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May 25, 2017 3:39 PM EST
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May 25, 2017
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2015 PEA

Based on the 2015 Preliminary Economic Assessment, the Wellgreen project is envisioned as a conventional open pit operation, with some selective higher grade underground mining. Milling would start at 25,000 tonnes per day (tpd) for the first five years of operation, then would scale up to 50,000 tpd for an additional 20 years. Under the base case of the 2015 PEA, the mill would produce a bulk Ni-Cu-Co-PGM-Au concentrate through conventional sulphide flotation for shipping via existing deep sea ports south of the project in Alaska. It should be noted that the study also details a number of opportunities to further enhance economics (see below) and the current Mineral Resource remains open along strike and at depth.

The full 2015 PEA technical report on the Wellgreen project is available by clicking here.

Production Highlights

  • Average annual production of 208,880 ounces of platinum+palladium+gold (3E) (42% Pt, 51% Pd and 7% Au), along with 73 million pounds of nickel and 55 million pounds of copper over the first 16 years of operation at a production grade of 1.88 g/t platinum equivalent (Pt Eq.) or 0.50% nickel equivalent (Ni Eq.) (0.63 g/t 3E (46% Pt, 45% Pd and 8% Au), 0.27% Ni and 0.18% Cu), which equates to a net smelter return (NSR) of CAD$38.60 per tonne milled using the base case metal price assumptions set out below.
  • Average strip ratio of 0.75 to 1 over the 25 year base case life of mine (LOM).
  • LOM production to average 177,536 ounces of 3E (42% Pt, 51% Pd and 7% Au), 68 million pounds of nickel and 44 million pounds of copper per year over 25 years with the potential to add an additional 15 years using bulk underground mining or 31 years through additional open pit mining of Inferred Mineral Resources.
  • Total LOM production of 4.4 million ounces of 3E (42% Pt, 51% Pd and 7% Au), with 1.7 billion pounds of nickel and 1.1 billion pounds of copper in concentrate from approximately 34% of the current pit constrained Mineral Resource.

Wellgreen projections based on the results of the 2015 PEA Technical Report on the Wellgreen project entitled “Preliminary Economic Assessment Technical Report, Wellgreen Project, Yukon Territory, Canada”, which is dated effective February 2, 2015, which is available under the Company’s profile on www.sedar.com. A PEA is preliminary in nature, in that it includes an economic analysis that is based, in part, on Inferred Mineral Resources that are considered too speculative geologically to have economic considerations applied to them which would allow them to be categorized as Mineral Reserves, and there is no certainty that the results will be realized. Mineral Resources are not Mineral Reserves because they do not have demonstrated economic viability.

Economic Highlights: (Unless otherwise noted, all dollar amounts in this news release are in Canadian dollars (CAD$) and all figures with respect to the 2015 PEA reflect the Base Case. Base Case metal price assumptions: US$1,450/oz Pt, US$800/oz Pd, US$1,250/oz Au, US$8.00/lb Ni, US$3.00/lb Cu, US$14.00/lb Co and US$0.90 = C$1.00))

  • Lowest quartile all-in sustaining costs on co-product and by-product basis
  • Pre-tax net present value (NPV) of CAD$2.1 billion with a pre-tax internal rate of return (IRR) of 32.4%, and an after-tax NPV of CAD$1.2 billion with an after-tax IRR of 25.3% at a 7.5% discount rate.
  • Average annual operating cash flow of CAD$338 million over the first 16 years and an average of CAD$301 million per year over the 25 year LOM.
  • Initial capital expenditures of CAD$586 million (including contingencies in the amount of CAD$100 million) with expansion, sustaining and closure capital of CAD$964 million over the LOM.
  • Payback of 2.6 years pre-tax and 3.1 years after taxes.
  • Total net smelter revenue of CAD$15.5 billion and operating cash-flow of CAD$7.5 billion over the LOM.

