Panther Metals: The Art of the Deal

Panther's dealmaking pace picked up in recent times with the company even managing to do two deals in one day (one a disposal and the other an acquisition). In the process, it ended up gaining a sizeable stake in a soon-to-be-listed entity

Proactive Published 06/06/2022

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In 2021 its main deal had been the demerger of the Australian assets into a separately listed entity on the Australian Stock Exchange (ASX) and then the addition of some extra territories in Canada.

The London main market-listed company now controls a Canadian exploration portfolio and has a strategic stake of 36.6% in the spun-out Panther Metals in Australia and shortly in an AIM-listed entity.

Investment thesis

The gold price has been through a variety of mood swings in 2022 as it has been whip-lashed by war sentiments and then inflation/interest rate sentiments. Despite this, it is still trading at levels that make gold exploration an attractive prospect.

Panther keeps bringing “fresh meat” to the table by doing deals that add value to what it already holds and adds further depth to the portfolio. Its divide and multiply strategy keeps adding value to its net asset value (NAV) and it will shortly have large strategic stakes in two listed explorers over and beyond its own targets in Ontario.

The Hemlo camp may seem like vintage territory, but it is now showing its potential to surprise. As we have noted before, in 2022, the drivers for Panther’s price will be exploration results on its volcanogenic massive sulphide (VMS) targets in Ontario where the auguries are looking very good indeed.

Conclusion

Panther morphed into two companies in fairly short order and now has a strategic stake in another that will shortly be listed on the AIM market as a result of divesting its Big Bear project in Ontario.
The master company holds the stake in the properties in Ontario’s Hemlo camp while the spun-out subsidiary (36.6% controlled and now quoted on the ASX) controls the projects in Australia’s Northern Territory and the Laverton district of Western Australia
Since then, it has added further territory in the Hemlo-Schreiber camp and most recently in the Manitou-Stormy Greenstone belt
Now that the accumulation phase has been achieved, the exploration begins in earnest
Gold is the main target and the metal has enjoyed a strong start to 2022 driven by inflation fears and uncertainty created by Russian sabre-rattling; however, after breaching the US$2,000 mark, gold retreated to around US$1,800 per oz but is now holding its ground in the face of higher interest rates and inflation fears
The company is now positioned in three top tier jurisdictions, directly in Ontario and via the ASX-listed spin-out, Panther Metals in the Northern Territory and Western Australia

Key takeaways

Exiting Big Bear DisposalAnd Entering Fulcrum

In the first week of April 2022, the company announced the signing of a sale agreement for the transfer of 128 mining claims that constituted its Big Bear Project located on the Schreiber-Hemlo Greenstone Belt. Under the terms of the agreement the claims, associated data, and documentation will be transferred to Fulcrum Metals (Canada) Ltd., the Canadian subsidiary of Fulcrum Metals Limited, an Irish registered company, which is seeking an initial public offering on the AIM section of the London Stock Exchange.

As consideration for the sale upon Fulcrum initial public offering (IPO) Panther will be issued with; 20% of the entire issued share capital in Fulcrum as consideration shares; a payment of £200,000 and the grant of a 2% net smelter return royalty.

The agreement is conditional upon, inter alia, Fulcrum being admitted to trading on AIM. The longstop date of the agreement completion is 31 October 2022. In the event that completion does not occur before the longstop date Panther will be due a payment of €50,000 from Fulcrum.

Mitchell Smith, the chief operating officer of Panther is also a director of Fulcrum.

Big Bear Lake Concession

What this MeansAbout Fulcrum Metals

The sale will supplement Panther's Dotted Lake property through indirect exposure to early-stage gold and base metal exploration over a further four properties on the Schreiber-Hemlo Greenstone Belt; with an additional two properties on the Dayohessarah Lake Greenstone and the Michipicoten Greenstone Belt; while diversifying commodity exposure through Fulcrum's two uranium exploration properties in the vicinity of the Athabasca Basin in Saskatchewan.

Entering the Shear Zone

On the same day as the Big Bear disposal was announced the company advised that it had entered into an option and sale and purchase agreement with Shear Gold Exploration to purchase a substantial claim holding known as the Shear Gold Project including the West Limb and Glass Reef gold properties, all on the Eagle-Manitou Lakes Greenstone Belt.

The optioning of Shear Gold brings exposure to a third Ontario greenstone belt.

The Shear Gold Project covers a total area of about 98km2 and is located within the gold endowed Kenora Mining District, some 300 kilometres (km) east of Thunder Bay and equidistant between the towns of Fort Frances and Dryden in north-western Ontario, Canada.

