Wellgreen Platinum’s 100% owned Wellgreen PGM-Ni-Cu project is the 3rd largest undeveloped PGM resource outside southern Africa or Russia1. The project is located in Canada’s mining-friendly Yukon Territory, just 15 kilometres from the Alaska Highway, leading to sea ports at Haines and Skagway. Ranked 8th in the 2012/2013 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 committed to the development of a sustainable long term mine operation at the Wellgreen project, with current efforts underway designed to further define the mineral resource, improve overall project economics, simplify project financing requirements and complete environmental permit applications. The Company expects to complete an updated NI 43-101 PEA in Q2 2014.
- Estimated production of 7M oz PGM+ gold, 2B lbs. nickel and 2B lbs. copper 2
- 3rd largest undeveloped PGM resource outside Southern Africa or Russia1
- Executive management team with track record of success in large scale project development, operations and financing; specific PGM, Yukon and Sudbury District experience
- Severe, ongoing PGM supply risk as production concentrated in politically unstable jurisdictions; steady demand growth across sectors
- Yukon is a mining-friendly jurisdiction: ranked in the top 10 globally by the Fraser Institute
- 15km all season road to Alaska Highway leading to Haines & Skagway sea ports
- Opportunity to improve PEA economics through use of liquefied natural gas (LNG), lower CAPEX start-up operation with phased construction, improved metallurgical recovery rates, addition of exotic PGM elements in updated NI 43-101 resource estimate
- Exploration upside – expansion potential along strike and at depth within 64 square kilometre property
1Oct 2012 GMP Securities report entitled “Palladium and Platinum Supply-Demand Fundamentals Improving”.
2These estimated metal production numbers are from the 2012 Wellgreen PEA, the full text of which is available under the Company’s SEDAR profile at www.sedar.com.
Wellgreen Resource Area
2014 PEA Update
The Company anticipates release of an updated preliminary economic assessment (PEA) in the first half of 2014 and associated engineering studies that will optimize 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, with the view of demonstrating the potential to significantly decrease the unit cost of $0.28kWh cited in the 2012 PEA. The project team is investigating a staged CAPEX approach that considers a much lower production rate during the initial years of operation with the goal of decreasing pre-production capital expenditures. As revenues are generated by the operation, production expansions could potentially occur. The Company will also continue to review a large production scenario that demonstrates the full potential value of the Wellgreen project and sees excellent potential for significant improvement in the economic key performance indicates over those indicated in the 2012 PEA..
The Company has continued environmental baseline studies and First Nations consultation in order to submit permit applications to the Yukon Environmental Socio Economic Board in Q4 2014 and to the Water Use Board late Q4 2014.
2013 Project Activities
Mineralization at Wellgreen has been defined over a strike length of approximately 2.5km and is open in most directions. Drilling conducted in 2012 identified a nearly continuous zone of disseminated PGM, nickel and copper mineralization in ultramafic intrusive rocks, starting from surface and continuing up 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 content.
Based on the integration of existing geologic information, an updated geologic model for the project was developed which allowed 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 has also been re-logged with the previous assay results being utilized since they are NI 43 101 compliant. Logging of the 2013 exploration drill hole core and assay results have also been completed. All of this data is now being utilized in the updated ore deposit model;
- Mineral Resource Upgrade - Strategic infill drilling has been conducted at the site from July to October, which is expected to convert a significant portion of existing inferred mineral resource into measured & indicated resource categories;
- Mineral Resource Expansion – The Quill and Burwash areas to the east of the main resource demonstrate geomagnetic & geochemical structures are strikingly similar to those at Wellgreen proper and may be part of the same system. This will continue to be investigated in the future;
- Mine Plan Optimization - JDS Energy & Mining Inc. commenced a mine planning review of accelerating surface and underground production of high grade material that includes a review of a “staged approach”. This objective of this approach is to decrease pre-production capital requirements with expansions at a later date which are supported by site revenue generation;
- Metallurgy - Eggert Engineering Inc. has continued the metallurgical testing program 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. Environmental Assessment / Mitigation studies have commenced with the objective of satisfying the requirements of the Yukon Energy, Mining and Resources, Yukon Environmental and Socio-economic Assessment Board (YESAB) and Yukon Water Use Board permit and license applications. Drilling of water wells including installation of instrumentation was completed in Q4 2013.