Opportunities to Enhance Value not included in Base Case economics:

  • Potential to expand the mine life by an additional 15 years through a bulk underground operation or by 31 years through additional open-pit mining targeting the remaining 66% of the pit constrained resource in a fifth stage open pit. The deposit remains open at depth and along trend to further expansion.
  • Metallurgical testing shows recovery of exotic PGMs, including rhodium, into the concentrate(s); evaluate potential to bring exotic rhodium into future mineral resource estimates and include within overall project economics
  • Long-term metallurgical program objectives include evaluation of secondary processing methods that could provide additional metals recoveries

Economics

The reader is advised that the 2015 PEA is preliminary in nature and includes Inferred Mineral Resources that are considered too speculative geologically to have the economic considerations applied to them that would enable them to be categorized as Mineral Reserves. There is no certainty that the preliminary economic assessment will be realized. Mineral Resources are not Mineral Reserves because they do not have demonstrated economic viability. There is no guarantee that Inferred Mineral Resources will be converted to the Measured and Indicated Mineral Resource categories and, therefore, there is no guarantee that the project economics described herein will be achieved.

Metals & FX Assumptions Units Base Case Peer Base Case Prices
Platinum US$/oz $1,450 $1,642
Palladium US$/oz $800 $775
Gold US$/oz $1,250 $1,350
Nickel US$/lb $8.00 $8.34
Copper US$/lb $3.00 $3.21
Cobalt US$/lb $14.00 $14.00
Exchange Rate4 C$ / US$ 0.900 0.930
Summary Economics Units Base Case Peer Base Case Prices
Pre-tax NPV (7.5%) CAD$ millions $2,074 $2,934
After-tax NPV (7.5%) CAD$ millions> $1,217 $1,750
Pre-tax IRR % 32.4% 41.6%
Post-tax IRR % 25.3% 32.2%
Payback period, before taxes years 2.6 2.0
Payback period after taxes years 3.1 2.4
Revenue and Cash Flow (Base Case in CAD$ millions) Average Annual Years 1 – 16 Average Annual Life of Mine Total Life of Mine
Net Smelter Revenue $687 $620 $15,494
Annual Operating Cash Flow $338 $301 $7,513

Wellgreen projections based on the results of the 2015 PEA Technical Report on the Wellgreen project entitled “Preliminary Economic Assessment Technical Report, Wellgreen Project, Yukon Territory, Canada”, which is dated effective February 2, 2015, which is available under the Company’s profile on www.sedar.com. A PEA is preliminary in nature, in that it includes an economic analysis that is based, in part, on Inferred Mineral Resources that are considered too speculative geologically to have economic considerations applied to them which would allow them to be categorized as Mineral Reserves, and there is no certainty that the results will be realized. Mineral Resources are not Mineral Reserves because they do not have demonstrated economic viability.

Base Case Production and Cash Flows


Units Average Annual Years 1-16 Average Annual Life of Mine Total LOM
Net smelter revenue CAD$ millions $687 $620 $15,494
Cumulative net smelter revenue CAD$ millions $337 $301 $7,513
Annual Pre-tax cashflow CAD$ millions $285 $264 $6,593
Annual post-tax cashflow CAD$ millions $188 $174 $4,341
Average Annual Metals Produced in Concentrate
Platinum 000 ounces 89,518 74,019 1,850,479
Palladium 000 ounces 103,471 90,413 2,260,331
Gold 000 ounces 15,890 13,103 327,578
3E (Platinum+Palladium+Gold) 000 ounces 208,880 177,536 4,438,388
Nickel Millions of pounds 73.1 68.4 1,709.7
Copper Millions of pounds 55.3 44.5 1,111.3
Cobalt Millions of pounds 3.4 3.3 82.0

Not including pre-production years.

Capital Expenditures (including contingency)

The pre-production capital cost of the project infrastructure and development indirect costs is projected to be CAD$586.2 million, including CAD$100.3 million of contingencies. Additional expansion and sustaining capital of CAD$889.4 million are estimated for the remainder of the LOM. Expansion and sustaining capital includes expenditures for the underground development program.