The Manitou Lake Shear Zone

Terms of the Shear DealFinancing

A cash consideration of a mere C$11,325 was paid to Shear Gold Exploration Corporation to secure the option and sale and purchase agreement, under which Panther has committed to:

a minimum spend commitment of C$325,000 to be expended over years one and two
a further C$400,000 to be expended between the second and fourth annual anniversaries of the agreement. Any excess spending in years one and two can be offset against expenditure in years three and four.
the granting to Shear Gold of a net smelter return royalty of 2% over the 32 multicell mining claims covered in the agreement. Panther can elect to purchase 50% of the net smelter royalty (reducing the remaining royalty to 1%) for the sum C$1mln at any time.

Panther Metals PLC (LSE:PALM) can elect at any time to purchase the claims outright through a payment of C$250,000 to Shear Gold.

Geology

The gold potential of the Manitou Lakes area and the wider Kenora Mining District of Ontario has been on Panther's radar for some time.

The Manitou-Stormy Lakes Greenstone belt lies within the western Wabigoon Subprovince, a granite-greenstone terrain of the Superior Province. This volcanic greenstone belt is believed to be an arcuate structure and is 20 km wide and 80 km long. It extends from Lower Manitou Lake in the southwest to Bending Lake on the east, tapering at either end

The known mineralisation is hosted in quartz veins, auriferous shear zones, auriferous semi-massive sulphides infilling fissures and quartz feldspar porphyry.

There are over 200 known gold occurrences in the Manitou Lakes area and numerous historic gold producers in the Eagle — Manitou Lakes Greenstone Belt which is prospective for Archean age orogenic gold and associated base metal deposits.

The company has secured the services of an experienced Ontario geologist, Ryan Hrkac, that put together through Shear Gold.

Exploration work conducted by Shear Gold to date identified numerous gold-bearing structures and favourable geological host rocks through early-stage mapping and surface sampling. The work has focussed on two target areas, namely the West Limb Gold Property and the Glass Reef Gold Property, both of which host historic gold mines which have never been systematically explored using modern techniques or drill tested.

CloseologyManitou Lake's Deal

The recent sale of Kenwest, an immediately adjacent project, announced in March by Manitou Gold Inc, for C$7mln to the private company Dryden Gold underpins the value attributed to the Manitou exploration address.

Dryden Gold is backed by the founders and management of Ely Gold Royalties, which was taken over by Gold Royalty Corp (NYSE-A:GROY) (GRC) for approximately C$300mln in 2021.

This property covers five parallel shear structures.

Kenwest encompasses a 700-metre wide zone, containing a number of highly prospective gold-bearing structures. Together with the Canamerica 502 block Property, there is a 4.5 km long section of favourable structures hosting one past producing gold mine with nine other shafts and numerous exploration pits with unreported production. The high density of shafts in this area is a very positive indicator of the exploration potential.

Regional Context

Stormy Lake

~12 000 ha proposed
Nearby significant gold resource (Pelham zone)
Poorly explored regional fold and fault area with adjacent Timiskaming type sedimentary basin
Many similarities with nearby Gold Rock mining camp

Things to considerRisks

The risks are narrowed at Panther by the almost total absence of political risk in the jurisdictions in which it operates. This leaves us with the following considerations:

Gold price weakness
Financing markets deteriorate
Failure to prove up sufficient resources/reserves

The main risk currently is that the gold price might move unfavourably, but that holds for all gold miners. Our outlook is for gold to break through US$2,000 per oz in 2022 but not to advance significantly beyond that. In our view, anything over US$1,600 is highly prospective for encouraging investment and exploration in the gold space. If a project does not work at US$1,600 then it should not be in consideration.

Financing waves come and they go. At the moment the mining space, in general, is attracting significant attention from dedicated and non-dedicated investors, with the latter group, in particular, seeking to rotate out of other more overvalued sectors in the broader markets. The perspectives look good for funds to continue to be dedicated to precious metals for at least the next two years.

The risk of non-discovery or inadequate resources being defined is a perennial in the exploration space. This risk is best mitigated by the prospectivity of the ground being explored and the quality of the team involved. Panther appears to have addressed these two issues.

Exploration to the ForeConclusion

Panther Metals, the UK-listed version, now has its main focus on Ontario. The split-off of the Australian assets was a welcome move and crystallisation of value. Now the divestment of Big Bear has given the company yet another strategic stake in a new listing to further underpin its NAV.

With the gold price regaining some of its mojo, and the gold exploration pipeline looking thinner than ever at the global level, Panther brings “fresh meat” to the table. Over a fairly short life as a quoted company, it has accumulated a promising portfolio of territory that it will now flesh out with exploration work over the next twelve months.

We had thought the company's deal-doing days were over but it has continued to surprise by flipping assets and building value through the transactions. In what remains of 2022, the drivers for Panther’s price upside will be exploration results, particularly as more work is undertaken on the VMS targets at the Obonga project in the Hemlo district and as the potential at Manitou Lake starts to be gauged.

The coming year will show which project pulls to the front of the pack.