Prophecy Platinum sees promising signs at Wellgreen

Things keep rolling along for Vancouver-based Prophecy Platinum (NKL-V) at its flagship Wellgreen platinum group metals (PGM) and nickel project in the Yukon. The junior released a flurry of news to end May, including a maiden full-spectrum analysis on the project’s PGM content, preliminary metallurgical test results and assays from the first seven holes in its 2012 drill program.

Prophecy is in the midst of a 9,000-metre, infill drill program at Wellgreen, targeting areas around its inferred resource in an attempt to extend its strike southward and expand a potential pit in a preliminary economic assessment (PEA) expected mid-year.

Highlights from the company’s first round of assays include 21 metres grading 0.9 gram platinum-palladium-gold per tonne, 0.39% nickel and 0.25% copper at 50 metres depth in hole 12-526; 22 metres carrying 0.98 gram platinum-palladium-gold, 0.35% nickel and 0.30% copper from 28 metres in hole 12-527; and 15 metres of 1.12 grams platinum-palladium-gold, 023% nickel and 0.68% copper from zero metres in hole 12-531.

Holes 12-524 and 12-527 were collared at the Central East zone 140 metres from the adit portal entry, while hole 12-531 was collared 270 metres westward along strike near the Central East zone of the Wellgreen resource. All holes were underground and drilled “on-and-off section” to provide an improved picture of the mineralized structure.

Prophecy has completed 15 holes and 3,000 metres of its program so far.

“Wellgreen is gaining recognition as a premier Canadian nickel-copper-PGM project for its location, size and grades,” comments Prophecy chairman and CEO John Lee, . “We expect a busy June with analyst site visits, continued infill and priority-target exploration drilling and the delivery of the first-ever Wellgreen preliminary economic assessment.”

Prophecy’s parallel surface-drill program this month is expected to total 6,000 metres to augment its underground exploration. The company is exploring geophysical and geochemical data that indicates the host intrusion to the Wellgreen resource may extend eastward by up to 9 km.

Casimir Capital analyst Steven Willis initiated coverage on Prophecy in early May with a “speculative buy” rating and a $7 price target, based substantially on a valuation of Wellgreen.

“The current resource covers a strike length of 2.6 km, and directly to the east, a 2.3-km magnetic anomaly suggests potential for resource expansion,” Willis comments in May 14 research report. “If the deposit holds together, the additional strike length implies the resource could increase by nearly 90%.”

Wellgreen’s indicated resource totals 14 million tonnes carrying 2.25 grams platinum-palladium-gold per tonne, 0.69% nickel and 0.62% copper for 220 million lb. nickel, 200 million lb. copper, 16 million lb. cobalt and 1.04 million combined oz. platinum-palladium-gold.

Prophecy released first-phase metallurgical test results focusing on bulk-concentrate production in May. The company found that a concentrate grading over 10% could be produced using conventional flotation methods, with recoveries clocking in at 68% nickel, 88% copper, 46% platinum, 73% palladium and 59% gold.

“In our opinion, the market has unfairly punished [Prophecy] for what are only preliminary results, and for the most part positive,” Willis writes. “The only negatives we note are lower-than-expected platinum recoveries and a slightly lower concentrate grade.”

In a separate study Prophecy experimented with a nickel-copper concentrate that could provide “additional downstream marketability.” The company is tweaking its metallurgical testing ahead of its PEA, with more results expected in the coming weeks.

Prophecy followed up with results from a full-spectrum platinum, palladium, rhodium, ruthenium, osmium and iridium (6E) metals test in late May. The test used samples from hole 11-188, and revealed the presence of all six metals. When taken with existing platinum and palladium content, the results boosted the project’s average 6E metals content by 28%.

The company is aiming to improve Wellgreen’s economic conditions by recovering the auxiliary 6E credits, which could bring processing costs down and improve operating margins. When taken together, the updates could foreshadow a larger resource, improving metallurgy and lower production costs for Prophecy’s upcoming PEA.

“We expect the study to demonstrate strong economics based on the current resource and through production of a single bulk concentrate,” Willis notes. “We assume Wellgreen goes into production in 2017.”

Prophecy has 55.4 million shares outstanding at presstime, with 1.2 million outstanding warrants at an average exercise price of $1 and 7.2 million options at an average exercise price of $1.45. The company held US$2 million in cash and equivalents to end January, plus US$4 million in marketable securities, with a market capitalization of $112.4 million.

Prophecy’s shares jumped as much as 10%, or 20¢ on the back of the Wellgreen drill results, but momentum sputtered around midday and led to a $2.03 close, for a 5¢ gain.