An exploration permit was issued by the Ontario government. In 2013 which expired in 2016. A new 3 year exploration permit was applied for in September 2017 and is pending approval.
f) Nabish Lake
On August 11, 2014, Platinex acquired an option to purchase the Nabish Lake Ni-Cu-PGE property located 20 kilometres south of the Town of Dryden, Ontario. The property comprises 94 claim units covering 1,504 hectares of the Nabish Lake mafic intrusive complex. The intrusion is one of several mineralized, mafic to ultramafic intrusions that ring the large Atikwa Batholith. Documents on record with the Ontario Ministry of Northern Development and Mines report samples collected on the property have returned values of up to 3.5% Ni, 6.5% Cu and anomalous levels of PGE. In addition, an airborne VTEM survey over a portion of the property has outlined several unexplained geophysical conductors worthy of drill testing.
On August 11, 2014, Rubicon Minerals Corporation agreed to grant the Company a four-year option to purchase a one hundred percent (100%) undivided interest in 10 unpatented mining claims, subject to a 1.5% NSR, in exchange for 800,000 common shares of Platinex and $70,350 to be paid by the fourth anniversary according to a prescribed payment schedule. An initial issuance of 200,000 common shares recorded at the fair market value of $0.01 per share was made on August 19, 2014 and the first payment for $7,350 was to be made on the earlier of four months after signing or receipt of drilling permits and exploration financing; the payment is in default as at May 29, 2015. A second optional payment of $6,000 on August 11, 2015 and a third payment of $10,000 on August 10, 2016 have not been made. The property comprises 10 claims for 92 claim units covering 1,504 hectares of the Nabish Lake mafic intrusive complex.
Former Big Trout Lake Property, Ontario
As described in detail in the Management Discussion and Analysis for the year ended December 31, 2009, the Company made considerable efforts to attain lawful access to its property for the purpose of exploration through attempts to consult, engage and accommodate KI and then through litigation.
The claims and leases were surrendered in December 2009 to the Ontario government in return for a payment of $5,000,000 plus additional mediation and negotiation costs totaling $377,056 and a retained 2.5% Net Smelter Royalty interest.
Discussions with several parties are ongoing to sell the royalty in whole or in part as an alternative to other financing initiatives currently being pursued by the Company. An internal evaluation of the royalty was completed in 2014 for that purpose.
In March, 2017, Platinex listed on the Canadian Securities Exchange and voluntarily delisted from the TSX Venture Exchange. The move to the CSE was prompted by favourable reviews of the newer exchange and advice from securities counsel that the Company could not seek to engage in non-mining initiatives without first obtaining a change of business. Although Platinex is a mining issuer, it simply wanted the freedom to pursue other entrepreneurial opportunities that may present themselves.
In July 2017, the Company engaged FMI Capital Advisory Inc. to act as a non-exclusive financial advisor to the Company in its efforts to grow, finance, and secure projects and acquisition opportunities.
Platinex in conjunction with FMI Capital Advisory has developed and is implementing an expansion strategy that is focused on partnering with businesses that are involved in the cannabis sector by way of acquisition, joint-venture, strategic partnership, or direct investment. The strategy is comprehensive of geographic, regulatory and value chain segment considerations. Efficiency of investment providing a hand up to excellent entrepreneurs, risk mitigation and customizing partnerships to meet needs are guiding principles.
On October 16, 2017, the Canadian Securities Administrators published Staff Notice 51-352 Issuers with U.S. Marijuana-Related Activities (‘‘Staff Notice 51-352’’) which provides specific disclosure expectations for issuers that currently have, or are in the process of developing, cannabis-related activities in the United States as permitted within a particular state’s regulatory framework. All issuers with United States cannabis-related activities are expected to clearly and prominently disclose certain prescribed information in prospectus filings and other required disclosure documents. As a result of the Company’s proposed investments in certain United States entities (as described herein), the Company believe it is subject to Staff Notice 51-352 and accordingly provides the following disclosure:
The marijuana industry has accelerated in recent years as a number of jurisdictions, including Canada and certain U.S. states, continue to explore liberalization measures around marijuana law. While most jurisdictions have a uniform national framework for marijuana regulation, in the U.S., there is a conflict between state and federal law related to marijuana with certain U.S. states permitting its use and sale within a regulatory framework notwithstanding that marijuana continues to be listed as a controlled substance under U.S. federal law. As such, marijuana related practices or activities, including the cultivation, possession or distribution of marijuana, are illegal under U.S. federal law.