Pre-production Capital Expenditures – LOM CAD$
Direct Costs
Open Pit Equipment & Pre-Stripping 74.9
Site Development 36.8
Processing Plant 154.2
Site Infrastructure 89.7
Tailings Storage Facility 45.2
Total Direct 400.9
Indirect Costs 45.2
EPCM 30.2
Owner’s Costs 9.6
Contingency 100.3
Total pre-production capital expenditures 586.2
Expansion, Sustaining and Closure Capital Expenditures – LOM
Expansion & sustaining capital expenditures 889.4
Closure costs 75.0
Total LOM capital expenditures 1,550.6

The underground operating development and capital expenditures (included in the expansion and sustaining capital) are summarized in the following table:


Operating Development CAD$ (millions) Capital CAD$ (millions)
Lateral 45.5
Vertical 5.8 0.3
Sumps & Pumping
9.8
Satellite Garage and Fuel Systems
1.8
Backfill System
3.2
Magazines, Refuge Stations
1.8
Ventilation
6.1
Electrical
4.3
Sub-Total Direct 51.3 27.2
Indirects (Engineering, Freight, Spare Parts) 0.8 4.9
Contingency
4.9
Total 52.1 37.0

Operating Expenditures
The LOM operating costs (which include pre-production processing) are summarized below:

Operating Costs CAD$/tonne mined CAD$/tonne processed
Open Pit Mining 2.16 3.65
Underground 54.59 1.29
Rehandle 0.75 0.31
Processing
13.64
General & Admionistrative
0.99
Total operating cost
19.88
Net Smelter Return Value
38.60

Mining
The 2015 PEA recommends development of the Wellgreen deposit as a conventional truck and shovel open pit mine with selective underground mining of higher grade zones using open stoping and post pillar cut and fill mining. The PEA mine plan focuses on accessing and mining higher grade material early in the mine life, with stockpiling of lower grade material in the first 16 years, with the stockpiles then being processed in years 17 through 25. The mill is expected to have a nominal production rate of 25,000 tonnes of mill feed per day in the first five years, increasing to 50,000 tpd in year six for twenty years, with an average waste-to-mineralized material strip ratio estimated at 0.75 to 1 over the life of mine under the base case.

One of the key observations from extensive metallurgical work conducted on the Wellgreen project was that the optimization of sulphide flotation recovery varied based on the three major geological domains. In general, the recovery of economic metals is highest from the Gabbro domain, followed by the Clinopyroxenite/Pyroxenite domain and then by the Peridotite domain. Testing has shown that the material from each domain can be processed in the same circuit with variances related to grind size, conditioning time, pH and the use of magnetic separation, with the majority of reagent selection applied across all the domains. For further detail, see Wellgreen Platinum’s news release dated September 3, 2014.

Given the different metallurgical performance of the geological domains, the mine plan in the 2015 PEA was designed to access higher grade material as the initial mill feed and incorporates a stockpiling strategy whereby lower grade material is stockpiled and processed by the mill in the last eight years of the LOM plan. The mill production feed is estimated to be comprised of 99% of material from the Gabbro and Clinopyroxenite/Pyroxenite domains during the first 16 years of operation and lower grade material, estimated to contain about 24% of material from the Peridotite domain, which would be stockpiled and processed after mining is completed in year 16. Under the mine life expansion opportunities, up to an additional thirty one years could be added to the mine plan with a fifth stage of open pit with 75% of the materials being Gabbro and Clinopyroxenite/Pyroxenite, and the remaining 25% being Peridotite.

2015 PEA Base Case Mill Feed Tonnage by Geological Domain

Geological Domain PEA Base Case 5th Stage Pit
First 16 years Life of Mine
Gabbro 11% 8% 2%
Clinopyroxenite/Pyroxenite 88% 83% 3%
Peridotite 1% 10% 25%
Total Mill Feed* 100% 100% 100%

* Totals may not add due to rounding

The majority of open pit mining costs were calculated from first principles based on equipment required and include pit and dump operations, road maintenance, mine supervision and technical services cost. The average open pit operating costs for the LOM plan (which includes pre-production mining) are provided in the table below:

Function Average Cost per Tonne Mined (CAD$/t)
Drilling 0.45
Loading 0.16
Hauling 0.93
Dozing 0.20
Other 0.43
Total Open Pit Operating Cost (not including rehandle) 2.16

