Mitsubishi Corp. will acquire a 25% interest in Stillwater Mining Co.’s Marathon PGM and copper project for $81.25 million and meet the venture’s first cash call of $13.6 million for a total cash payment by Mitsubishi of $94.6 million. Mitsubishi will be responsible for funding its 25% share of the project’s operating, capital and exploration expenditures and has agreed to cooperate and support efforts to secure project financing for Marathon. Mitsubishi also will have an option to purchase up to 100% of the PGM production under a related supply agreement. Stillwater’s total investment in these properties to date is about $159 million.
“This agreement brings a world-class partner to a first-class PGM asset. The Marathon project ranks as one of the few PGM plays in North America, and Mitsubishi’s financial commitment highlights the significant potential value contained in this resource opportunity. This transaction brings to the project a strategic investment by an exceptional and globally integrated business partner and at the same time allows us to be prudent in balancing the cash requirements of our various growth projects,” said Frank McAllister, chairman and CEO, Stillwater.
“For a number of years we at Stillwater have recognized the critical need to grow and diversify the company’s production, which at present is limited to our PGM operations along the J-M Reef in Montana. Consequently we were very pleased to acquire Marathon in 2010. We recognized early on that the development of Marathon likely would require raising new capital and/or bringing in a partner,” said McAllister. “In this regard we are delighted to have the support of Mitsubishi, with whom we have a long-standing commercial relationship and already consider them a key business partner. Mitsubishi’s participation adds greater certainty to Marathon in return for part ownership in the project—a project which is now expected to see Stillwater’s future PGM production increase 30% and add a portfolio diversifying component of copper. Mitsubishi’s relationship with project financing sources, particularly in Japan, should also greatly benefit the project economics.
“The Marathon project promises to make a substantial contribution to the economy of Northern Ontario. Both the initial construction phase and subsequent mine operations should generate significant employment opportunities, critical investment, vibrant economic activity and new revenues for the peoples and the Government of Ontario. Consistent with our long-established commitment to responsible operations and partnering for environmental excellence, we intend to demonstrate safe, sustainable development and show respect for the people, communities and environment where we operate,” said McAllister.
The Marathon deposit is located about 10 km north of the town of Marathon, Ontario, near the north shore of Lake Superior. Stillwater acquired the property, which is an advanced-stage PGM/copper development project, in November 2010. The project is currently in the environmental assessment and permitting stage. Once approved, the project would include development of an open-pit mine and milling operation with one primary pit and several smaller satellite pits. Concentrates produced at Marathon would be transported off-site to a third-party smelter and refinery for final processing. Initial projections suggest the mine would produce about 200,000 oz of PGMs (mostly palladium) and 37 million lb of copper per year over a mine life of about 11.5 years.
Preproduction capital cost of the project is currently projected to be between $550 and $650 million, with first production of PGMs and copper projected in about 2016.