Eastern Platinum Limited (TSX: ELR)(OTC: ELRFF)

About: Eastplats is based in Vancouver, Canada and listed on the Toronto Stock Exchange (TSX:ELR) and the Johannesburg Stock Exchange (JSE:EPS). The Company has four platinum group metals (PGM) assets in South Africa’s Bushveld Complex.

Interview with Rowland Wallenius, Chief Financial Officer

Eastplats CFO Rowland Wallenius provided and overview of the company and discussed the recent Q3 results. He went over key trends in the Chrome and PGM sector and how the company is positioned to capitalize. Mr. Wallenius discussed goals for the first half of 2021 and the key drivers investors should keep an eye on for ELR moving forward.


WSA: Good day from Wall Street, this is Juan Costello, Senior Analyst with the Wall Street Analyzer. Joining us today is Rowland Wallenius CFO for Eastern Platinum Limited, the company trades on the Toronto Stock Exchange ELR and over the counter ELRFF. Thanks for joining us Rowland.

Rowland Wallenius: Yeah, thank you for having me.

WSA: Yeah sure. Please start off by providing us with the intro of the company.

Rowland Wallenius: Definitely. Eastern Platinum Limited, we have all of our properties, our mining properties owned in South Africa. We’re in PGM territory—Most of it is in the East, remember the Bushveld Complex. We have several properties on the Western and the Eastern limb of that core geological anomaly. It’s almost 80% of the world’s PGM that’s coming out of that area. We’re in operations in Retreatment Projects that is removing from our tailing facility platinum and we have recently put up our PGM scavenger plant to continue to extract PGM from that tailing zone. We still have significant underground assets that remain to be tapped out and re-mined, and so we’re looking to reactive that in the current uptick in the PGM market. And so that’s looking very positive. We’ve had revenue for the past seven quarters, and we look to carry on with that positive outlook of the company.

WSA: Certainly. Can you bring us up to speed there on the recent Q3 results as well as some of the other key news?

Rowland Wallenius: Sure. We announced our Q3 results in the middle of November. Once again we continued to show a strong growth in both our revenues and our mine operating income, and so after several years of being in care and maintenance, we’re very pleased to show growth in both revenue and mining operating income. Our continued positive working capital, it shows good growth. And as we push into developing our PGM extraction and therefore begin to add PGM revenue growth to the bottom line, we see turning the company forward and beginning to produce income for all shareholders so we can increase the bottom line. And I think that’s the key for the company here, we’ll be able to take the resources that we have and begin to turn all those results into shareholder income as we go forward.

We continue to show strong growth in the tons of chrome concentrate that we’re producing and we’ll continue to do that. Our retriever project maintenance state still has three to four more years before we begin to go underground. So we see a good transition between that and the underground results that exist at the company, at the Crocodile River Mine in South Africa. Our PGM scavenger circuits have been operating and we look to turn the revenue taps on during the fourth quarter of those. And then into the future of 2021 until we’re looking at strong PGM revenue growth and continued strong market will help that. So we’re very excited to continue those trends.

WSA: Yeah certainly. And what are some of the other key goals that you are looking at here over the course of the next 6 months?

Rowland Wallenius: Certainly. Really good question. I think for us the key target that we have is we’re focused on continued strength of our Retreatment Project at the Crocodile River Mine to implement the optimization program which will increase the results of the chrome, which will then also assist us in producing better results of our PGM circuits subject to capital constraints and we’ll see what we can do, and see if we can build out in 2021, our main PGM circuits. And if we can do that then continue to take advantage of the high PGM prices, and produce revenue from the Retreatment Project from both chrome and PGM sources.

Following that, in January, we’re looking for the results of our feasibility study regarding our circuit age project which is basically re-mining some of the previously re-mined, already extraction or with chrome and re-activating that for PGM. So that will actually allow us to have multiple PGM strings taking advantage of the current market. And we’ve got a partner that’s completing a feasibility study and look to the results in January. Should those be positive, we can then complete that using our partner and external financing through some sort of debt structure in that joint venture to activate that and produce additional revenue in that circuit. And that will begin to add more revenue and profits to the company as we go forward.

