Palladium has found another gear as it races past $2,200 an ounce, leaving its sister platinum-group metal platinum, and even gold, eating its dust.
On Tuesday palladium (Pd) hit a record $2,191 an ounce, building on nine straight sessions of gains, but even that wasn’t enough for the autocatalyst ingredient, as it powered higher on Wednesday to trade at a dizzying $2,227/oz, as of this writing.
In comparison spot platinum (Pt), which up to 2016 was priced higher than Pd, was trading at $1,110/oz as of Wednesday afternoon, a long way below the $1,812/oz it commanded during the height of the mining supercycle, in September 2011, the same month gold powered up to its personal best of $1,900/oz.
Why the enviable price performance?
Palladium has been in deficit for eight straight years, because of low mined output and smoking-hot demand for catalytic converters in gasoline-powered vehicles, as smog-belching diesel cars and trucks get phased out to meet tighter air emissions standards particularly in Europe and China.
Palladium is the dominant auto-catalyst ingredient in gas-fueled internal combustion engines, whereas more platinum than other metals is found in ICEs run on diesel.
An 800,000-oz deficit was expected in 2019 as palladium consumption reached 11.2 million ounces, while mining production lagged and stockpiles dwindled.
Around 90% of palladium is mined as a by-product of nickel (mostly in Russia) and platinum (in South Africa).
With palladium and rhodium prices at record highs, it makes sense for platinum and nickel companies that mine them, to ramp up production to take advantage. Problem is, there is limited scope for producers to increase supply, especially in South Africa. There just isn’t a lot of new palladium-rich ore available. Just as important, a boost in output could add to the glut in platinum, which is these miners’ bread and butter.
Most seem to agree that palladium is in for another great year after posting a massive 46% gain in 2019. Here’s an analyst quoted by Reuters on Tuesday:
For 2020/21, “we forecast heavy structural supply/demand deficits for palladium,” James Steel, chief precious metals analyst at HSBC, wrote in a note. “Likely robust automotive demand will help keep the market tight. Tighter emissions regulations globally imply heavier palladium auto catalyst loadings.”
In their 2020 forecast, analysts at MKS Pamp Group, a precious metals refiner, are equally bullish. They see prices rising to $2,400 this year, and averaging $2,288, meaning the metal still has a ways to go. As quoted on Kitco,
“All key factors that propelled Palladium to new highs in 2019 remain in place in 2020,” the analysts said. “We expect palladium to remain in the spotlight again this year!”
Palladium One (TSX-V:PDM)
Amid this very encouraging palladium market, our pick in the palladium space, Palladium One (TSX-V:PDM), has kicked off its 2020 exploration program with an extensive geophysical survey of its flagship Lantinen Koillismaa (LK for short) copper-nickel-PGE project in Finland.
Located in north-central Finland, nine exploration permit applications (totaling 2,500 hectares) at LK feature three mineralized zones: Kaukua, Murtolampi and Haukiaho.
Surface sampling and previous drilling have shown evidence of palladium, platinum, gold, copper, cobalt and nickel.
Last year the company published the first (maiden) NI 43-101-compliant resource estimate at Kaukua. The new 22-million-tonne, “pit-constrained” resource is estimated to contain 635,000 palladium-equivalent (Pd_Eq) ounces (@ 1.8 g/t) in the indicated category, and 526,000 oz (@ 1.5 g/t) inferred, for a total of 1.16 million oz.
Palladium One’s goals are to upgrade historical estimates to comply with NI 43-101 standards, and to find define more than 3 million ounces of Pd_Eq in open-pit resources.
The modeled pit suggests the future mine is expected to have a relatively low “waste-to-resource” ratio of 3:1, resulting in a low-cost, low-capital operation.
Much of the roughly 25 km of Koilissmaa’s basal (base) contact was mapped and reconnaissance-drilled (81 holes/11,514m) by majority-state-owned Outokumpu for copper/ nickel and later by GTK for Cu-Ni-PGE mineralization. GTK, the Geological Survey of Finland, punched in a series of widely spaced, shallow (typically about 40 meters depth) drill holes that demonstrated anomalous Cu-Ni-PGE mineralization along the 25 km of basal contact – only about four kilometers of which has been drill-tested.
