Monday February 2, 2015, 2:30pm PST
By Teresa Matich+ - Exclusive to Platinum Investing News
It’s been a long time coming, but Wellgreen Platinum (TSX:WG) has finally released the results of a preliminary economic assessment (PEA) for its Wellgreen project in Canada’s Yukon.
The project has garnered plenty of attention from market watchers and investors in the platinum-group metals (PGM) space for being a large and potentially open-pittable PGM deposit in a stable jurisdiction.
Currently, the majority of the world’s platinum is produced in South Africa (about 70 percent), while Russia produces the most palladium (about 40 percent) — end users have seen their fair share of supply disruptions from those countries.
Based on the results of the PEA, Wellgreen claims that the project “could be one of the two largest platinum producing mines (along with the Stillwater Mine in the United States) outside of South Africa or Russia.”
The study considers a four-phase, open-pit operation with some selective higher-grade underground mining over a 25-year mine life. Average annual production of 208,880 ounces of PGMs and gold, 73 million pounds of nickel and 55 million pounds of copper is expected over the first 16 years of mining.
Total life-of-mine production is set at 4.4 million ounces of PGMS and gold, 1.7 billion pounds of nickel and 1.1 billion pounds of copper. Furthermore, the current resource remains open along strike and at depth, and Wellgreen has plans to conduct further drilling this year.
“Completion of the 2015 PEA for the Wellgreen project is a major milestone in our Company’s development,” said Wellgreen CEO Greg Johnson in a statement. “These results show a robustly economic project at conservative metal prices and an expected base case mine life of 25 years utilizing only one-third of the pit constrained mineral resources.”
The mine features a low life-of-mine average strip ratio of 0.75:1, and the company has plans to stockpile lower-grade material for processing through years 17 to 25. In terms of production, the mill at Wellgreen will put out a bulk nickel-copper-cobalt-PGM-gold concentrate for shipping to deepwater ports in Alaska.
Taking a look at the economics of the project, Wellgreen will garner initial capital expenditures of C$586 million and has a base-case, after-tax NPV of C$1.193 billion. Investors would see an IRR of 24.6 percent and a payback period of 3.2 years.
Admittedly, the base case prices used in the report are a bit higher than current prices, at $1,450 for platinum, $1,250 for gold and $3 for copper.
To shed more light on that subject, Wellgreen’s PEA includes average base-case price assumptions from its peers — based on data from SEDAR — and Wellgreen’s assumptions are definitely lower in comparison. The report also contains consensus long-term pricing forecasts based on data from Bloomberg, and again, the price assumptions used in Monday’s PEA are lower.
Beyond that, cash costs for precious metals from Wellgreen are also fairly low, set at US$457 per ounce of PGMs and gold on a co-product basis with base metals at the project. Base metals costs are a bit higher at US$5.78 per pound of nickel equivalent.
In terms of what’s next, Wellgreen has a lot planned for 2015. The company will conduct drill programs to upgrade its resources at Wellgreen, and expects to complete additional metallurgical testing and advanced engineering work at the project, among other things.
Wellgreen got a bit of a bump from the market on Monday. Shares of the company were up 4.69 percent as of 12.19 p.m. EST, trading at 0.67.
Securities Disclosure: I, Teresa Matich, hold no direct investment interest in any company mentioned in this article.