Prophecy Platinum shares gain on Wellgreen PEA results, 38% IRR

Prophecy Platinum Corp. (CVE:NKL)(OTCQX:PNIKF) unveiled Monday results from an NI 43-101 preliminary economic assessment (PEA) of its flagship Wellgreen project in the Yukon, including a whopping $3.0 billion net present value.

Shares of the company rallied more than 10 per cent early Monday morning, to $2.54 as of 9:37am ET.

The economic report, prepared by Tetra Tech, evaluated a base case open pit mine at an 111,500 tonne per day mining rate, and an onsite concentrator at a 32,000 tonne per day milling rate.

The project is expected to produce 1.959 billion pounds of nickel in concentrate, 2.058 billion pounds of copper and 7.119 million ounces of platinum plus palladium plus gold over a 37-year mine life, with an average strip ratio of 2.57.

The company said the Wellgreen economics yield a 38 per cent internal rate of return (IRR), pre tax, as well as a $3.0 billion net present value at an 8 per cent discount rate, with a payback period of just over three and a half years.

Initial capital costs were pegged at $863 million, including 25 per cent contingency.  Total operating costs are estimated to be $29.74 per tonne of mill feed over the life of mine, based on a diesel power rate of $0.28 per kWh.

"We are pleased with the PEA results," said Prophecy chairman John Lee.

"The numbers indicate Wellgreen as one of most exciting mineral projects in Yukon.

"The company is currently drilling to both upgrade and expand the resource base. The infrastructure is excellent as the project is merely 1,400 meters in altitude and 14 km from the paved Alaska Highway that leads to Haines deep seaport."

Lee further noted that discussions are underway regarding permitting and logistics, with support from local stakeholders.

The base case scenario used in the preliminary report was based on the Energy & Metals Consensus Forecast, a consensus forecast of long-term energy and metals pricing among 20 top international financial institutions.

The copper price used was $3.11 per pound, while nickel was pegged at $10.82 per pound, and platinum at $2,043.50 an ounce. The gold price used was US$1,347.40 an ounce.

Prophecy said that if prices were increased by 10 per cent, pre-tax IRR would jump to 43 per cent, while net present value would soar to $3.7 billion at the same 8 per cent discount rate, with a pay back period of 2.9 years.

The PEA report recommends the development of the Wellgreen deposit as a conventional, diesel truck-shovel open pit mine.

The deposit will be processed using a conventional concentrator to produce bulk nickel-copper-platinum group element (PGE) concentrate.

Average feed grades include 0.32% nickel, 0.26% copper, 0.411 grams per tonne (g/t) platinum, 0.347 g/t palladium, 0.177 g/t gold and 0.02% cobalt.

Average annual pre-tax cash flow was estimated at $367 million over the life of the mine, and $189 milliom from years one to six.

The company said permits to start construction are anticipated to be obtained in 2016, with the production of concentrated expected to begin in 2019.

At a 0.22% nickel equivalent cut-off, the Wellgreen project is estimated to contain an indicated resource of 14.4 million tonnes at 0.68% nickel, 0.62% copper, and 2.23 g/t platinum plus palladium plus gold.

In the inferred category, the project holds 446.6 million tonnes at 0.31% nickel, 0.25% copper, and 0.87 g/t platinum plus palladium plus gold.

The company said the PEA report did not take into account opportunities for improvement such as the inclusion of revenue from rhodium, ruthenium and iridium recovery, increasing the overall resource, and the use of liquid natural gas to lower power costs.

Split stream copper and nickel concentrates to reduce smelting charges were also not included as well as further improvement on metal recovery rates.
The past-producing Wellgreen mine was originally operated in the 1970s as a nickel-copper mine, when prices for platinum group metals were low.
The Wellgreen property is located around 35 kilometres northwest of the airstrip at Burwash Landing, and just 15 km from the Alaska Highway and 402 km from Alaska's Haines deep sea port.
Recent results from the current 20,000 metre program – the largest in the project’s history - included hole WU12-533, which returned 10.4 metres of 0.98% copper, 1.18 grams per tonne (g/t) platinum + palladium + gold, and 0.24% nickel, or 2.54% copper equivalent.
In addition to Wellgreen, Prophecy also holds Manitoba’s Lynn Lake nickel-copper property, which has over 262 million pounds of nickel and 138 million pounds of copper in the measured and indicated categories.