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High hopes for Panoramic's recovery after managing director admits past mistakes

Outgoing Panoramic Resources Ltd. Managing Director Peter Harold has been frank about bad decisions around the company's flagship Savannah project in Western Australia, but broker Hartleys still believes that Panoramic's share price could more than double with the potential of the newer Savannah North ore body.

While Panoramic had flagged delays in commissioning the paste plant, clumpy explosives and reduced ventilation, which plagued Savannah's ramp-up, various market participants were impressed with Harold's honesty at the Oct. 15 Australian Nickel Conference in Perth, Australia, about the company's failings.

SNL Image

Outgoing Panoramic Resources Managing Director Peter Harold addresses
the Australian Nickel Conference in Perth, Australia, on Oct. 15, 2019.
Source: Paydirt Media

Harold later told S&P Global Market Intelligence that Panoramic "underestimated" how hard it would be to access the technical people and operators required and revealed that the company had seen a lot of turnovers to start with.

That was the result of a very tight labor market 12 months ago that persists today, a lack of people experienced in working in the Kimberley region's humidity in Western Australia's far north, and the six- to seven-hour commute from Perth to site via plane and car.

Panoramic has since opted for a roster of two weeks on, two weeks off, which Harold said has helped somewhat. The company still struggles with the stiff competition in the state's mining sector, Harold said, citing one of his jumbo drillers who had received five competing job offers with higher pay.

Harold said Panoramic pays its jumbo operators A$1,200 a shift, but others get paid as much as A$2,000 a shift elsewhere.

He also conceded that Panoramic had underestimated the remnant ore body's complexity, which the company planned to mine first to generate cash flow to help pay for Savannah North's development costs.

"That's proven to be difficult because the old ore body is all secondary stopes, and some of the paste filling that we thought had been done hadn't been done before we closed," Harold said in an interview.

The decision to mine some areas the company "probably shouldn't have" compromised the geotechnical situation, which caused a seismic event. This had effects that required additional ground support and restricted access.

Savannah North, however, promises to be a new beginning for Panoramic. It is a virgin ore body that has never been mined and is "so much easier" as there are no secondary stopes and no paste filling required initially, Harold said.

"Once we get into Savannah North, which is next month, then the whole thing changes," he said.

Hartleys Resources analyst Mike Millikan, who also addressed the conference, said in an interview that Panoramic would have been better off raising more equity or debt and mining Savannah North first, then blending in the original Savannah orebody material later.

Yet Millikan still believes that Panoramic is on the way up, as reflected in his firm's 12-month price target of 70 Australian cents per share and 72 cent valuation, both of which are more than double Panoramic's Oct. 18 price of 31.5 cents.

Platinum-palladium interest

Harold also reported inbound interest from brokers, financial institutions and other market players in Panoramic's 2 million-tonne Panton platinum-palladium project 60 kilometers from Savannah.

Panoramic is running a desktop review on Panton, which Harold said would likely need a new bankable feasibility study as the company is considering producing a chromite concentrate for the stainless-steel market that was not considered before.

Palladium has experienced a price surge lately amid strong demand for automotive catalysts, increased vehicle recycling and a continuing supply shortage, and Harold noted that though many at the nickel conference talked up the electric vehicle market, it is still only a very small percentage of the overall car market.

Thus, Harold believes that palladium remains a very important commodity for catalysts, probably for the next 20 years.

Panoramic will therefore keep Panton, despite selling its Thunder Bay North platinum group metals project in Ontario to Benton Resources Inc. as it is too far from the Perth company's home state and is also a much smaller deposit.