Wellgreen Platinum Ltd.
Is a Canadian mining company focused on the acquisition and development of platinum group metals (PGM) projects in politically stable, mining-friendly jurisdictions.
The Company is led by a highly-experienced management team with a track record of successful large scale project discovery, development, operation and financing.
The 100% owned Wellgreen project hosts a large PGM-Ni-Cu deposit located just off the Alaska Highway in the southwest of Canada’s mining-friendly Yukon Territory. A 2012 Preliminary Economic Assessment (“PEA”) on Wellgreen estimated open pit production potential of 7 million ounces of PGM + gold, 2 billion pounds of nickel and 2 billion pounds of copper over a 37 year mine life (please refer to footnote disclosure on the PEA below)1. The Wellgreen property features excellent access and transportation infrastructure and the deposit is just 15 kilometres by all-weather road from the paved Alaska Highway, a major all-season trucking route leading to deep sea ports at Haines and Skagway, Alaska. Ranked in the top 20 mining jurisdictions globally in the 2013/2014 Fraser Institute Survey of Mining Companies, the Yukon has a rich mining heritage that dates back to the Klondike gold rush of the late 1800s.
Wellgreen Platinum is focused on the advancement of the Wellgreen project toward production, with current efforts underway designed to further define the mineral resource, evaluate overall project economics, simplify project financing requirements and complete environmental permit applications.
The Company expects to release the results from an updated PEA by the end of Q2 2014.
2014 PEA Update
The Company anticipates releasing the results of an updated PEA on the Wellgreen project in Q2 2014 and associated engineering studies on pit designs, the location and general arrangements of the mill, tailings pond, waste piles, water treatment system, accommodations, and water (domestic, potable and process) are in progress. The updated PEA will consider Liquefied Natural Gas (LNG) as a primary power source rather than higher cost diesel, which was the primary power source in the 2012 PEA. The project team is investigating a staged capex approach with a lower production rate than the 2012 PEA during the initial years of operation with the goal of decreasing pre-production capital expenditures. The Company will also evaluate the economics of larger production scenarios in the PEA update.
The Company has continued environmental baseline studies and First Nations consultation in order to begin the environmental assessment process in 2015.
2013 Project Activities
Mineralization at Wellgreen has been defined over a strike length of approximately 2.5 km and is open in most directions. Drilling conducted since 2012 has identified a nearly continuous zone of disseminated PGM, nickel and copper mineralization in ultramafic intrusive rocks, starting from surface and continuing down to 200-500 metres, with a higher grade package of ultramafics lower in the section of up to 150-300 metres with substantially higher PGM grades.
An updated geologic model for the project that integrates all existing geologic information is being developed as part of work to provide an updated resource estimate for the PEA update and which allows for the development of priority targets for future testing.
The 2013 Project Activities are summarized as follows:
- Re-Assaying Program – Historic 1987-88 drill hole core has been re-logged and was analyzed for 4E (platinum, palladium, rhodium plus gold), nickel & copper mineralization. In addition, 2006-2012 drill hole core was re-logged with the previous assay results being utilized since they are NI 43 101 compliant;
- Mineral Resource Update - Infill drilling was conducted at the site from July to October, 2013, to upgrade a significant portion of the existing Inferred mineral resource into Measured & Indicated resource categories and to test key areas with potential for expansion;
- Mineral Resource Expansion – In addition to the main Wellgreen resource which remains open to expansion in multiple directions, the Quill and Burwash areas to the east of the main resource demonstrate geomagnetic & geochemical structures that are similar to those at Wellgreen. Priority targets in those areas may be investigated in the future;
- Mine Planning - JDS Energy & Mining Inc. has commenced a mine planning review as part of the PEA Update to evaluate a staged development approach focused on accessing higher grade material that is near-surface or accessible underground is scheduled earlier in a mine plan involving a lower processing throughput than the 2012 PEA. The objective of this approach is to evaluate a project with lower pre-production capital requirements than the 2012 PEA, with capacity expansions over time;
- Metallurgy - Eggert Engineering Inc. has continued the metallurgical testing program for the PEA update, with the objective of increasing PGM and Ni recoveries as well as improve concentrate quality. A magnetic separation circuit that has been inserted into the mill flow sheet after the Cu flotation circuit and before the Ni flotation circuit is being tested;
- Environment & Permitting - Baseline environmental studies continue on the Wellgreen project including drilling of water wells for ground water monitoring which was initiated in Q4 2013. This program is intended to provide the information necessary to enter the environmental assessment process in 2015.
