Broker Ambrian described Sylvania Platinum's (LON:SLP, ASX:SLP) tie-up today with Aquarius Platinum (South Africa) (AQPSA) as "great".
The company announced it had agreed a deal with the world's fourth largest primary platinum producer, in which the pair will assess mining ore from the Everest North deposit in South Africa's Bushveld complex.
The agreement is with Aquarius Platinum (South Africa) (AQPSA) and will see a committee formed to update the existing feasibility study for processing PGM-bearing (Platinum Group Metals) ore from Everest North.
Specifically, the committee will look at demonstrating the viability of mining for PGMs at Everest North and thereafter treating and concentrating them at the Everest South metallurgical plant to produce saleable PGM concentrate.
An application for a mining right for Everest North will also be submitted, said Sylvania today in a statement.
If mining is viable, AQPSA and Sylvania will form a joint venture - each holding a 50 percent share.
On the granting of amining right, Sylvania will pay AQPSA R6 million in cash. The JV will appoint AQPSA as contract miner to carry out all mining at Everest North, it added.
All PGM concentrate produced from mining by the JV at Everest North shall be sold by the joint venture, in accordance with an off-take agreement.
Ambrian Analyst Nick Mellor said in a note: "The original feasibility projected a mine life of eight years and average production of 46,000/oz pa of PGMs from an open pit-able resource.
"When commercialised, this would equate to an approximate addition of 20,000oz/pa production for Sylvania. The delivery of these ounces is significantly de-risked though the association with Aquarius’ Project Development team.
"The effect of this addition on investors perception of the company cannot be underestimated in our view."
CEO of Sylvania Terry McConnachie said today: "Today's agreement with a world-renowned platinum producer will allow us to successfully exploit significant value from the Vygenhoek Prospecting Area.
"While we are effectively giving away half of our ore resource the advantage to Sylvania is a vastly reduced capex bill and thus increased IRR and NPV.
"The area has further resource potential for Platinum Group Metals and we are delighted that by signing this JV we are now in a position to re-examine the feasibility study with our new partners, Aquarius Platinum."
The broker retained its 'buy' recommendation for the stock with a target price of 80 pence (current share price 41 pence).
It said: "Sylvania is cheap on the basis of its existing production profile at its producing operations. Any growth outside of this (Everest North and Northern Limb) is therefore 'in for free’.