The other projects that we really want to look at more is assessing the underground at the Zandfontein at the Crocodile River Mine in South Africa and looking at how best we can do that. And the third is what timeline can we activate the Mareesburg project on the Eastern limb. We’re completing economic assessment and hopefully we have the results in the New Year which then we can make a decision on how we can build up those projects. All those have very positive potential return in some of the pre PGM heights of where the market is at right now. And so we see in the current environment these will be very, very lucrative projects.

WSA: In terms of the company’s growth strategy and joint ventures and strategic alliances, what are some of the synergies that you look for?

Rowland Wallenius: Sure. The key for us is how can we access the resources that we have on the various properties using either the revenue generation ability that we have or through maybe some strategic partnerships to access external capital to activate those projects. And so that’s some of what we’ve been looking at. What’s the best mix and so as an example, in July we announced a joint venture project in which our partner is doing a feasibility work using our resources. Assuming it’s successful which we’re very hopeful but let’s wait for the result, we can then partner with them using their abilities and so that means to rate the capital so therefore we’re not pushing extra issues on the liquidity of the Eastern Platinum through our joint venture partner. We can build out these projects and then the current shareholders can take advantage of the upside without having that liquidity risk directly on to the Eastern Platinum balance sheet.

So those are the kind of things that we are looking at. How can we leverage our resources against future production and so that example is one, we’re also looking at others and how can we partner with other teams in South Africa to leverage capital against the resources we have. And so we do see that we hope to have some other announcements in the future, but we’ll continue to work and as those come to fruition we can announce those into the market and see our growth. And so we see that we have a really good potential for growth over the next several years using the resources. And we have a significant amount of resources in the CRM project but also in the Eastern limb and some of the other projects. So we’re very comfortable with what we have in our ability to bring those on stream appropriately without putting too much capital pressure on the company.

WSA: Good. And what are some of the other key factors that you feel make you guys unique from some of the other players in the sector and make you unable to capitalize on some of the trends you have mentioned?

Rowland Wallenius: Sure. I mean in South Africa there is some significant issues both with some of the larger companies and what they are looking at. There is some challenges with platinum, and so as people begin to look at the basket of PGMs more. PGMs have always been looked at the basket but platinum we use always lead the way. But the other price increase is in palladium and rhodium have really changed the mix of what you have underground. And so different properties have the different mixture of the different metals, but we’re quite comfortable that the overall basket for us has really increased in the current environment. And we see continued strength in the PGM market for –we think it’s significant around time and so we see that our ability to reactivate our existing mines and some of our other resources using that as a back drop, it’s very positive.

Given the size and given the size of our operation, we see them as reasonably not too capital intensive. Some of the other mines are really large, takes a lot to get going and so we see ours as sort of not too small but not too large either. right. And that’s sort of the right mix to be able to access some capital, access partners, make good decisions on putting a package together that makes sense for all parties without too much capital risk. Because I would say mining in capital risk that can be a big challenge and so that mixture can make a good metric for going forward. And I think we’ve seen some uptake in our stock price to show that there’s still a lot of upside to be had, even given the environment of PGMs. But I think PGMs is a pretty good long term in the current environment in South Africa.

WSA: Yeah certainly. What sort of infrastructures is in place there in terms of roads and access?

Rowland Wallenius: When you think of a remote mine, you don’t think of where we are operating. All the mines have very good infrastructure. Even Mareeseberg which the actual mine is kind of — when you first get there it’s like, “Well, this is a little bit out there,” but it’s still on relatively good roads. And where we actually intend to take the ore output is actually within miles or kilometers of that actual ore body. And so our overall road infrastructure is really excellent in South Africa. Some of the roads are challenging but considering distances some mines have to go, it’s actually relatively close.