The Company has conducted a thorough technical review of the Wellgreen project, including a comprehensive assessment of exploration results back to the 1950’s. With the historic focus on high grade massive sulphide occurrences amenable to narrow seem underground mining many of the historic drill holes were only selectively assayed for high grade mineralization. With a focus on the bulk mining potential of the deposit the Company has re-logged and completed continuous assays where possible sampling all of the material within the mineralized ultramafic host rocks.
On July 17, 2013, the Company announced the commencement of the 2013 exploration field program. Metallurgical test work and engineering initiatives had also commenced at that time. Comprehensive re-logging and cataloging as well as re-sampling of historic drill holes has now been completed and is being integrated and interpreted. The total re-logging and re-testing program completed to date is 18, 377m.
RE-ASSAYING PLAN VIEW
A targeted surface exploration drilling program, designed to upgrade a portion of the Inferred resource as well as test potential higher grade zones also commenced in July 2013. This drill program was completed near the end of November 2013. The program included deeper holes from surface designed to pursue higher grade PGM mineral resources as well as a number of shorter holes designed to increase confidence in the model and upgrade portions of the resource to Measured & Indicated resources from Inferred.
All of the historical exploration data that was re-evaluated along with most recent drilling programs will be utilized in an updated deposit model that is projected to be completed by Q2 2014 and will be part of a PEA update. The above image shows the locations of the historic holes that were re-logged and assayed in 2013 and early 2014.
As noted above, extensive work conducted on the geologic modeling of Wellgreen revealed some exciting new potential developments. The modeling work started in the center of the deposit with the most concentrated drill information and moved out from there to both the easternmost and westernmost ends where less information was available. This work has been aimed at increasing confidence in the resource model, defining new bulk mineable zones of mineralization that have not been previously recognized as well as better defining the geometry and distribution of higher grade material in the resource.
2.5Km Strike: Open East / West and at Depth
Work to date has allowed the Company to identify three promising target areas with wide intervals of higher grades:
- The Central Zone remains open down dip and along trend within both the western and eastern ends of the deposit;
- The previously highlighted higher grade target on the west end of the main Wellgreen deposit, referred to as the Far West and West Zones, begins at surface and is open to expansion to the south. This material is as much as three times higher grade than the average of the deposit; and
- The modeling and compilation effort has also identified a higher grade zone at the east end of the deposit which occurs to the north of the main tabular body that hosts the current mineral resource. The East and Far East Zones show areas of significantly higher grade than the average of the deposit and are often enriched in PGMs and copper. Based on recent and historical drill results, this zone is in excess of 300 meters in width and is open to expansion in all directions. The new assessment and interpretation is that this zone may represent a potential connection between the main Wellgreen deposit and a second parallel tabular body referred to as the North Arm that is not currently included in the mineral resource but was 2012 PEA pit outline.
- Resource Expansion Potential
As the vast majority of the Wellgreen property’s 64 square kilometres has received little exploration work, the Company recognizes that there may be opportunities to increase the overall mineral resource through additional exploration work. The Company has developed priority targets for new drilling near high grader resource blocks, which have not been classified as mineral resource. These targets are beyond the lateral or vertical extent of the existing drilling limits.
To the east of the known mineral resource are the Quill and Burwash areas, both of which demonstrate geomagnetic and surface geochemical signatures which are similar to those found at Wellgreen proper. The results indicate the possibility that these sites may be part of the same mineralized system found at Wellgreen. Higher grades also appear to develop at the western part of the property and further exploration drilling may also occur in this area.
Market conditions in the resource sector have led major institutional investors to focus on projects with lower pre-production capital requirements over those with large scale high initial capex expenditures. To address this, the Company is analyzing first-stage operations targeting a lower production rate and a significantly reduced capex scenario as compared to the 2012 PEA1. The full text of the 2012 Wellgreen PEA is available here and under the Company’s SEDAR profile at www.sedar.com.
