-- Posted Wednesday, 3 April 2013 | | Disqus
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 release announced 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/.
Legal Notice / Disclaimer: Prophecy Platinum advertises on GoldSeek.com. The author and members of the GoldSeek group may or may not own shares in the company described by this report.
Simon Russell is a mining and geological engineer with over 10 years of diverse industry experience. His background includes hydrology and environmental engineering, exploration geology, underground contract mining, mine engineering, project management, and mine investment analysis. He has worked for many different types of mineral projects across the western United States and internationally for investors, consulting firms, and both major and junior resource companies. Mr. Russell is not an investment advisor and this is not intended as investment advice.
Legal Notice / Disclaimer: This document is not and should not be construed as an offer to sell or the solicitation of an offer to purchase or subscribe for any investment. GoldSeek.com, have based this document on information obtained from sources it believes to be reliable but which it has not independently verified; GoldSeek.com makes no guarantee, representation or warranty and accepts no responsibility or liability as to its accuracy or completeness. Expressions of opinion are those of GoldSeek.com only and are subject to change without notice. GoldSeek.com assume no warranty, liability or guarantee for the current relevance, correctness or completeness of any information provided within this Report and will not be held liable for the consequence of reliance upon any opinion or statement contained herein or any omission. Furthermore, we assume no liability for any direct or indirect loss or damage or, in particular, for lost profit, which you may incur as a result of the use and existence of the information, provided within this Report.
Additional Disclosure: The owner, editor, writer and publisher and their associates are not responsible for errors or omissions. The author of this report is not a registered financial advisor. Readers should not view this material as offering investment related advice. Authors have taken precautions to ensure accuracy of information provided. Information collected and presented are from what is perceived as reliable sources, but since the information source(s) are beyond our control, no representation or guarantee is made that it is complete or accurate. The reader accepts information on the condition that errors or omissions shall not be made the basis for any claim, demand or cause for action. Past results are not necessarily indicative of future results. Any statements non-factual in nature constitute only current opinions, which are subject to change. The information presented in stock reports are not a specific buy or sell recommendation and is presented solely for informational purposes only. The author/publisher may or may not have a position in the securities and/or options relating thereto, & may make purchases and/or sales of these securities relating thereto from time to time in the open market or otherwise outside of the trading timeframe listed above. Nothing contained herein constitutes a representation by the publisher, nor a solicitation for the purchase or sale of securities & therefore information, nor opinions expressed, shall be construed as a solicitation to buy or sell any stock, futures or options contract mentioned herein. Investors are advised to obtain the advice of a qualified financial & investment advisor before entering any financial transaction.
-- Posted Wednesday, 3 April 2013 | Digg This Article
| Source: GoldSeek.com
