Prophecy Platinum says phase 1 metallurgy results could “enhance economics” at Wellgreen

Thu 10:56 am by Carrie White and Brad Lemaire

Prophecy Platinum shares are higher Thursday, as the company says its latest metallury results could "enhance the economics" of its Wellgreen project.

Prophecy Platinum (CVE:NKL) Thursday announce the results of its ongoing metallurgical testing at its Wellgreen project, a Platinum group metals (PGM)-rich nickel-copper property in the Yukon.

Shares of the company were up 0.86 per cent as at about 11 a.m. ET, trading at $1.17.

The company said that the results conclude the first phase of a metallurgical program that began in 2011, and show it is now possible to produce separate nickel-platinum group elements (PGE)-copper and copper-PGE-gold concentrates from disseminated sulphide-bearing, ultramafic mineralized rocks that comprise the bulk of Wellgreen's resource.

Prophecy noted that the metallurgical tests, completed at SGS Laboratories, indicate separate nickel- (PGE)-cobalt concentrates grading up to 12.9 per cent nickel and copper-PGE-gold concentrates grading up to 23.2 per cent copper can be produced from Wellgreen.

Testing showed that locked-cycle test results successfully produced a nickel-PGE-cobalt concentrate grading 12.9 per cent nickel, 13.7 grams per tonne (g/t) PGE and 0.76 per cent cobalt, and a copper-PGE-gold concentrate grading 23.2 per cent copper with 7.0 g/t PGE and 1.4 g/t gold.

“The ability to produce split concentrates is a milestone for the Wellgreen project,” said chairman John Lee.

“The new diversity in product marketability increases the number of potential strategic partners which will no doubt result in more favourable life of mine smelter terms.”

Lee added that the high-grade concentrate and increased metal recoveries will also result in a drop in the overall concentrate transportation cost improving the project viability.

“The results are preliminary with grade and recovery optimizations planned on both precious and base metals in phase 2 of the metallurgical program in the fall.”

Conventional flotation conditions were used to produce a concentrate with emphasis on base metal recoveries from locked-cycle testing.

The company said its recently completed preliminary economic assessment PEA was based on the assumption of Wellgreen project producing a bulk concentrate.

In addition to discounting the standard smelting recoveries in the financial model, a further 25 per cent smelter cost factor was applied to account for the bulk concentrate option.

“The results reported today indicate the 25 per cent cost factor is likely conservative in light of the added marketability of separate concentrates,” said the company in a recent release.

“This may reduce the downstream costs, and enhance the economics of the Wellgreen project.”

Prophecy Platinum was spun off of Prophecy Coal (TSE:PCY) in June of last year, and is focused on increasing the resource at Wellgreen, with the highly-anticipated PEA of the project released in July.

The PEA, 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 study further noted that the development of the Wellgreen deposit will produce a pre-tax internal rate of return (IRR) of 38 per cent and a net present value (NPV) of $3.0 billion, based on an 8 per cent discount rate.

Initial capital costs were pegged at $863 million, including a 25-per-cent contingency. The deposit is to be processed using a conventional concentrator to produce bulk nickel-copper- PGE concentrate.

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

The underground drilling program at the site, is part of an extensive infill drilling campaign designed to upgrade a significant portion of Wellgreen's NI 43-101 inferred resource into the measured and indicated category.

The July 2011 NI 43-101 technical report gave the project 289 million tonnes of inferred resource grading 0.38 per cent nickel, 0.35 per cent copper, 1.18 grams per tonne PGM plus gold, and 14 million tonnes of indicated resource at 0.69 per cent nickel, 0.62 per cent copper, 2.25 grams per tonne PGM plus gold.

An updated resource is planned for early 2013, with a pre-feasibility study expected soon after based on the updated numbers.

In addition to Wellgreen, Prophecy also holds Manitoba’s Lynn Lake nickel-copper property, which has an NI 43-101 compliant measured resource of 1 million tonnes at 0.76 per cent nickel and 0.36 per cent copper, and an indicated resource of 21.9 million tonnes at 0.56 per cent nickel and 0.3% copper, according to a technical report in January 2010.