Canadian Co. Gets US$4.94 M Investment From Top Global Miner

Canadian exploration company Stillwater Critical Minerals (PGE:TSX.V; PGEZF:OTCQB; 5D32:FSE) has announced a strategic equity investment from one of the largest mining companies in the world, Glencore.

Stillwater said it had executed a definitive agreement with Glencore Canada Corp, a wholly owned subsidiary of Glencore PLC,.to purchase 19,758,861 units of Stillwater, priced at 25 cents per unit, for a total of US$4.94 million. A unit in the sale represented one common share and 0.70 of the common share purchase warrant of Stillwater.

The warrants entitle Glencore to purchase one common share at 37.5 cents, which will be exercisable for three years from the data and contain customary acceleration provisions. If exercised in full, the warrants will provide around US$5.2 million in additional financing.

The Canadian mining firm said the proceeds would finance the exploration and development activities at its North American nickel projects, as well as be used for working capital and general and administrative expenses.

After the deal, Glencore will have a 9.99% stake in the outstanding common shares of Stillwater on a non-diluted basis. Including the warrants, it will own 15.87% of Stillwater's outstanding common shares on a partially diluted basis. Glencore does not currently own any interests or control in the company.

In addition to the deal, Stillwater and Glencore have agreed to enter into an investor rights agreement, which will entitle Glencore to certain customary rights, including participation in future equity issuances and a right to maintain its pro-rata position in Stillwater.

There will also be a technical committee to be formed with representatives from each company. 

Michael Rowley, Stillwater's President and Chief Executive Officer, said that having Glencore as an investor is a major step forward as it makes its bid toward becoming a large-scale source of battery and precious minerals in the United States.

"This represents a major step forward for Stillwater as we advance our flagship Stillwater West project with the vision of becoming a large-scale source of battery and precious minerals that are now listed as critical in the U.S. and elsewhere," Rowley added.

Stillwater is a Canadian mining company focused on the exploration of projects rich in nickel, copper, cobalt, palladium, platinum, rhodium, and gold. They have a total of five projects currently, including the Stillwater West project.

Why This Sector?

The mining sector, especially the critical minerals industry, is poised to see significant growth in the coming years amid the demand increase for relevant metals.

Critical minerals, especially, have been at the forefront of international discussions as it one of the building blocks of many modern technologies.

The International Energy Agency noted that the demand for these critical minerals, copper, lithium, nickel, cobalt, and rare earth elements, will grow quickly with the rapid transition toward clean energy.

Analysts from Ahead of the Herd noted that many countries, including the world's leading economy, the United States, have made it imperative to secure reliable supplies for these minerals, which are essential to national security and economic prosperity.

The U.S. Department of Interior updated its list of critical minerals from the original 35 minerals to a new list released in February 2022 that contains 15 more commodities.

The IEA noted that mineral demand for clean energy technologies is set to quadruple by 2050, with annual revenues reaching US$400 billion.

Around US$360 to 450 billion in investments is needed over the course of 2022-2030 for the critical mineral mining sector to reach its projected level of production as demand for the five key critical minerals is seen to increase by 1.5 to 7 times by 2030.

IEA noted that it is critical to ensure a diverse, resilient, and secure clean energy supply chain, particularly for critical materials.

Why Stillwater?

Stockwatch Daily Gold Summer noted that following the agreement to buy nearly 20 million shares, Stillwater's stock leaped 5.5 cents to 22 cents on 1.97 million shares.

"The cash, Stillwater cheers, is for work at its various nickel projects in North America, chief among them being Stillwater West in Montana, which is a platinum group elements, nickel, copper, cobalt and gold project," Stockwatch said.

Stillwater is focused on its flagship development Stillwater West in Montana, which is one of the largest, highest-grade PGE-Ni-Cu regions located within the United States.

"There are very few projects globally, and especially located within the United States, that offer the combination of grade and scale in a producing district that we see at Stillwater West," according to Rowley.

The company is rapidly advancing its Stillwater West projects toward becoming a world-class source of low-carbon, sulphide-hosted nickel, copper, and cobalt.

It also holds a high-grade Black Lake-Drayton gold project adjacent to Treasury Metals' development-stage Goliath gold complex in Northwest Ontario and the Kluane PGE-Ni-Cu-Co critical minerals project.

According to Sadif Investment Analytics, Stillwater has a business rating of 76/100 due to quality financials and attractive valuation with low leverage and revenue stream.

"Overall, the company is rated as high risk. With large information risk, it has great market risk but low operational risk," Sadif stated in its note.

"The current sentiment in relation to Stillwater Critical Minerals Corp is bullish with a neutral

outlook. The company's business forecast is negative based on a deteriorating trend in our estimates. To conclude, we believe Stillwater Critical Minerals Corp to be an above average long-term investment that is prone to perform long term," it added.

The Catalyst: Expansion and 2023 Drilling Program

Its expanded resource estimate on its Stillwater West project released in January delineates a compelling suite of critical minerals contained within five Platreef-style nickel and copper sulfide deposits at Stillwater West.

The company announced a 62% expansion of its inaugural mineral resource estimate on the Stillwater West project consisting of 1.6 billion pounds ("Blbs") of nickel, copper, and cobalt and 3.8 million ounces ("Moz") palladium, platinum, rhodium, and gold ("4E") in a constrained model totaling 255 million tons.

It has recently retained two top geologists from Ivanhoe's Platreef project to guide its expansion as the company lays claim to the largest cobalt resource in the U.S.

"We are now booking drills and crews for our 2023 drill campaign, with a focus on the expansion of the high-grade nickel-copper sulfides identified in our past campaigns. We look forward to announcing further details in the coming weeks, along with the start of drilling," he added.

The company noted that it is banking on potential additional deals on 100% owned, district scale, brownfields, and non-core assets this year as it rides the wave of increasing metals prices and rising demand for domestically sourced critical materials.

Ownership and Structure

According to the company, 22% of Stillwater's stock is held by management and insiders. Executive Chairman and Director Gregory Johnson has 3.28%, with 5.83 million shares. President, CEO, and Director Michael Rowely has 2.79%, with 4.97 million. Director Gregor Hamilton has 1.82%, with 3.25 million. Director Gordon Toll has 0.56%, with 1 million, and Vice President of Exploration Daniel Grobler has 0.04%, with 0.06 million.

8.52% is with strategic investor Glencore Canada Corp., with 19.76 million shares. 

1.21% is with institutional investors. U.S. Global Investors Inc. has 1.12%, with 2 million shares, and Plutos Vermögensverwaltung AG has 0.09%, with 0.16 million.

The rest is with retail investors.

The company has approximately CA$2.2 million in cash and equivalents or cash in the bank, but the company did not disclose its monthly burn rate. As for drilling costs, the company states this will vary greatly with the scale of the program. Stillwater anticipates 2023 will be the largest drill program to date. The drilling season typically starts this month or July and runs into the fall.

Stillwater has a market cap of CA$40 million, has 177 million in issued and outstanding shares, and trades within the 52-week range of CA$0.1078 to CA$0.21, according to Marketwatch.