Monday, 28 May 2012

Casimir Capital sees "strong economics" at Prophecy Platinum's Wellgreen project

Natural resources investment bank Casimir Capital has started coverage on Prophecy Platinum (CVE:NKL), expecting "strong
economics" in a Preliminary Economic Assessment (PEA) at its flagship Wellgreen project.

Prophecy Platinum is focused on developing platinum group metals (PGM) and Nickel sulphide projects. Its flagship 100 percent-owned Wellgreen project, a PGM-rich Nickel-copper project located in the Yukon comprising 120 claims over 2,500 hectares.

A July 2011 technical report gave the project 289 million tonnes of inferred resource grading 0.38% Nickel, 0.35% copper, 1.18 grams per tonne PGM (Platinum group metals) plus gold, and 14 million tonnes of indicated resource at 0.69% Nickel, 0.62% copper, 2.25 grams per tonne PGM plus gold.

Casimir has initiated coverage on Prophecy with a "Speculative Buy" rating and $7 target price. A PEA for Wellgreen is expected in June 2012.

"We expect the study to demonstrate strong economics based on the current resource and through production of single bulk concentrate," Casimir analyst Steven Willis said.

"Directly to the east, a 2.3 km magnetic anomaly suggets potential for resource expansion. If the deposit holds together, the additional strike length implies the resource cound increase by nearly 90%."

Casimir is assuming Wellgreen will go into production in 2017 at an annual rate of 98.6 million pounds of Nickel equivalent at cash costs of $0.98 per pound of Nickel. The investment bank assumes a 250 million tonne resource will be mined over 20 years for a total capex of $1.6 billion, with a 10% Net Present Value of $1.3 billion and IRR of 28% and 3.6-year paybeack period.

In terms of future catalysts, metallurgical test drilling is ongoing with a 20,000-metre drilling program scheduled for 2012. A
resource update is due in early 2013 with a pre-feasability study expected in early 2014.

The company's other holdings include the Lynn Lake Nickel-copper project in Manitoba, the Las Aguilas Nickel-PGM deposit in
Argentina, as well as five prospective claims in Uruguay.

Prophecy has agreed to acquire Ursa Major Minerals (TSE:UMJ) in a stock-swap deal announced in March 2012. Ursa Major's key asset is the producing Shakespeare Nickel Mine located 70 km west of Sudbury, Ontario.

As at January 10, 2012 the company had cash and cash equivalents of $2 million and $7 million in short-term investments.

In March, Mackie Research initiated coverage on Prophecy Platinum at "Speculative Buy" with a $7.50 target.

"We like Prophecy Platinum for its decisive management team, growing technical capability and valuation upside potential. The

Wellgreen project stands out for its size, metal mix, open-pit potential, good jurisdiction and blue-sky potential," Mackie analyst Matt O'Keefe said.

Mackie Research expects the PEA for "world-class" Wellgreen to be followed by a capital raise of $20 to $30 million to fund ongoing infill and exploration drilling.

Last week, the company unveiled "encouraging" assay results from Wellgreen. The assay results suggest that 6E PGE composite grades increase by an average of 28 percent (disseminated sulphide) to 114.8 percent (massive sulphide) over grades previously announced when only platinum and palladium were considered.

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