The U.S. Department of Justice issued guidance in 2013 indicating that it will focus on certain enforcement priorities, outside of which it will generally not enforce federal prohibitions on marijuana in U.S. states that have authorized this conduct so long as the U.S. state has implemented a strong and effective regulatory program. This federal guidance is subject to change, rescission or alteration by other federal government policy pronouncements at any time.
The company remind investors that the political and regulatory circumstances surrounding the treatment of U.S. marijuana-related activities are uncertain. In the event that U.S. federal law against marijuana is enforced, there could be material consequences for any issuer with U.S. marijuana related activities, including prosecution and asset seizure.
The Company will not be attempting to raise capital in the public or private markets in the United States.
The first concrete steps were initiated in November, 2017 with the execution of non-binding letters of intent to ake an investment in Brand Company that holds the rights to an edible brand and a related Co-Packing Company. Both entities are located in Oregon. Licencing and due diligence are being pursued.
As noted in the Company’s Press Release dated Nov 9, 2017, Platinex has entered into a non-binding letter of intent ("LOI") to make an investment into a company ("Brand Company") that holds the rights to an edible brand that is known in the Southern and Western Oregon regions. It is intended that Platinex will advance funds in exchange for the royalty interest in the Brand Company. There is no assurance that the transaction will be completed on the terms satisfactory to the Company or at all. This investment will be a non-controlling position in Brand Company and as such is considered to be “indirect involvement in the United States cannabis industry” under Staff Notice 51-352. At present Brand Company is not operating, pending access to a licenced facility in which its products can be manufactured. The Company believes Brand Company is in compliance with the relevant Oregon State regulations, primarily administered under the Oregon Liquor Control Commission ("OLCC").
In addition, the LOI also provides for acquiring an interest in a company ("Co-Packing Company") that is in the final stages of obtaining a Processor Licence with the OLCC to manufacture cannabis-infused edible products. The transaction is subject to completing a due diligence review to the satisfaction of the Company and other conditions, which include but are not limited to: obtaining OLCC approval and entering into agreements to consummate the transfer of interests. There is no assurance that the transaction will be completed on the terms satisfactory to the Company or at all. This investment will be a controlling position in Co-Packing Company and as such is considered to be a “direct involvement in the United States cannabis industry” under Staff Notice 51-352. At present Co-Packing Company is not operating, pending approval and licencing by the OLCC. The Company believes Brand Company is in compliance with the relevant Oregon State regulations, primarily administered under the Oregon Liquor Control Commission ("OLCC").
The products of Brand Company will be manufactured at the facilities of Co-Packing Company once the license is in force and operations commence.
Three private subsidiaries have been formed with the intention to hold assets of the different company activities: Cannabis Mall Inc. will hold cannabis related assets; South Timmins Mining Inc. will hold the Shining Tree property assets, and: Endurance Elements Inc. will hold the platinum and nickel assets. This structure will afford the Company more flexibility to restructure its assets.
Shining Tree Gold Property
- Expanded Property by over 500% with new options and claim purchases increasing exposure to high potential ground convening part of the former Ronda Mine workings and acquiring many known gold prospects which are underexplored. Preparation of a new NI 43-101 report on the expanded is underway.
- The Company now has a 21-km strike length of the Tyrrell-Ridout Deformation Zone between the 10.5 million ounce IAMGOLD Cote Lake gold deposit and the 4 million ounce Tahoe Resources Juby gold deposit. This deformation zone is up ice from all of the highly anomalous gold in till results on the property and deemed to be a likely source of the anomalous gold results.
- The Tyrrell-Ridout Deformation Zone is thought to be the southern equivalent of similar major gold hosting deformation zones in the Abitibi and three major discoveries have been made on it in the last ten years.
- An independent review of the gold mineralization outlined by drilling in the Herrick gold deposit has been commenced. It will be completed pending additional sampling of core, channel sampling and some fill in drilling.
- Extended time to make advance royalty payments on Shining Tree property to 2018 and made favourable changes to buyback schedule on advance royalties.
- A new NI43-101 report is currently underway.
- The Company has filed an Exploration Plan and applied for an Exploration Permit with the Ontario government. The plan is effect and the permit is pending.
General Company Developments
- In fiscal 2017 up until June 28, 2017, $509,450 was raised through exercise of warrants and options.
- On November 15, 2017, the first tranche of a $600,000 private placement was closed to yield $427,500 to the treasury
- On November 24, 2017, 580,000 warrants having an exercise price of $0.125 were exercised for 580,000 common shares of the Company generating an additional $$72,500 of funding.