Therein lies the exploration opportunity, the upside. The induced polarization (IP) survey, commonly used in base metals exploration to locate ore deposits such as disseminated sulfides, will survey five separate grids for a total of 75 line kilometres.
The five grids represent a strike length of about 12 kilometers.
“Our Phase 1 program includes both IP geophysics and up to 5,000 meters of diamond drilling,” said Derrick Weyrauch, Palladium One’s President and CEO, in a news release.
Previous IP surveys at Kaukua worked very well, clearly identifying the core of the deposit. For example, drill hole Kau08-018 returned 65m @ 1.57 g/t PGE (1.04g/t Pd, 0.35g/t Pt, 0.18g/t Au, 0.18% Cu, 0.10% Ni).
The survey is expected to begin next week, with diamond drilling to follow.
Remember, PDM has already identified 1.16 million palladium-equivalent ounces (indicated + inferred), at the Kaukua target alone.
How much more mineralization is the IP survey likely to find? The prospectivity of a 12-km strike length is tantalizing.
As palladium prices continue their multi-year run, new sources of palladium supply are needed to meet demand for gas-powered auto-catalysts, and thereby help achieve stricter air quality standards.
This bodes well for explorers like PDM whose deposits contain significant amounts of palladium, as well as nickel and copper, which are also needed for electric vehicles and their lithium-ion batteries.
We look forward to the results of the survey and seeing how the upcoming drill program will unfold. A treasury brimming with CAD$3.78 million raised from a private placement, including a $1.2 million investment by storied resource investor Eric Sprott, Palladium One is ready to go to work and deliver solid news flow for shareholders.
TSX.V:PDM, Frankfurt:7N11, OTC:NKORF
Shares Outstanding 109,792,349m
Market cap Cdn$21,958,469
Richard (Rick) Mills
subscribe to my free newsletter
Ahead of the Herd Twitter
Legal Notice / Disclaimer
Ahead of the Herd newsletter, aheadoftheherd.com, hereafter known as AOTH.
Please read the entire Disclaimer carefully before you use this website or read the newsletter. If you do not agree to all the AOTH/Richard Mills Disclaimer, do not access/read this website/newsletter/article, or any of its pages. By reading/using this AOTH/Richard Mills website/newsletter/article, and whether or not you actually read this Disclaimer, you are deemed to have accepted it.
Any AOTH/Richard Mills document is not, and should not be, construed as an offer to sell or the solicitation of an offer to purchase or subscribe for any investment.
AOTH/Richard Mills has based this document on information obtained from sources he believes to be reliable but which has not been independently verified. AOTH/Richard Mills makes no guarantee, representation or warranty and accepts no responsibility or liability as to its accuracy or completeness. Expressions of opinion are those of AOTH/Richard Mills only and are subject to change without notice. AOTH/Richard Mills assumes no warranty, liability or guarantee for the current relevance, correctness or completeness of any information provided within this Report and will not be held liable for the consequence of reliance upon any opinion or statement contained herein or any omission. Furthermore, AOTH/Richard Mills assumes no liability for any direct or indirect loss or damage or, in particular, for lost profit, which you may incur as a result of the use and existence of the information provided within this AOTH/Richard Mills Report.
AOTH/Richard Mills is not a registered broker/financial advisor and does not hold any licenses. These are solely personal thoughts and opinions about finance and/or investments – no information posted on this site is to be considered investment advice or a recommendation to do anything involving finance or money aside from performing your own due diligence and consulting with your personal registered broker/financial advisor. You agree that by reading AOTH/Richard Mills articles, you are acting at your OWN RISK. In no event should AOTH/Richard Mills liable for any direct or indirect trading losses caused by any information contained in AOTH/Richard Mills articles. Information in AOTH/Richard Mills articles is not an offer to sell or a solicitation of an offer to buy any security. AOTH/Richard Mills is not suggesting the transacting of any financial instruments but does suggest consulting your own registered broker/financial advisor with regards to any such transactions
Richard owns shares of Palladium One (TSX.V:PDM), PDM is an advertiser on his site aheadoftheherd.com