I think that represent basically the long term South African serious mined operations and how they built out the roads all over the country. And so where our main mine is, CRM, it’s right off main freeway, literally within two-three kilometers of a main freeway. So you can really get to where you need to go, whether it would be rail or trucking to the ports really efficiently and effectively. And even in the East whether we’re looking to take it to our local smelter or somewhere else, it all makes sense. And so infrastructure with all our properties is not really an issue. Environmental, I think it’s a much larger issue which like all properties, we just need to make sure that we’re looking at what we need to do and appropriately dealing with it upfront before the project goes forward so that all environment issues are taken care of. Looking at what the community needs from a social point of view and really partnering with our local community to make sure that both the company and the communities are partnering to make successful projects.

WSA: Certainly. And perhaps you can talk about your background experience Rowland and the rest of the management team there. What makes you guys qualified to be able to deliver on some of those goals?

Rowland Wallenius: Sure. Our CEO Diana Hu hassignificant experience in the mining and metals trading for many years working out of China, Asia and North America. And so a significant background and operating in the space and really understands what it takes to deliver the material. And working with various partners both in Asia and North America and right now obviously in this particular project in Africa. And so a significant background in that area.

Our COO Andrea Zhang, has a good background in understanding businesses in Asia and working with our team in site. Our GM Hannelie Hanson has worked in numerous mines in South Africa and has worked with us for the last, I think it’s about eight years in various roles and she has been our GM for almost two years now in South Africa. And has previously worked as the Underground and Infrastructure Manager, and so has a really good understanding of what our needs are at site and has the experience of the team below her to put these projects and the operations together. She is overseeing the construction of the Retreatment Project in completion and commissioning of that project, and has been overseeing it for the last seven quarters and so really is on top of that.

Myself I’ve been in both mining and bio technology for over 25 years in various CFO roles and COO roles looking at significant amount of times and building several projects, raising the capital for those projects and then putting them into operations. So I feel very comfortable and confident that we can do the same here and really feel pleased being able to put these projects that we already have into production. And it’s really, in the current environment, if you had a producing mine that’s great but we took something that was in care maintenance and we’re able to take the assets and then build them out and put them into production. Like I said the last seven months of production and revenue can bare that out and so we’re very confident to continue that success. Obviously everyone was challenged this year with issues around Covid but we were able to deal with those lockdowns in South Africa, and right now in South Africa they are at level one and things are operating and has had no issues for the last three months in any of our mining operations. So we are very pleased and happy with the team that we’ve got.

WSA: Great. So once again joining us today is Rowland Wallenius CFO for Eastern Platinum Limited. The company trades on the TSX venture ELR and over the counter ELRFF. Currently trading at $0.27 a share US, market cap is about 27 million US. So before we conclude here Rowland, to get a brief recap of some of your key points here. Why do you think an investor should consider the company as a good investment opportunity today?

Rowland Wallenius: First of all, thank you for this opportunity to talk to the investors. Our company, we’re positioned where we can one, our stoke is still relatively undervalued considering the assets that we have and our ability to put those assets back into production with not too much of a significant capital stretched to the shareholders, shows that I think over relatively short period of time, we can see significant returns to all the stakeholders and specifically the shareholders of the company. What we’re bullish about the various projects that we have and I think showing the last seven quarters of revenue after almost seven years of being in care and maintenance. The new management team from 2016 has been able to take the assets and change the trajectory of the company and therefore the ability of increasing the share price based on those new targets. So we’re quite confident in where we’re going and hope that shareholders could see the growth potential and where we want to go. So that’s why we feel pretty comfortable with our trajectory, and in the current environment our goal is to deliver.

WSA: Well, we certainly look forward to continue to track the company’s growth and report on your upcoming progress. And I would like to thank you for taking the time to join us today Rowland and update our investor audience. It was great having you on.

Rowland Wallenius: Thank you very much. We look forward to continuing to delivering on our targets and thanks for your time.

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