Prophecy Platinum Passes a Milestone with its First Yukon PEA
By Kevin Michael Grace
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Throughout a 50-year history with numerous owners, the Wellgreen Project has never lacked for promise. Extensively drilled, it briefly produced high-grade nickel and copper in the Yukon 30 years ago. The property has been owned since 2011 by Prophecy Platinum TSXV:NKL, which has added gold and platinum group metals (PGMs) to the traditional resource base. With the June 18 release of a positive preliminary economic assessment, that promise has begun to emerge. Wellgreen could, in the words of Chairman John Lee, “potentially reach of the size of the some of the world’s largest nickel-sulphide projects.”
Lee calls Wellgreen “humungous.” It measures 22.1 square kilometres precisely, with “up to almost 18 kilometers of known mineralization. We’ve only explored two kilometers. The existing resource, which is at 450 million tonnes, is entirely encapsulated in that two-kilometer strike.” The project is located in the southwest of the Yukon, 317 kilometres northwest of Whitehorse, 35 kilometres northwest of the Burwash Landing airstrip, 15 kilometres from the Alaska Highway and 402 kilometres from the deepsea port of Haines, Alaska.
According to the PEA, Wellgreen hosts (at a 0.22% nickel-equivalent cutoff), an indicated pitshell of 14.4 million tonnes grading 0.68% nickel, 0.62% copper, 0.05% cobalt, 0.51 grams per tonne gold, 0.99 g/t platinum and 0.73 g/t palladium. The inferred pitshell is 446.6 million tonnes grading 0.31% nickel, 0.25 copper, 0.02% cobalt, 0.16 g/t gold, 0.38 g/t platinum and 0.33 g/t palladium.
Over a 37-year mine life, Wellgreen is expected to produce annually 53 million pounds nickel, 55.6 million pounds copper, 3.6 million pounds cobalt, 36,600 ounces gold, 66,600 ounces palladium and 89,200 ounces palladium. This totals 1.96 billion pounds nickel, 2.06 billion pounds copper and 7.12 million ounces of platinum+palladium+gold in concentrate.
The project has a CAPEX of $863 million, a pretax internal rate of return (IRR) of 38%, a pretax net present value (NPV) of $3 billion (at an 8% discount rate) and a 3.55-year payback. The CAPEX is based on diesel power, but Prophecy will consider reducing energy costs by such means as importing natural gas and building natural gas plants.
We’ve only explored two kilometers [of almost 18]. The existing resource, which is at 450 million tonnes, is entirely encapsulated in that two-kilometer strike —John Lee
Lee comments, “The early indications of economic viability appear to be excellent. I think the market also reacted fairly well. We traded a half million shares, which is the highest trading-volume day for this year.”
The market has of late reacted negatively to several large-CAPEX projects. Does Lee believe $863 million will be amenable to investors? “I think we have to look at things relatively,” he responds. “This mine, once it is in production, will become one of the largest platinum-palladium projects in all of North America. And given the grade is fairly high compared to other deposits, we’re able to reduce the footprint to the milling rate of 32,000 tonnes per day at a fairly decent strip ratio of 2.5 to 1. I think our footprint is lower than the other megaprojects like International Tower Hill['s TSX:ITH Alaska Livengood gold project], that envisions 200,000 tonnes or 300,000 tonnes of mining weight, whereas we’re about 100,000 tonnes of mining weight.”
He continues, “We look at Wellgreen as more of a midsized project, and because of our location we’re able to eliminate a lot of the infrastructure costs. Not to mention that the $863 million CAPEX includes a 25% contingency. Not to say there won’t be project overruns, but we’re fairly comfortable with these numbers compared to the numbers turned out by our peers. Relative to our NPV, which is pegged at $3 billion, the CAPEX also seems very reasonable, versus other projects that have a $2-billion CAPEX and a $2-billion NPV.”
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