This report analyzes the Marathon Project with specific reference to the market prospects for palladium in the medium term. The analysis suggests that the Project entails far greater economic risk than Generation PGM’s promotional material allows. In particular, the report draws attention to the following areas of concern:
- As a low-grade orebody, the Marathon Property may well be rendered uneconomic in the event of a decline in metals prices. Since the 1980s, the Property has been abandoned by several major mining companies in light of weak commodities markets. Most recently, in 2013, the former Property owner Stillwater Mining was subject to a proxy contest centring on management’s “faulty due diligence” in purchasing the Property, ultimately resulting in the Project’s suspension in 2014.
Although palladium prices are currently well above their long-term averages, there are several risks that could undermine the metal’s rally within the span of a few years, including:
- The growing market penetration of electric vehicles at the expense of internal combustion engine vehicles;
- The substitution of palladium by platinum in the production of automotive catalysts; and
- An increase in the volume of palladium sales from either the Russian state stockpile or from new proposed mining projects in Russia.
The analysis begins with an overview of global palladium production, reserves, as well as its various end uses before highlighting in greater detail each of the areas of concern noted above.