The 2015 PEA assumes that underground mining will be performed by contractors who will provide mobile equipment and personnel. Underground development would commence with rehabilitation of the existing adit access followed by development of two 5 metre x 5 metre ramps. Mineralized material will be extracted predominantly using open stoping with hydraulic fill and post pillar cut and fill. The average underground operating costs for the LOM plan are provided in the table below:

Underground Mining Method Average Cost per Tonne Mined (CAD$/t)
Post Pillar Cust and Fill 54.45
Open Stoping 48.40

Mineral Processing and Metallurgical Testing

The recoveries of metals to concentrate and concentrate grade assumptions used in the 2015 PEA are based on a combination of metallurgical testing programs conducted between 1988 and 2014. Laboratory scale testing in 2013 and 2014 was performed by SGS and XPS under the supervision of an independent metallurgical consultant and Qualified Person, John Eggert, P.Eng. of Eggert Engineering Inc., with review and consultation by Dr. David Dreisinger. These test programs evaluated the effect of factors such as grind size, pH, conditioning, the use of various collectors, flotation reagents, dispersants and depressants on mineral recoveries and concentrate grades, magnetic separation and modifications to the mineral processing flowsheet.

Recovery-grade curves for each geological domain have been developed for platinum, palladium, gold, nickel, copper and cobalt using data from 183 batch tests and 12 locked cycle tests (LCTs) on 26 representative samples from the deposit. The recovery grade curves used linear regression to generate an equation to calculate recovery to concentrate by metal for each geological domain based on a normalized nickel grade. Analysis of the test results indicated that recoveries were typically higher in LCTs than in batch tests, so adjustments were made to the linear regression equations to adjust batch test results upwards to reflect recoveries that are expected to be achieved in future LCTs and pilot plant testing. The table below provides the recoveries to bulk concentrate by geological domain for a bulk concentrate grading 6% nickel. On this basis, the concentrates produced through conventional sulphide flotation are anticipated to grade 6-10% nickel, with 4-8% copper and 11-18 g/t 3E.

Estimated Metal Recoveries by Geological Domain

Geological Domain
Recovery to Bulk Concentrate
Ni
Cu
Co
Pt
Pd
Au
Gabbro
83.6%
94.5%
67.9%
73.0%
77.0%
66.8%
Clinopyroxenite/Pyroxenite
75.0%
88.4%
64.4%
59.0%
73.0%
58.89%
Peridotite1
68.1%
65.1%
54.9%
50.8%
56.5%
58.8%
Average Mill Recoveries – First 16 Years of LOM
75.2%
88.5%
63.8%
60.5%
72.1%
60.0%

1. It must be noted that there has been limited testing of the peridotite metallurgical domains and, therefore, positive or negative variances may occur.

Preliminary testing of various leaching methods indicates that a PGM concentrate or tails from the magnetic flotation and cleaner tails may be amenable to additional secondary processing, potentially adding to the recovery of PGMs. Additional metallurgical testing will further evaluate secondary processing options and the associated economics, potentially including recovery of exotic PGMs, rhodium, osmium, iridium and ruthenium. Historical results indicated total PGM grades in mineralized material that were 10-25% higher if the exotic PGMs rhodium, iridium and osmium were included. These exotic PGMs were recovered in concentrates by HudBay in the 1970s and consistently show up in the metallurgical testwork but have not been included in the base case economics.

Mineral Processing operating expenditures are summarized as follows:


25,000 tonnes / dayCAD$/t milled
50,000 tonnes / dayCAD$/t milled
Labour
0.84
0.48
Power
4.16
4.16
Consumables
8.95
8.95
Total
13.95
13.60

General Administration
The G&A expenditures include management and site technical personnel as well as equipment. The unit expenditures are summarized as follows:


25,000 tonnes / day
CAD$/t milled
50,000 tonnes / day
CAD$/t milled
Labour
0.50
0.31
Equipment
0.12
0.10
Materials
0.05
0.04
Expenses
0.39
0.27
Services
0.60
0.20
Total
1.66
0.91

Project Infrastructure
The 2015 PEA envisions the construction of the following key infrastructure items that are included in the capital cost estimates:

