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Stillwater Acquires Marathon PGM for $118 Million

Shares of Marathon Soar 92%

Written by Luke Burgess
Posted September 21, 2010

Shares of Canadian platinum and palladium exploration company Marathon PGM (TSX: MAR) nearly doubled after an acquisition offer.

Stillwater Mining (NYSE: SWC) will acquire all of Marathon's outstanding shares in a cash and stock deal worth $118 million as the company seeks to increase its platinum and palladium resources.

Stillwater, one of only two major North American platinum and palladium producers, will pay $1.78 plus 0.112 shares of Stillwater's common stock for each outstanding share of Marathon. The deal values Marathon at $3.55 per share.

Shares of Marathon gained 92% to $3.62 following the announcement of the acquisition, suggesting some investors feel the offer is too low and could attract a rival bid.

September 2010 mar chart

The deal has been unanimously approved by the boards of directors of both companies and is expected to be completed by the end of November 2010.

Stillwater will gain control of all of Marathon's properties, including a nickel-copper-platinum-palladium project near Thunder Bay, Ontario, which is expected to begin production within three years. The company aims to increase its platinum and palladium production by 40% as a result of the acquisition.

Under the deal, Marathon PGM will also spinoff shares its subsidiary, Marathon Gold Corp., to Marathon PGM shareholders before the exchange with Stillwater.

Commenting on the acquisition, Stillwater's Chairman and Chief Executive Officer, Frank McAllister, noted:

This transaction offers significant value and upside potential to Stillwater shareholders, and as the Marathon PGM/Copper project is one of the few near-term PGM development opportunities on this continent, it solidifies our position as North America's leading PGM producer. We have long recognized that geographic and commodity diversification is an important engine of growth for our company, and we are delighted to have reached an agreement on a transformative transaction that fits perfectly into our long-term strategy to create value for shareholders. Our post-acquisition PGM reserve base and production scale should increase significantly across mines in the US and Canada and will position the Company to capitalize on robust PGM fundamentals and the favorable pricing outlook.

Modern mineral exploration in the Thunder Bay region has led to the discovery several new high-grade precious and base metal deposits in the past few years. Today, the area is home to resources of over:

  • 16 billion pounds of nickel,

  • 501 billion pounds of copper,

  • 33 million ounces of platinum, and

  • 37 million ounces of palladium.

In total, these resources would be worth nearly $1.9 trillion out of the ground.

The entire Thunder Bay region now has significant potential to become a major North American nickel-copper-platinum-palladium camp.

Other major players that have projects in the region other than Marathon PGM include Rio Tinto (NYSE: RTP) and North American Palladium (AMEX: PAL).

These are very large companies. However, there are a few smaller companies that are exploring and developing similar nickel-copper-platinum-palladium projects in the Thunder Bay region — including one that I'm particularly excited about...

It's a junior exploration and development mineral company with over 100,000 hectares, and it's located smack-dab in between the two largest palladium deposits in North America.

To the west is North American Palladium's Lac des Iles Mine, one of the largest palladium mines in North America. Lac des Iles has 3.7 million ounces of palladium resources and is projected to produce 140,000 ounces next year.

To the east is Marathon PGM's Marathon Mine — containing 2.4 million ounces of palladium reserves plus 3.0 million ounces of palladium resources, which was just bought by Stillwater. Take a look for yourself:

September 2010 Great Lake Map 600x308

These are two of the most important palladium mines in North America. Every junior palladium explorer wants land around them, especially after the recent Stillwater acquisition.

This junior company has already a mineral discovery that includes 730,000 ounces of palladium-equivalent resources...

But it is actively working to upgrade and increase this resource base.

The target: 2.6 million ounces of palladium-equivalent resources.

This is worth 12.6 times more than the company's current market cap.

And it means that — once this company becomes the resource-heavy firm their aiming for — share prices could increase 1,163%.

I just finished putting the final touches on a new report that discusses the investment highlights of this new junior palladium stock. You can read this report for free now simply clicking here or copying and pasting the following link into your internet browser's address bar:

Good Investing,


Luke Burgess
Editor, Wealth Daily
Investment Director, Hard Money Millionaire and Underground Profits

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