Glencore takes 15.4% Stillwater Critical Minerals stake

Swiss diversified miner Glencore (LSE: GLEN) has increased its stake in Stillwater Critical Minerals (TSXV: PGE; US-OTC: PGEZF) to 15.4% for a total investment of C$7.1 million in less than a year, the junior said on Wednesday.

Glencore, one of the world’s top-10 miners by market value, now owns 15.4% of the Montana platinum group metals developer and its eponymous project next to Sibanye-Stillwater’s (JSE: SSW; NYSE: SBSW) Stillwater Operations. The mine is credited with producing 14 million oz. of platinum and palladium production since 2017. Glencore had invested just under C$5 million in June last year to take a 9.99% position in Stillwater, seen at the time as a major endorsement of the Stillwater West project.

The strong expression of interest from both new and old investors is a recognition of the Stillwater West project’s potential, according to president and CEO Michael Rowley.

“Our vision of rapidly advancing a large-scale primary source of low-carbon nickel, cobalt, PGMs, copper and other critical minerals in a famously productive American mining district is strongly aligned with the U.S. government’s stated mandate to secure domestic supplies of nine of the minerals we host at Stillwater West,” Rowley said in a statement.

The news sent Stillwater’s shares up 7% by the closing bell at C15.5¢ apiece, having touched C13¢ and C23¢ over the past 12 months. It has a market capitalization of C$30.7 million($22.3m), compared with Glencore’s roughly $72 billion market cap.

Glencore’s approach to investing in early-stage companies typically involves providing significant financial backing, which improves the explorer’s finances for development. In March last year, the major made a similar investment in GT Resources (TSXV: GT; US-OTC: NKORF), formerly Palladium One Mining. GT develops nickel-copper projects in Ontario and Finland, and the investment was part of a strategy to boost GT’s exploration and development know-how.

Glencore has been rebalancing its portfolio to meet the rising demand for critical materials like copper, cobalt, nickel, and platinum group metals, which is telling of a strategic shift towards energy transition commodities, Fitch Solutions unit BMI says.

“Shifting cash flows from coal assets to transitional metals will better position the firm (Glencore) to take advantage of more favourable long-term trends in the metals market,” it said in a March report.

In February, Glencore sold its stake and suspended production in the Koniambo nickel operations in New Caledonia, a French territory between Australia and Fiji, following declining prices and increased-cost operations.

Glencore stepped in with a C$2.1 million lead order in a private placement of 27.8 million units at C14¢ totalling C$3.9 million. It includes one common share and half a warrant, which allows the holder to buy an additional share at C21¢. Exercising all the warrants could generate a further C$2.9 million.

The deal could be worth as much as $2.9 million more for Stillwater depending on share performance and the exercise of warrants.

In the shadow of a giant

As of January last year, Stillwater had defined an inferred 1.6 billion lb. of nickel, copper and cobalt and 3.8 million oz. of palladium, platinum, rhodium and gold within a constrained model totalling 255 million tonnes at an average grade of 0.39% nickel-equivalent. The 2023 resource spans five deposits in the 9-km central area of the project, all of which are open along strike and at depth.

Next door, Sibanye’s Stillwater operations, comprising the Stillwater East and East Boulder underground mines near the towns of Nye and McLeod, mainly mine the J-M Reef. The deposit is considered the highest-grade PGM deposit globally with head grades averaging 12.62 grams per tonne platinum and palladium in the second half last year. The mine boasts a projected mine life through 2053 and East Boulder through 2065 and is the model Stillwater aims to emulate.

According to the company, multi-kilometre-scale geophysical targets and metal-in-soil anomalies indicate excellent expansion potential at Stillwater West. Untested anomalies and earlier-stage targets extend across much of the 32-km-long property.