Power

The initial power draw of the Wellgreen project is expected to be 36 Megawatts in year 1, with expansion to 69 Megawatts by year 3 of production in order to provide power for underground ventilation, open pit electric equipment and surface infrastructure. Power for the site could be generated by liquefied natural gas (LNG) sourced from western Canada-based Ferus NGF, per memoranda of understanding (MOU). Wellgreen Platinum has also signed an MOU with General Electric Canada (GE) for the electrical infrastructure technology for the mine processing equipment, transmission technology and control & automation equipment. GE has recommended an initial installation of nine Jenbacher J624 LNG generators with gradual expansion to seventeen 17 units by year six. Based on these recommendations, the 2015 PEA assumes a cost of CAD$0.14/kWh for long-term power supply. Future connection to the Yukon electric grid may represent an opportunity to further reduce power costs.

Access and Concentrate Transport

Concentrate would be transported by diesel truck from the milling facility to existing deep sea ports south of the project in Alaska, at approximate trucking distances of between 380 kilometres and 475 kilometres. Improvements to the existing 14 kilometre all-season access road from the Alaska Highway to the project and tailings storage facility will be required to facilitate project construction and to handle the transport of concentrates.

Other Site Infrastructure

Site infrastructure required includes items such as a tailings management facility, water diversion channels, process plant support facilities, stockpiles, workshops, camps, concentrate filter plants, potable and waste water treatment plants, bulk explosives storage and magazines, bulk fuel storage, warehouse, and office complexes.

Market Studies and Contracts

The 2015 Wellgreen PEA contemplates a conventional flotation flowsheet that results in the production of a bulk concentrate containing PGMs, gold, nickel, copper and cobalt that would be sent to a nickel sulphide smelter. There are at least seven large nickel smelters globally that could process the bulk concentrate from Wellgreen: Jinchuan and Jilin Jien in China; Xstrata Nickel and Vale in Sudbury, Canada; Stillwater in the United States; Kalgoorlie in Australia; and Boliden Harjavalta in Finland. These smelters are believed to be processing concentrates with average combined Ni-Cu-Co grades ranging from 8% to 21%. Wellgreen’s concentrate is expected to have combined Ni-Cu-Co grades near the middle of this range with low levels of deleterious elements, so the concentrate should be readily marketable. The ability to market Wellgreen’s bulk Ni-Cu-PGM concentrate will be driven by industry demand at the time of production.

The base case concentrate terms used in the 2015 PEA are conceptual in nature and are based on information from other nickel projects or contracts. Actual smelter terms could vary considerably from those used in the PEA and could have a significant positive or negative economic impact on the Wellgreen project.

Metallurgical testing commencing in Q1 21016 is focused on the Clinopyroxenite and Pyroxenite domain which are expected to account for over 80% of the life of mine mill feed. This goals of this program are to optimize grinding, flotation and them magnetic separation circuit to increase confidence with respect to PEA predicted recoveries. In addition, the 2016 metallurgy program will explore the development of an optimal approach to produce separate nickel and copper concentrates with qualities that are desirable to smelters.

Environment, Reclamation and Stakeholder Engagement

In 2013, Wellgreen Platinum initiated comprehensive environmental baseline studies, building on the environmental studies that have been ongoing since 2011 with the aim of completing an Environmental Impact Statement for submission in advance of permitting. Wellgreen Platinum will be seeking the input and involvement of the Kluane First Nation in the design and implementation of these baseline studies and is committed to working with stakeholders to ensure the best approach for the Wellgreen project’s development. A closure and reclamation plan will be prepared for the project proposal submission. Financial assurance must be posted to secure the closure and reclamation works. In the 2015 PEA, the estimate for the closure cost is projected to be CAD$75 million, including a 25% contingency of $15 million, and is based on the owner-operator closing the mine and completing the reclamation activities. The Government of Yukon will determine the amount and form of security to be provided.

It is estimated in the 2015 PEA that the Wellgreen project could create about 200 new direct jobs at full production, additional indirect spin off jobs, and will have a positive effect on the local and regional economy. The mechanized nature of the proposed mining at Wellgreen will mean a significant reliance on skilled workers, with remuneration expected to reflect these high quality positions. Should the Wellgreen project proceed, there will be significant opportunities for training, particularly for local and indigenous people, and a corresponding expansion of the local economy.

