The market is usually right about exploration and development companies. The good ones get cashed up, the others have a hard time raising funds.
Clean Air Metals (AIR.V) recently announced that it was increasing a proposed private placement from 9 million dollars to 12.5 million dollars. This suggests a lot of confidence. The market is clearly impressed with Clean Air’s Thunder Bay North platinum, palladium, copper, nickel Project.
There is a surge of interest in reducing the emission of greenhouse gases. The technologies critical to a zero-emissions future such as catalytic converters on gasoline engines and hydrogen fuel cell hybrid electric vehicles require palladium and platinum and Clean Air Metals is developing a polymetallic deposit in Ontario to mine those metals. The shift to battery electric vehicles is also creating significant demand for copper and nickel both for the cars themselves and the infrastructure required to support them. The Thunder Bay North project contains both those metals, in addition to by-product gold and silver.
Clean Air Metals recently published a technical report outlining a financially robust Preliminary Economic Assessment (PEA) on development of two PGE/Copper and Nickel deposits on the Thunder Bay North Project near Thunder Bay, Ontario.
The PEA is a key benchmark for a project and a critical tool for planning and future feasibility studies. It gives management, shareholders and potential partners or acquirers an appraisal of the resource, the metallurgy, the infrastructure and the mine plan and includes the estimate of the potential returns from a project. In the news release Executive Chair Jim Gallagher states, “The initial PEA for the Thunder Bay North Project brings together two previously independent deposits into one mining plan which is relatively low risk, low capital, quick to production and generates robust financial metrics. Given the significant potential upside with continued exploration drilling along the known conduits and with the already identified massive sulphide targets we believe that this PEA is a minimum base case that Clean Air Metals will continue to attempt to de-risk towards pre-feasibility.”
Speaking with Abraham Drost, Clean Air’s CEO, he said. “This is very much a base case PEA that we can grow the project on. At a minimum, we have ten years of new mill feed in the camp. For a project that we purchased two years ago from our predecessors Rio Tinto and Panoramic Resources, the new underground mine plan and breakthroughs in metallurgy and PGE recoveries now indicates a $400 million project on a fully discounted basis.”
The PEA mine plan is based on the mineral resource published January, 2021. That particular mineral resource does not yet reflect the results of 30,000 meters of drilling undertaken for the balance of 2021. Additional drill results were released January 5, 2022 and Drost is quoted in the release, “step-out drilling on the margins of the Escape South High Grade Zone (HGZ) continues to deliver impressive assay results. Under the results of the recent PEA press release, the Escape South High Grade Zone (HGZ) (>5g/t Pt+Pd) is identified as a high value potential mining area at the base of the Escape Deposit in years 5 and 6 of the PEA mine plan”.
The metallurgy for the area has been encouraging. The company is seeing mid-80% recoveries for platinum and palladium and 95% for copper in a clean concentrate with 50g/t PGE’s. However, there is another aspect to the project: nickel.
“We will be looking at how to improve the mine plan by developing a clean nickel concentrate as well as a third stage cleanup bulk sulphide concentrate to capture PGE’s that normally would go out to tailings in barren sulphides. Metallurgical optimization means drill testing the proposed stopes year by year through the mine plan,” said Drost. “We hope to obtain large diameter drill bulk sample material for metallurgical testing. If all goes as planned, we hope to add Rhodium and Cobalt to the payables mix in the first five years of the future mine life.”
The Thunder Bay North Project checks all the common infrastructure boxes: it is accessible by logging roads just off a highway and a high voltage power crosses the mining claims and can be brought to the project. The Lac des Iles palladium mine operated by Impala Platinum is located 60km away to the northwest.
Important as infrastructure is, investors always look at a company’s management. Drost is modest about his own, substantial accomplishments as a geoscientist and mining entrepreneur, pointing instead to Jim Gallagher, his Executive Chair. “Jim is a mining engineer,” said Drost. “He’s committed to generating mineral feed in the Thunder Bay region.” Gallagher was the CEO of North American Palladium which operated in the Thunder Bay area and where he led an operational turn-around which culminated in the sale of the company to Impala Platinum of South Africa late in 2019.
Clean Air has all the pieces in place and its shares are trading significantly below their levels in early 2021. Which, while frustrating for Clean Air management, is an opportunity for savvy investors. The path ahead for Clean Air is expanding the resource and de-risking the plan. Currently, the market is pricing Clean Air as if it were an exploration play when it is, in fact, an early-stage development company. When the market realizes this there should be a substantial rerating of Clean Air Metals shares.