Over the first half of 2013, the Company conducted a thorough review of the Wellgreen project, including a comprehensive assessment of the 2012 exploration results, prior deposit modeling, historic exploration drilling, as well as various open pit and underground mine planning studies. Updated geological modeling arising from these efforts led the technical team to re-evaluate historical drilling which revealed that many of the drill holes were only selectively assayed for high grade mineralization in keeping with prior owners’ narrow seam, underground mining philosophy. For example, since the disseminated zones did not match the model of mining high grade Ni-Cu zones, only the narrow, 3-5 metre massive sulphide portion of an entire drill hole was often assayed. In addition, the assay results from some historical drill holes completed by previous project operators were never publicly announced via news release.
On July 17, 2013, the Company announced the commencement of the 2013 exploration field program. Metallurgical test work and engineering initiatives had also commenced. Comprehensive re-logging and cataloging as well as re-sampling of historic drill holes has now been completed. The total re-logging re-testing program completed to date is 18,377 m. Assay results from the 1987 – 1988 holes are currently being compiled. Assay results from the 2006-2012 holes have already be prepared in accordance with NI 43 101. There is additional 1987 – 1988 drill core located in Whitehorse, YT which is to be evaluated in Q4 2013 with results to follow.
REASSAYING PLAN VIEW
A targeted surface exploration drilling program, designed to facilitate the concept of a higher-grade, lower CAPEX start-up and convert a significant amount of Inferred Mineral Resources to the Measured and Indicated category, as well as test potential high-grade zones also commenced in July 2013. This program was completed near the end of November 2013. The program included “deep holes” designed to pursue high grade PGM mineral resources amenable to a short term low CAPEX bulk underground mining scenario as well as a number of shorter holes that are projected to increase Measured & Indicated resources associated with the surface starter pits.
The Company has further determined that rhodium and other rare PGM analysis can be undertaken on these historical holes at reasonable assay costs. It is noted that previous operators did receive economic benefits associated with these rare PGMs, such as rhodium, rhenium, osmium and iridium. Metallurgical testing is now estimating the value of this economic contribution by completing rare PGM assays of the concentrate products.
All of the historical exploration data that has been re-evaluated in 2013 as well as the 2013 exploration drilling data will then be utilized in the new deposit model that is projected to be completed by Q1 2014. The above image shows the locations of the historic holes that have been re-logged and assayed during 2013.
Mineral Resource Upgrade
As noted above, extensive work conducted on the geologic modeling of Wellgreen over the first 6 months of 2013 revealed some exciting new potential developments. The modeling work started in the center of the deposit which has the greatest density of drilling and moved out from there to those zones where less information was available. This work has been aimed at defining new bulk mineable zones of mineralization that have not been previously recognized, particularly in the East and North zones. Some of the holes currently being reviewed are showing grade thickness values that are among the very best ever seen at Wellgreen.
2.5Km Strike: Open East / West and at Depth
Development of the new, comprehensive 3D geologic model for the Wellgreen deposit enabled 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 Zone, 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.
- 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. This eastern zone is significantly higher grade than the average, running as high as 4 g/t platinum equivalent, and is particularly enriched in PGMs and copper. Based on 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 not currently included in the mineral resource but within the present pit outline. Our goal is to demonstrate that this area has the potential of being reclassified from waste rock into a mineral resource designation adding economic benefit.