2015 PEA Contributors

The following companies have undertaken work in preparation of the 2015 PEA on the Wellgreen project:

  • JDS Energy & Mining Inc. – Lead Author, Overall Mine and Project Design
  • SNC-Lavalin Inc. – Underground and Open Pit Mine Design
  • Knight Piésold Ltd. – Tailings Storage Facility
  • SRK Consulting (U.S.) Inc. – Open Pit Geotechnical Stability
  • Eggert Engineering Inc. – Mineral Processing and Metallurgy
  • GeoSim Services Inc. – Mineral Resource Estimation

Qualified Persons

John Sagman, P.Eng., Wellgreen Platinum’s Senior Vice President and Chief Operating Officer, is the Company’s designated “Qualified Person” for this news release within the meaning of NI 43-101 and he has reviewed and validated that the scientific and technical information contained in this news release is consistent with that provided by the QPs responsible for the 2015 PEA.

The following Qualified Persons (QPs) have reviewed the content of this news release and will be responsible for the preparation of their relevant portions of the 2015 PEA on the Wellgreen project:

  • Mike Makarenko, P.Eng., JDS Energy & Mining Inc.
  • John Eggert, P.Eng., Eggert Engineering Inc.
  • George Darling, P.Eng./ing., SNC-Lavalin Inc.
  • Ron Simpson, P.Geo, GeoSim Services Inc.
  • Mike Levy, P.Eng., SRK Consulting (U.S.) Inc.

Cautionary Note Regarding Forward Looking Information: This news release includes certain information that may be deemed “forward-looking information”. Forward-looking information can generally be identified by the use of forward-looking terminology such as “may”, “will”, “expect”, “intend”, “estimate”, “anticipate”, “believe”, “continue”, “plans” or similar terminology. All information in this release, other than information of historical facts, including, without limitation, the results of the economic analysis outlined in the 2015 PEA, such as all-in sustaining costs, other projects costs, NPV, IRR, capital expenditures, sustaining expenditures, production and LOM, the initiation or completion of a pre-feasibility study, future exploration and development of the Wellgreen project or any of the Company’s other Canadian projects, the potential of the Wellgreen project, engineering and mine planning objectives for the Wellgreen project, are forward-looking information that involve various risks and uncertainties. Certain key assumptions related to the 2015 PEA are outlined herein. Although the Company believes that the expectations expressed in such forward-looking information are based on reasonable assumptions, such expectations are not guarantees of future performance and actual results or developments may differ materially from those in the forward-looking information. Forward-looking information is based on a number of material factors and assumptions. The factors and assumptions that could cause actual results to differ materially from the forward-looking information include the high degree of uncertainties associated with a preliminary economic assessment, changes in project parameters as plans continue to be refined, uncertainties inherent to Mineral Resource and Mineral Reserve Estimates, future metal prices, availability of capital and financing on acceptable terms, general economic, market or business conditions, uninsured risks, regulatory changes, defects in title, availability of personnel, materials and equipment on a timely basis, accidents or equipment breakdowns, delays in receiving government approvals, the Company’s ability to maintain the support of stakeholders necessary to develop the Wellgreen project, unanticipated environmental impacts on operations and costs to remedy same, and other risks detailed herein and from time to time in the filings made by the Company with securities regulatory authorities in Canada, including but not limited to the full 2015 PEA Technical Report on the Wellgreen project that will be filed on SEDAR (www.sedar.com) and on Wellgreen Platinum’s website at www.wellgreenplatinum.com within 45 days of the issuance of this news release.. Mineral exploration and development of mines is an inherently risky business. Accordingly, actual events may differ materially from those projected in the forward-looking information. For more information on the Company and the risks and challenges of our business, investors should review our continuous disclosure filings which are available at www.sedar.com. Readers are cautioned not to place undue reliance on forward-looking information. The Company does not undertake to update any forward looking information, except in accordance with applicable securities laws.