Wellgreen Platinum Ltd.

-- Posted Wednesday, 3 April 2013 | Share this article | Source: GoldSeek.com

By Simon Russell, GoldSeek.com Mining Analyst

Prophecy Platinum (NKL: TSX-V,PNIKF: OTCQX) is a Canadian-based PGM-Ni-Cu company that is focused on developing their district-scale Wellgreen project in the Yukon and fully permitted Shakespeare mine in Ontario. The company is well positioned with respect to fundamental supply and demand changes in the PGM market, and recently appointed managers are helping their team expedite growth.

Prophecy currently has a market cap of about $51.6 million, since they are trading around C$0.75 per share and have 68.8 million shares issued and outstanding. The company also has approximately 82.6 million shares fully diluted, no debt, and about $1 million of working capital.

Wellgreen PGM District, Yukon

Prophecy Platinum’s 100%-owned Wellgreen property is located about 300 km from Whitehorse in the southwestern corner of Canada’s Yukon Territory.

This property is easy to get to year-round by the Alaska Highway and a 15 km access road. Future metal concentrates would be transported from the property along 392 km of paved road to the port at Haines, Alaska.

View of the Wellgreen Project – Courtesy Prophecy Platinum

Wellgreen was previously mined underground for nickel and copper in the early 1970s and has 3 km of underground workings. However, the deposit’s outstanding PGM mineralization, size, and potential for low cost bulk tonnage surface mining have only recently been realized with modern exploration and current metal prices. Also, vehicle emission regulations and the use of PGMs in Catalytic converters were only developed after the old underground mine was closed.

Geologically, Wellgreen’s metal occurs within an ultramafic intrusion. However, the rocks here are unique in comparison to most other PGM deposits because of its thick zone of disseminated sulfide minerals that contains relatively high concentrations of platinum, palladium, and gold with nickel and copper. This deposit also outcrops to surface, whereas a lot of other PGM mines are deep underground.

According to Wellgreen’s NI 43-101 compliant Preliminary Economic Assessment (PEA) that was published August 2012, a future surface mining operation could potentially have a NPV of $2.4 billion (at 8% interest) and pre-tax IRR of 32%. Capital expenditures are estimated to be about $863 million.

This preliminary mine design could produce approximately 7 million ounces of PGMs and gold, plus 2 billion pounds of nickel and 2 billion pounds of copper. Over its 37 year lifetime this mine would produce 32,000 tpd of ore and have an average strip ratio of about 2.6 to 1.

When accounting for co-products, the 2012 PEA results shows that Wellgreen’s production costs could be in the lower quartile of the world’s PGM mines.

Even with these robust results management continues looking for ways to optimize the project’s economics as they work towards updating the PEA in early 2014 while en route to a Preliminary Feasibility Study. For example, while the PEA assumes the camp and plant’s power would be generated from diesel fuel, liquefied natural gas is being evaluated as a cheaper alternative. In 2012 Prophecy’s consultants SGS completed a metallurgical study that is being used to help guide the mill design and optimize metal recoveries.

The primary focus of Prophecy’s upcoming 2013 exploration program is infill drilling so as to upgrade a significant portion of the resource from Inferred to the Measured & Indicated categories. Management also intends to test areas of the resource that show potential for a high grade starter-pit. Richer concentrations of mineralization trend towards the surface at the western region of the existing resource, so the upcoming drill program will also test targeted areas within this region.

The following figure shows Wellgreen’s 2.5 km strike length in green at the center of their claim block. This deposit remains open to exploration at depth, and along a district-scale 17.5 km trend of ultramafic intrusive rocks.

(Map from Prophecy Platinum)

The following cross-section is located near the middle of the resource and illustrates the thick intervals of disseminated mineralization recovered in 2012 drill hole 214 and 2011 hole 188.

(Map from Prophecy Platinum)

The company’s February 4, 2013 news releaseannounced that drill hole WS12-214 cut three mineralized intervals that total 362.8 meters of 2.22 g/t PtEq or 0.49% NiEq. The $6.5 million 11,000 meter 2012 drill program also intersected grades that on a gram-meter PtEq basis are much higher than most North American PGM mines.

The upcoming campaign will also test three important under-explored targets that illustrate the property’s district-scale potential:

1. A geophysical anomaly that is interpreted as potentially being the Wellgreen deposit’s high grade feeder zone.

2. The buried 2 km-long Quill target that was intercepted by historic test-holes.

3. The Burwash target that has been identified by historic magnetic geophysics, geochemistry, trenches and initial drill holes. This target’s footprint in the ultramafic rocks is larger than the current Wellgreen resource.

Shakespeare Mine, Ontario

In addition to developing the Wellgreen district, Prophecy Platinum’s management and technical team are also busy optimizing the economic potential of their fully permitted Shakespeare PGM Ni-Cu mine near Sudbury, Ontario. This past producing surface mine could potentially be quickly and inexpensively re-started by using nearby toll mills, and a contract miner with leased equipment to minimize capital expenditures. Prospective new haulage options are also being considered.

Management

In the fourth quarter of 2012, Prophecy made some adjustments to their management team in preparation of advancing the company to the next level. President and CEO Greg Johnson is a P.Geo who previously developed several world class mineral deposits as the former President and CEO of South American Silver, and a co-founder of NovaGold.

Senior VP and COO John Sagman is a P.Eng with over 30 years of operations and engineering experience. Mr. Sagman was former VP Technical Services with Capstone, who operates the Minto gold-copper mine in the Yukon. He was also previously a Project Manager with Xstrata and Vale in Sudbury, Ontario.

PGM Supply & Demand Fundamentals

The company has compiled an impressive dataset of PGM market supply and demand fundamentals on their website and in their Presentation, which investors should consider.

The most relevant issue is that over 90% of the world’s PGM production comes from mines in South Africa, Zimbabwe, and Russia. While global demand continues to grow, supply from these countries has been declining. In comparison to these politically risky jurisdictions, Prophecy is focused on projects located in some of Canada’s most mining friendly areas.

Furthermore, the company has reached an agreement to collaborate on responsible development of the Wellgreen deposit with the local Kluane First Nation. Consequently the risk to reward ratio for Prophecy Platinum is very compelling.

Summary

Prophecy Platinum (NKL.TSXV, PNIKF.OTCQX) provides investors with low risk exposure to Canadian PGM Ni-Cu projects that have tremendous upside from district scale exploration and development at Wellgreen, plus near-term production potential at their fully permitted Shakespeare mine.

The following chart illustrates how undervalued the company’s share price is compared to the spot price of platinum, despite significant value being added at both Wellgreen and Shakespeare:

(Chart from Prophecy Platinum)

For more information about Prophecy Platinum please visit www.prophecyplat.com/.