As the vast majority of the Wellgreen property’s 64 square kilometres has received little exploration work, the Company recognizes there may be opportunities to significantly increase the overall mineral resource. During H1 2013, the Company developed priority “high grade extension” targets for new drilling near high grade 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 Wellgreen mineral resource are the Quill and Burwash sites, both of which demonstrate geomagnetic and surface geochemical signatures which are strikingly similar to those found at Wellgreen. The results indicate the possibility that these sites may be part of the same Wellgreen system. 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 capital requirements over those with large scale high initial CAPEX initiatives. To address this, the Company is analyzing first-stage operations targeting a lower production rate and significantly reduced CAPEX scenario as compared to the 2012 PEA which was based on a 32,000 tpd mill and pre-production CAPEX of US $863 million. It is expected that such an approach will create the potential ability to bring in financing through off-take or streaming agreements with parties that need to secure concentrate materials for their smelters and would expedite the path to production.
This alternative would utilize value from off-take of the nickel and copper co-products, allowing the Company to increase production in phases with reduced dependence on equity or debt financing. A number of potential parties that would be a good fit for the project have been identified and discussions will continue throughout the year. Given the size of the Wellgreen property, the Company intends to balance this approach against the goal of continuing to expand the mineral resource to its ultimate potential.
In addition, there is good potential that high grade starter pits and a short term underground production scenario could be optimized which would significantly improve economic key performance indicators.
During its production phase in the early 1970s, Sumitomo Group contracted with Hudbay for the purchase of Wellgreen concentrate, which included the economic benefit of the full suite of PGMs including rhodium, osmium and iridium and ruthenium.
The metallurgical test work, upon which assumptions in the 2012 PEA were based, were preliminary in nature and attained the initial objective of demonstrating the material would report to a conventional sulfide flotation circuit and also would report to separate nickel and copper concentrates. These tests indicated the opportunity to optimize recoveries, pursue recovery of rhodium, ruthenium, osmium and iridium and improve concentrate quality.
Metallurgical test work will continue throughout 2014 with the focus on optimizing metal recoveries of disseminated mineralization (particularly in the PGMs), improving concentrate quality, and determining the economic contribution of the rare PGMs that are present in specific high grade high sulphur domains that are to be extracted during the initial production years in order to enhance economic performance. We are working on further optimization of the flotation recovery of the metals using variations of grind size, flotation methods, magnetic separation and other techniques to enhance overall recovery of PGMs. As part of this process, the magnetic separation circuit was added to the flowsheet after the Cu flotation circuit and in front of the Ni flotation circuit. This allowed for increased recovery of copper in the copper flotation circuit. The magnetic separation product then enters a re-grind circuit followed by a small dedicated nickel flotation circuit. The magnetic separation “tail” then enters a separate main nickel flotation circuit. The two nickel flotation products are then combined into one nickel concentrate.
A significant benefit that was determined in 2013 is that magnetic separation removes much of the sulphide gangue that would normally proceed to the nickel flotation circuit. Since this sulphide gangue is no longer present, it allows for the use of aggressive nickel sulphide flotation reagents without the risk of having a detrimental impact on concentrate quality.
Environment & Permitting
Baseline environmental studies continue on the Wellgreen Project, including collection of meteorological data, surface water flows, surface water quality and wildlife studies. These baseline studies are being conducted with the assistance of the Kluane First Nation as part of the exploration cooperation and benefits agreement announced by the Company on August 2, 2012. In addition, socio-economic and environmental assessment studies have commenced and intends to submit the Project Proposal to the Yukon Environmental and Socio-economic Assessment Board (YESAB) and the Water Use Board (WUB). YESAB and WUB requires approximately two years to review the baseline data, assess the project / operation influence on the environmental baseline and evaluate the mitigation processes designed to minimize this influence as part of the overall mining permit application. In addition, YESAB will review the socio-economic aspects associated with the project and subsequent operations. Under this agreement Wellgreen Platinum will seek ways to facilitate local economic and business development opportunities through the various stages of project implementation. Given that the project is a former operating mine within an area of historic and current placer mining, and the project is supported by the First Nations, the Company expects that the permitting process will be completed within the 2 year time frame.