During its production phase in the early 1970s, Sumitomo Group contracted with Hudbay for the purchase of Wellgreen concentrate, which included nickel, copper, platinum, palladium and gold as well as the exotic PGMs (including rhodium, osmium and iridium and ruthenium).
The metallurgical test work upon which the 2012 PEA was based was preliminary in nature and attained the initial objective of demonstrating the material would report to a conventional sulfide flotation circuit bulk concentrate. Subsequent metallurgical testing has supports the potential of using conventional sulphide flotation methods to produce separate nickel and copper concentrates (click here to view the 2012 metallurgy report). The metallurgical testing also indicated opportunities to optimize recoveries, improve concentrate quality, and pursue recovery of rhodium, ruthenium, osmium and iridium.
Metallurgical test work continues in 2014 to look at improving metal recoveries of disseminated mineralization (particularly in the PGMs), improve concentrate quality and estimate the economic contribution of the rare PGMs that are present in specific high grade high sulphur domains. Work is looking at the flotation recovery of the metals using variations of grind size, flotation methods, reagent usage and magnetic separation. As part of this process, a magnetic separation circuit was added to look at improvement of recovery from the magnetic minerals which may benefit by re-grinding. The magnetic separation “tail” then enters a separate main nickel flotation circuit. The nickel flotation product and the magnetic separation nickel flotation product are then combined into one nickel concentrate.
The magnetic separation step may allow for the use of more aggressive nickel sulphide flotation reagents. Results from the metallurgical testing program will be included in the PEA update, which the Company targets to release by the end of Q2 2014.
Baseline environmental studies continue on the Wellgreen Project, including collection of meteorological data, surface water quality and flow data, ground water quality and flow data as well as wildlife and vegetation studies. These baseline studies are being conducted in collaboration with the Kluane First Nation as part of the exploration cooperation and benefits agreement announced by the Company on August 2, 2012. The Company targets initiating the environmental assessment process in 2015. The Yukon and Federal Government guidelines suggest 18-24 months as a guideline to review mine permit applications. The review consists of discussing the baseline data, assessing the project/operation influence on the environmental baseline and evaluating the mitigation processes proposed by the Company to minimize the influence of the project and operations as part of the overall mining permit application. The environmental assessment process at Wellgreen should be facilitated due to the project being a former operating mine in an area with historic and current placer mining and with the support of the Kluane First Nation. Wellgreen Platinum will continue to pursue First Nations engagement and seek ways to facilitate local economic and business development opportunities through the various stages of project implementation and operations.
Mr. Johnson has over 25 years of experience in the exploration and development of large scale projects in the mining industry and, through his global network of contacts, has been involved in raising over $650 million in project financing. Previously President and Chief Executive Officer at South American Silver Corp., he led the significant advancement and expansion of two development stage projects – a period in which the company’s market capitalization increased from $20 million to a peak of $350 million. A co-founder and executive at NovaGold Resources Inc., Mr. Johnson was a key member of the executive team that led NovaGold Resources Inc. from a $50-million market capitalization to more than $2-billion and oversaw the expansion of the company’s resource base to over 30 million ounces of gold.
Over his 12 years with NovaGold Resources Inc., Mr. Johnson played a prominent role in the acquisition and advancement of three world-class deposits, including the completion of three feasibility studies. Mr. Johnson began his career with Placer Dome Inc. (now Barrick Gold Corporation), where he held various senior roles in domestic and international exploration in projects from early discovery stage to feasibility and operations in Alaska, Canada, Africa, Australia and Russia. He holds an honours degree in Geology from Western Washington University.
Appointed to Prophecy Platinum in fall 2012, John Sagman holds a degree in Mining and Mineral Process Engineering from the University of British Columbia and has over thirty years of mining experience including the design, development, commissioning and management of both open pit and underground mining projects. Mr. Sagman formerly held the position of Vice President of Technical Services with Capstone Mining Corp. where he oversaw reserve estimates, prefeasibility studies, mining methods, equipment selection and drove the ongoing improvement of technical processes. John lead Phase V of Prefeasibility studies at the Minto copper-gold mine; an open pit mine that produced 37 million pounds of copper in 2011 and is located approximately 150km from the Wellgreen deposit.
