Platinum Group Metals - Is It Simply Bad Execution, Or Something Else?

| About: Platinum Group (PLG)
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Summary

On June 15, 2017, the company released a Maseve mine update.

The company highlights that additional working capital will be required to continue its operations, AGAIN.

Perhaps, it is about time for the company to come clean and stop diluting shareholders by selling the Maseve mine (spin-off) to a real professional.

Platinum Group Metals, Ltd. (NYSEMKT:PLG)

Investment Thesis:

Platinum Group Metals is a small start-up mining company established in Vancouver, Canada, with two main interests in South Africa (see the map above).

  1. The Maseve mine that has laboriously started its condensate production. PLG held an 82.9% working interest today.
  2. The New Waterberg JV, which is an interesting project, is three to four years before completion and commercial production. PLG held 58.62% of the working interest of the New Waterberg JV today.

As I said a while ago, the Maseve mine has been plagued by incompetence and lack of adequate supervision by a management cut-off from the mine's daily needed requirements. Is it just bad management, or is something more sinister going on?

The fact - Maseve mine: Chronological monthly production.

Company presentation April 26, 2017. Please click here.

▪ Mining permit granted in 2012.

▪ Smelter offtake goes to Anglo Platinum life of mine.

▪ Commissioning completed in April 2016 - currently in ramp-up phase.

Production Guidance: Amended and Updated - April 2017:

• 2017 Calendar Year: 85,000 ounces 4E

• Commercial Production Target: Calendar H1 2017

• Steady State Estimate: 250,000 ounces 4E/year

Monthly production Tonnage G/T % recovery 4E Oz
Before April 138 889 0,69 65,2% 2 013
April (Commissioning completed) 83 866 0,86 72,7% 1 682
May 97 542 0,77 67,0% 1 620
June 55 945 1,11 74,6% 1 488
July 54 420 1,01 76,8% 1 362
August 50 306 1,48 79,1% 1 893
September 55 897 1,29 78,4% 1 823
October 22 316 1,59 79,3% 907
November 29 945 1,58 81,4% 1 237
December 39 297 1,51 79,2% 1 509
January 34 661 1,53 79,2% 1 351
February 36 848 1,59 80,3% 1 651
March 43 961 1,88 83,3% 2 140
April 41 853 2,00 83,8% 2 256
May 50 484 1,81 84,3% 2 480
Grand Total 836 230 1,38 77,6% 25 412
12 months 515 933 1,53 80,0% 20 097

(1) Approximately 7,825 dry tonnes of ore mined in February 2017 were milled in March 2017 as a result of severe weather events. This table adjusts the results of milling these 7,825 dry tonnes from March 2017 back into February 2017 results.

Commentary:

From a shareholder's perspective, this whole painful saga is not making any sense, and it is time to question management seriously?

In fact, since April 2016, the company managed to produce a total of 25,412 Oz 4E only compared to the elusive first-year production estimated initially indicated at 110,000 Oz 4E and later reduced to 91,500 Oz 4E and finally reduced again to 85,000 Oz 4E.

Fact: A systematic destruction of the shareholder's value.

After further delays last year, PLG warned that further financing was needed:

At November 30, 2016, the Company held $27.507 million in cash. In order to achieve positive cash flow and to maintain its working capital covenants under existing loan facilities, the Company estimates that it will need to source $5 million to $15 million of additional funding by way of refinancing its existing debt, the issuance of new debt, private or public offerings of equity or the sale of project or property interests.

On January 24, 2017, the company announced that BMO Capital Markets has agreed to buy on a bought deal basis 17,125,000 common shares of the company at a price of US$1.46 per common share for gross proceeds of approximately US$25 million.

However, the bought deal financing was for a total of US$28.75 million.

On April 4, 2017, PLG released its six-month results and it was again disheartening.

  1. The company indicated that the two loan facilities were amended as the result of delay in production.
  2. Management is revising down production a second time to now 85k Oz 4E from 92.5K Oz 4E.
  3. The company announced AGAIN that it needs more money to "achieve positive cash flow", another "$10 million to $15 million".

On April 26, 2017, PLG announced that the company has issued 15,390,000 common shares at a price of US$1.30 per share for aggregate gross proceeds of US$20.007 million.

Since January 2017, PLG financed US$48.757 million in cash.

On June 15, 2017, the company indicates that due to further delays:

Sprott and LMM are each to be paid a fee of US $200,000 and US $400,000 respectively in consideration of the above amendments.

Furthermore:

The Company highlights that additional working capital will be required to continue its operations. Financing methods in consideration by the Company include but are not limited to sale of assets, debt or equity. While the Company believes that further funding will be achieved, there is no assurance that such will be concluded on terms acceptable to the Company, or at all.

Conclusion:

In my view, this whole saga does not pass the smell test, but I am not a professional miner, just another disgruntled investor left to pay the bill, and I do not like it and feel that I have been totally "misled".

Why so much potential "on paper" and so little results with delays and a money pit financing that requires an equity financing every three months?

"Where o where" all this cash has gone since January? PLG had over $27 million in cash in December 2016 and financed about $49 million in two separate bought deals and still need more cash? This is $76 million in cash.

One thing for certain is that PLG's management has broken the sacred rule of trust with its shareholders and should be liable for it. Obviously, it has no clue and keeps diluting the stock into oblivion; this action must stop!

The stock price is diving to new all-time lows on a weekly basis and closed at 0.85 per share on Friday probably on expectation of another $25 million bought deal financing at around $0.65 per share.

Perhaps, it is about time for the company to come clean and stop diluting shareholders by selling the Maseve mine (spin-off) to a real professional on an all-share deal that preserves the mine future potential remaining for PLG shareholders in a new company while keeping the New Waterberg potential in tack.

Disclosure: I am/we are long PLG.

I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Additional disclosure: I still own a reduced long position in PLG but I am trading the stock now only.

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