Wellgreen heats up, despite cool market

A reporter recently asked Greg Johnson, the newly appointed president and CEO of Prophecy Platinum Corp., if he was committed enough to his new role as head honcho of the company's emerging Wellgreen Project in southwestern Yukon Territory to stick around for five years.

Johnson, one of the original architects of NovaGold Resources Inc. which built the world-class Donlin gold deposit in Alaska from a few million ounces into a 30-million-ounce-plus resource, chuckled before he responded.

"With the caliber of asset that we have at Wellgreen, the company may not be here in five years, with the development work ahead of us and the potential value that this project may represent to the major mining companies," Johnson said.

Prophecy, seeking to advance the highly prospective PGE-nickel-copper play at Wellgreen, recently hired several senior executives.

Johnson told the reporter that he tends to stick around, citing his 10 years at Placer Dome/Barrick Gold and 12 years at NovaGold.

"This is my focus. This is where I will be concentrating my efforts, and the team will be concentrating our efforts. We are committed to making this work," he added.

Johnson's appointment, reported Nov. 5, followed closely the hiring of proven mine builder John Sagman as senior vice president and chief operating officer and immediately preceded the appointments of Jeffrey Mason as chief financial officer and Samir Devendra Patel as corporate secretary.

Sagman, a professional engineer who held the position of vice president of technical services with Capstone Mining Corp., led the phase V and phase VI prefeasibility studies at the Minto open pit copper-gold mine located about 150 kilometers (93 miles) northeast of Wellgreen. Minto produced 37 million pounds of copper in 2011.

Prophecy has already hit several key milestones at Wellgreen in 2012, including completion of a preliminary economic assessment, an early metallurgical study and a transportation and logistics study.

With the appointment of an experienced management team, the company appears to be on a roll at Wellgreen.

High demand for Wellgreen resources

Platinum, a precious metal 10 times rarer than gold and 100 times more rare than silver, is used primarily in automobile catalytic converters, a growing and vital market in an increasingly environment-conscious world.

The Wellgreen deposit has strong strategic value because it is located in politically stable Yukon Territory, which is currently ranked among the world's top 10 mining jurisdictions. Some 93 percent of the world's current platinum output comes from the more politically risky jurisdictions of South Africa, Russia and Zimbabwe.

Wellgreen could represent 15-20 percent of total platinum production in North America when it goes into production, according to Prophecy's management. Platinum, a precious metal 10 times more rare than gold and 100 times more rare than silver, is used primarily in catalytic converters, a growing and vital market in an increasingly environment conscious world.

As for nickel, Prophecy says declining ore grades and laterite technical challenges resulting in rising nickel mining costs should lead to rising prices. Though nickel markets are expected to have surplus supply in the near term, the junior says smelters will need new sources of nickel sulphide feed and demand is expected to surpass supply, starting in 2014.

The Wellgreen deposit is situated at 1,300 meters altitude near the Alaska-Canada Highway in southwestern Yukon Territory and ranks as one of the world's top undeveloped nickel-copper massive sulphide resources with significant PGM credits and a low second quartile C1 cost of US$2.18/lb nickel (net of PGM and copper credits). The deposit covers an area 2.6 kilometers (1.5 miles) long by 200-400 meters wide and 800 meters deep and is believed to have excellent expansion potential along strike and at depth. These factors significantly minimize the project's indirect costs.

The PEA study, released in July, recommends 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-elements concentrate at a nominal production rate of 32,000 metric tons of mill feed per day with average annual stripping ratio estimated at 2.57 over the life of mine.

Based on these estimates, Wellgreen is expected to produce 2 billion pounds of nickel, 2 billion lbs. copper, and 7.1 million ounces of platinum and palladium plus gold in concentrate over a 37-year mine life.

Surface and underground advances

Prophecy controls 17.5 kilometers of prospective strike length in the Wellgreen west, central and east claims and believes the area to be highly prospective, not only for nickel, copper and platinum-palladium +gold but also for less common PGEs with rhodium, ruthenium, osmium and iridium appearing in assays from hole 188 and in grab samples from underground.

The junior has completed more than 11,000 meters of infill drilling and exploration drilling in its ongoing 2012 program to test the eastern extension of Wellgreen.

The company Sept. 24 reported further drill results of five surface (WS12-195, 196, 197, 200, & 206) and four underground holes (WU12-541, 543, 546, & 547), all of which intercepted significant mineralized widths highlighted by 268 meters of 0.52 percent nickel-equivalent, including 44.04 meters grading 0.47 percent copper, 0.24 percent nickel, and 1.03 grams per metric ton platinum group metals + gold (WU12-541).

Prophecy said the style and occurrence of the mineralization are predominantly consistent with the geological model adopted by the company for the Wellgreen deposit. Higher grade portions are noted nearer to the footwall contact that represents the paleo-basal portion of the intrusion. Surface holes drilled on Central East (WS12-195, 196, 197, & 200) all ended in massive sulphide, and stopped upon entering the footwall lithologies outside of the Wellgreen intrusion, which hosts significant massive sulphide sections modeled from historic underground drill results.

WS12-206 was drilled on the western end of Central West (1,525-foot elevation), and intercepted five meters of 0.71 percent nickel-equivalent outside of the resource model.

Underground holes with the exception of WU12-541 were stopped short of target width due to difficult ground conditions. All underground holes reported here were from station 5 located at Central East Wellgreen (3,077E).

The underground drill program this year didn't manage to set up station 6 at 2,800E, where the highest historic underground drill results were recorded. To date, 27 underground holes have been reported with assays pending from one remaining hole drilled at station 5.

The surface drill program had completed 19 holes by late September and is continuing at a steady pace with two active rigs and assays pending for 10 holes. The Central East and Central West zones span more than 2.3 kilometers end to end (1,600E to 3,900E). One rig is drilling from Central West and the other from Central East with the goal of converging at 2,600E.

Prophecy Chairman John Lee said 2012 drill results demonstrated mineralization of significant strike and width, with several high-grade intercepts.

"We are bullish on PGM and nickel prices going forward. The price of nickel appears to be embarking on a stealthy run recently (up 10 percent at $8.2/lb in September). We expect further positive drill results from Wellgreen shortly," Lee added.

Upside surprises?

An airborne magnetic survey in 2011 identified a 2.3-kilometer anomaly immediately to the east of the main mineralized zone that remains open to the east. Drilling in this area returned results that suggest this anomaly may be an extension of the existing resource.

Hole 188, which intersected 120.9 meters averaging 1.26 g/t PGM + gold, 0.36 percent nickel and 0.30 percent copper within 457 meters grading 0.47 percent nickel-equivalent, proved that Wellgreen Central East and Central West are connected, further establishing both the continuity and tonnage of the deposit.

Johnson said the project offers a good chance for "upside surprises."

"There is a tremendous opportunity for upside expansion," he added.

Prophecy has initiated the environmental process for the project and begun planning its 2013 exploration campaign. In 2013, the company also intends to update the resource estimate for Wellgreen, complete 10,000 to 20,000 meters of drilling and conduct confirmation and additional metallurgical testing. Completion of a prefeasibility study is targeted for 2014.