Mr. Sagman has an extensive background of related project management success with major mining operations, including Vale’s Totten Ni-Cu-PGM mine as well as Xstrata Nickel’s Craig, Fraser, Lockerby, Strathcona and SMRQ Raglan projects.
Mr. Sagman received his Project Management Professional designation in 2010 and is licensed with the Association of Professional Engineers and Geoscientists of British Columbia.
Mr. Mason is a Chartered Accountant and has his Institute of Corporate Directors (ICD.D) designation with 25 years of public mineral company experience in exploration, development, construction and operation for PGM, gold, copper, nickel, lead, zinc, and diamond projects in Canada, USA, Mexico, China, Brazil, and South Africa. In September 2004 he was awarded the BC Ernst and Young Entrepreneur of the Year Award (Natural Resources Category). He has expertise in exploration, construction and operations reporting, mergers and acquisitions, corporate finance and regulatory reporting, including 15 years as a Principal with, and Chief Financial Officer of, Hunter Dickinson Inc., and in addition, as Chief Financial Officer, Corporate Secretary and director for 15 public companies listed on the TSX, TSXV, AMEX and NASDAQ.
As Chief Financial Officer of Taseko Mines Limited, he was instrumental in the acquisition of the Gibraltar Cu-Mo mine in British Columbia and moving it from a dormant project into the second largest open pit Copper mine operating in Canada. He negotiated the purchase of the Xietongmen Cu-Au Project in China on behalf of Continental Minerals Corporation and set up a joint venture arrangement with Jinchuan Group Limited, one of China’s largest nickel producers. Jinchuan Group Limited subsequently acquired Continental Minerals Corporation for $431 million. Mr. Mason’s wide experience also includes a number years on the Casino Project (now owned by Western Copper and Gold Corp.) in the Yukon and PGM’s in the Republic of South Africa with Atlatsa Resources Corporation.
Mr. Mason began his career and traditional training with Deloitte LLP as a Chartered Accountant, followed by Homestake Mining Company (merged with Barrick Gold Corporation) in mineral exploration, construction and operations reporting.
4/14 JAMES WEST INTERVIEW
CEO Greg Johnson provides an overview of Wellgreen’s renewed focus on bringing its flagship platinum-nickel-gold project into production with a revised (and smaller) capex approach, and the moves the company has made to strengthen both its management team and its share structure. Transcript: Greg Johnson: Well, it’s been a fairly busy period for the company. Our new management team all joined about 15 months ago, in late 2012 and at that point the Board brought in a new technically focused management group. We undertook a couple of important things over the last year plus. One was to comprehensively go back and compile all of the existing information on the project back to the 1950s to bring all that into a single database and systematize it and allow our geologists and team to really dive in, engage some of the leading experts in PGMs who helped us to be able to understand the Wellgreen system in context with other world class systems like Norilsk in Russia, the Bushveld down in South Africa.
So our work with the new drilling, we have got almost 40,000 meters of new drill information that’s gone into the program since the 2011 resource estimate has really built our confidence in terms of understanding of the system. The early work in 2011 demonstrated that we had a very large system, mostly inferred, and the work that we’re doing now is really reinforcing the scale of the system, in fact, it’s demonstrating that we’ve got what’s effectively becoming a porphyry scale PGM System here, that’s open-pitable. In addition, there were some pretty important structural changes at the corporate level. We had a controlling shareholder that was around a 30% position that we placed entirely in 2013, in new hands, and that restructuring of the company resulted in new Board of Directors and effectively taking that over-hang from those stock sales from that financially distressed investor out of the way so that we would be in a position to be able to take the story out.
James West: Okay, was that a Prophecy Coal you are referencing there? Greg Johnson: Prophecy Coal was the original control and shareholder in Wellgreen and they are now effectively completely out of the shares. James West: Okay. So what’s been happening since your new team has taken over? Greg Johnson: Well, in addition to the drilling, the development of the new geologic model, we have been undertaking as well, engineering and metallurgical test work. We’ve got a couple of major milestones here in the second quarter. We are looking to deliver an updated concept on the engineering and production for the project. We are looking at a smaller capital project focused on higher grade material, potentially an open-pit and underground combination operation, and we’re targeting an operation that could be the largest producer of PGMs in the first world, potentially larger than Stillwater; as our target for this project, and clearly the resource that’s coming together is demonstrating that this is a system that could be a very large producer for a very long period of time. In addition, we are getting set up to look at pre-feasibility activities, they are going to get kicked off in the second half of this year and we are targeting to be able to move into feasibility in 2015.
James West: Hey, well that’s interesting. Have you been drilling all through the winter this year? Greg Johnson: We drilled up in through November and we’ve been releasing the results of a combination program, it was about 5000 metres of new drilling, including one of the widest intercepts ever hit on the property, 756 meters at almost 2 grams per ton, platinum equivalent. In addition, we had the benefit of being able to go back into historic drilling. Particularly drilling that was done in the 1980s, and we were able to re-log and resample many of it for the very first time, about 20,000 meters of historic drilling. So our combined program was about 25,000 meter program. And all of that is going to go into this new resource estimate that’s going to be coming out in the second quarter and the new preliminary economic assessment.
James West: I see! Okay, so then — I had actually visited the Wellgreen project back in 2011 and at the time there was some discussion about a 16-17 kilometer strike length for the whole Wellgreen project. Is that still something that you feel comfortable sort of putting out there? Greg Johnson: Yeah, our property is about 18 kilometers long that we control a 100%. The main focus — we’ve got almost 800 drill-holes in the Wellgreen deposit proper, and that’s about a ten million ounce platinum equivalent resource for platinum, palladium and gold. Along trend of that, we have got a series of other deposits that are also associated with these ultramatic systems. (00:05:12) Most of the work on those was done in the 1980s. There really hasn’t been much more modern work done since that time. But we undertook some surveys on project, both of magnetics as well as surface sampling and we have identified two very high priorities areas. One that is the continuation of the Wellgreen to the East called Quill and that’s about a two-and-a-half kilometer long anomaly combination of soils and magnetics. And then the second is the Burwash area which historically was actually a separate property that was optioned by INCO and others looking for high grade massive sulfide deposits. And that deposit has a very strong signature similar in scale to Wellgreen itself, with historic drilling shallow holes, but some interesting results in some of that historic work. And with the new surveys that we have, we’ve got some very large targets that we’re hoping to be able to test this year. All of this is on the road. So all of this, if we can develop additional open-pitable resources could be processed through a centralized facility and all of it could be looked at as kind of a single coherent district.
James West: I see! Interesting! So those discrete deposits to the East that you mentioned in Burwash and Quill, are those — you don’t think those are contiguous possibly connected to the main Wellgreen deposit? Greg Johnson: Well, the geology is mapped as continuous. But we don’t have a lot of information on there yet. A lot of that is based on outcrop mapping and magnetics in particular. The Ultramatic Host Rocks for the deposits do have a high degree of magnetic minerals in them. So magnetics can be a very good tool, but until we actually have a series of drill-holes across those, it’s hard to say whether or not this is going to be continuous. Certainly when you look at Quill, and you look at the strength of the magnetic signature at Wellgreen, and the fact, that that runs unbroken into the Quill target, one could argue that there is a strong probability that there is continuation of Wellgreen into Quill. Burwash, it almost appears that there is a — the area that our main access road comes in and the Quill creek drains out of — it looks like there may be some kind of important structure; geologic structure that goes through there. And sometimes in geology and ore deposits, big structures can be important. So it looks like we may have a little different geometry as we get across into Burwash. And we don’t know what level we’re looking at in the system, we could be looking deeper than we are at Wellgreen. So we’re pretty excited to take a look at that and see what comes out of it. James West: Sure! Okay, so what is the drilling budget for 2014 in terms of dollars and metrage? Greg Johnson: So we’re basically looking to start a pre-feasibility level program in the second half of the year. So that’s probably going to kick off sometime in June. We are talking of $5-$10 million program, and actually that’s likely to be something that’s going to be in the 5,000-10,000 meter program combination, probably of reverse circulation and core drilling. We haven’t finalized, right now we’re going through and developing our priority target list, and I can tell you that our target list is probably going to be longer than what we’re going to be able to go after, so you know we’ll clearly be prioritizing within our priority list. But there are some very exciting targets. Some of the very best holes at Wellgreen have not had the natural step-out adjacent to them, and so, were going to want to test some of these targets at Quill and Burwash look like, very promising targets. So I think we would want to test some of those. So it’s going to be a combination of both, infill confirmatory work, as well as step out and expansion work and testing some of these new targets.
James West: And I assume that’s all in support of an updated revised resource calculation? Greg Johnson: Yeah, so we’ll have an updated resource out this second quarter along with the updated economic approach looking at this smaller capital, higher grade start-up concept. And then, we would look to put out a pre-feasibility update to that probably early in 2015 and then begin the feasibility work in the remainder of 2015, with potentially permits could be completed by late 2016 on the projects. (00:10:03) So, we do have the opportunity that this thing can move quite rapidly, particularly mining is the industry in the Yukon, as you know. So they’ve got a good process in terms of going through environmental assessment, The Kluane First Nations are strong supporters of the project and we see the project being able to move fairly quickly through that process. James West: Sure! Okay, so in terms of financing a $10 million drill program in 2014, does Wellgreen have that capital in the bank? Greg Johnson: We are going to need to raise some money, and so we’re basically going to be looking to raise, probably something in the $5-$10 million range. It’s depending on the outcome of that investment round, that’s going to kind of set the plans in terms of how much work will be done in the summer or into the fall. But that work would be specifically targeted towards that next major milestone of the completion of the pre-feasibility studies. James West: I see. And at this point do you have as an investor any major mining corporations or large mineral funds that will sort of provide the role of lead order in that financing? Greg Johnson: Yeah, we’ve got — a number of our existing shareholders have invested in each round of financing, including, putting in lead orders. We’ve got a number of new funds that are looking at the company in terms of new investment. These are names that are also invested in other platinum names and are groups that are putting capital to work today. In addition, we are already discussing the project and potential investment from a number of more strategic type investment groups. These could be groups that are affiliated with smelting groups, or some of the producers. I think we’ve got a number of irons in the fire that we’re pursuing. It is still fairly early days at Wellgreen, but there are so few assets of scale in the platinum space, particularly that would likely have an open pit mining cost structure and scalability, and I think as we get out this next set of studies on the resource and on the engineering, and as we’re advancing that we’re likely to see a lot of attention from those groups over the next couple of quarters and years.
James West: Sure! Okay, now what about infrastructure? It seems to me that there were some challenges there in terms of energy, electricity etcetera. Has there been any progress on that front since 2011? Greg Johnson: I mean the Yukon energy is one of the main issues for all projects. Now fortunately, we’ve got the highway that goes past the project and we’ve got our year round access road and the two ports. The one at Skagway and the one at Haines are already in place with capacity to be able to handle our concentrates. So really when we talk infrastructure, for our project, it mostly is about energy with the access roads and things already there. The Yukon has about 20 MW of capacity on the grid. There is a high capacity line near Haines junction which is a about 100 kilometers from the project down the highway. LNG is definitely coming to the Yukon; there is a couple of initiatives that are underway now. The State of Alaska’s Industrial Development Bank is putting in place an LNG facility in Fairbanks, Alaska. They’ve completed their feasibility and they’ve gone to tender for the groups that’s going to construct that, and that’s supposed to be up and running by late 2015. So that’s a possible source for us, and in fact, we are in discussions with the Alaska Industrial Development and Export Authority right now about a potential MoU on that source of LNG. In addition, about 95% of the Yukon grid is hydroelectric, about 5% of their power comes from diesel and they are upgrading those sets to become LNG and are actually in the construction phase on their first LNG plant that would be tied into the grid now in Watson Lake. So the Yukon Energy Corporation is going to be bringing LNG to the territory for that. So we are going to be looking for this next study, the PEA that was done in 2012, we used diesel as its assumed power source. We are likely to be looking at an LNG-base case, which could be a significant reduction in the cost assumptions for power and it looks like we’ve got two or three different potential sources along with investigating whether or not it may make sense to extend the power line from the main Yukon Energy Corporation Grid. James West: Oh well, great! So it sounds like you’ve got options there.