South Africa, long known as a platinum and palladium powerhouse, saw an end to a protracted miners’ strike last week. However, the white metals are still rallying, and South African mines will take time to ramp up production again. In light of those factors, investors and analysts may be interested in looking at companies that operate outside that country.
One such company is Wellgreen Platinum (TSXV:WG), which holds the Wellgreen deposit, a large PGM-nickel–copper deposit in Canada’s Yukon. It features mineralization that begins at surface rather than deep underground, making it noteworthy for miners and investors alike.
To find out more about the company, Platinum Investing News (PIN) spoke with Wellgreen’s president and CEO, Greg Johnson. In the interview below, the CEO discusses the unique characteristics of the Wellgreen deposit, the importance of PGM projects in mining-friendly jurisdictions and what’s next for Wellgreen Platinum.
PIN: Just to start off with, I don’t think we’ve covered Wellgreen extensively on our network before, so could you tell our readers a bit about your company?
GJ: Wellgreen is a PGM-focused exploration and development company, and our primary asset is the Wellgreen project, which is located in the Yukon territory. It’s one of the largest undeveloped platinum and palladium resources in the world at about 10 million ounces, and it’s an open-pittable type deposit. This is quite unique in that most of the world’s platinum and palladium is concentrated in Southern Africa and Russia, so a large deposit in general is quite rare, and one that’s located in Canada in an open-pittable type configuration is even more scarce, so we’re seeing strong investor interest in the company. We just recently completed a $6.9-million financing that’s going to allow the company to move seamlessly into the prefeasibility level of activity this field season.
PIN: How does the Wellgreen deposit compare to others around the world?
GJ: Wellgreen is one of the largest undeveloped projects of its kind in the world, and has the potential to be a very significant producer. Most of the world’s platinum and palladium production is coming from deep, underground mines that are quite costly to operate, very labor intensive and don’t have the ability to really scale up the way you can with an open pit.
Our project is quite unique in that its very wide widths of mineralization start right at surface and are typically between 100 and up to 700 meters wide. So in many ways our project would look more like a porphyry copper–gold type deposit, except that our metals are PGMs and nickel. This is a project that was historically developed back in the 1970s by HudBay Minerals (TSX:HBM) as a high-grade underground operation, but since the late 90s, the focus has been on looking at it as a bulk mineable deposit, and that has been the focus of Wellgreen Platinum’s activities as well.
PIN: Interesting. I’ve seen a few comparisons between platinum deposits; for example, Ivanhoe Mines’ (TSX:IVN) Flatreef deposit in South Africa vs. the Bushveld Complex. How does Wellgreen compare to that deposit?
GJ: In terms of comparison, what makes the Ivanhoe and Platinum Group Metals (TSX:PTM,NYSEMKT:PLG) deposits stand out from the others in South Africa is that even though they’re mostly underground, they have much greater widths of mineralization than is typical of the area. I believe with Platinum Group Metals it’s around 25 meters width and I think for Ivanhoe it’s up to 90 meters in width.
Our mineralization on the western end of the Wellgreen deposit, where it’s the narrowest, is about 100 to 200 meters in width, and it widens out to over 500 meters at surface in the central part of the deposit; it then expands to almost a kilometer wide at the eastern end of the deposit where it’s open. So it’s a very large system, and we’re also fortunate with the geometry, since mineralization starts right at surface as opposed to being a kilometer deep or more, which is more typical in South Africa and Russia. And that’s just really the result of the particular geologic setting that we have at Wellgreen, which means that it happens to be exposed right at the surface. That allows us to look at far wider zones of mineralization with a slightly overall lower grade because it’s open-pit mining cost as opposed to underground mining cost.
PIN: How unusual is it to have an open-pittable platinum deposit?
GJ: It’s quite unusual, around 95 percent of the world’s platinum production is from underground mines. There are a handful of projects in the first world that are open pit and those tend to be the lowest-cost producers. I think much like we’ve seen in the gold and the silver business over time we’re going to see a migration towards the lower-cost, higher-scale open-pit type operations. The challenge is you have to have the right kinds of geology, the right rocks to host these deposits, and the ultramafic rocks that host ours are exceedingly rare; they only occur in a few places globally.
PIN: And you said there was historic mining in the area?
GJ: Yes, the historic infrastructure is still in place and available. We are right now updating our preliminary economic assessment on the project and targeting this summer for release. It will update the overall resource estimate on the project, as well address the major objective of converting a significant portion of the inferred ounces into measured and indicated.
Importantly, it will also update the overall approach to the mining of the project. The new approach that’s being developed is looking at a smaller-scale operation that has lower capital investment up front, but is focused on higher-grade material, so we think that should enhance the economics. Then, later in the mine plan, the project gets naturally wider as we start mining deeper and towards the east the project; at that point, we would likely scale up to a higher throughput level with the geometry of the deposit changing. And that could result in the project being one of the largest first-world producers of PGMs.
PIN: What does your timeline look like in terms of getting to commercial production?
GJ: Right now we are looking to start prefeasibility activities in the second half of this year. That would likely allow us to start feasibility activities in 2015, so potentially we could be looking at a construction decision in 2017, which would allow for first production in 2018 or perhaps 2019. For a development-stage project, it has the opportunity to move quite rapidly, and because the Yukon is one of the best jurisdictions for mining in Canada, there’s a very straightforward permitting and regulatory process to move the project forward to production.
PIN: Your website highlights the importance of your projects being outside of South Africa and Russia, which have been problematic jurisdictions in the past, but are the world’s largest PGM producers. What is the importance of platinum and palladium projects outside of these jurisdictions?
GJ: Starting on the demand side in general, the fundamentals for platinum and palladium are quite different than what we see today in gold and silver. Platinum and palladium are also precious metals, but the single largest use for both is catalytic converters in automobiles. So we’ve basically seen nearly continuous demand growth since the mid-1980s for platinum and palladium, particularly for catalytic converters. As higher emissions standards are implemented in the first world and in the developing world, we’re seeing that growth continue.
That demand growth was matched up until the mid-2000s, with new mine supply of platinum and palladium as one might expect, but because of the challenges of mining deep underground in South Africa and in Russia, we’ve seen falling mine supplies since 2006 for platinum and since 2004 for palladium. The main decrease in supply on the platinum side was due to a decrease in production supply from South Africa, while the main decrease in supply of palladium came from decreasing supply out of Russia. So the opportunity to have a project located in Canada that has an open-pittable and very saleable configuration that could add to the source of supply outside of Southern Africa or Russia has real strategic value.
PIN: Given the current situation in Russia and South Africa, what do you think the future holds for PGM producers in North America?
GJ: Well, the trend was in motion well before the strike in terms of declining supply out of South Africa and Russia, so most analysts continue to project deficits in terms of mined supply vs. total demand for the metals. That’s obviously very bullish for projects that are in areas that don’t have the same kind of political and operating risks that we see today in South Africa and Russia. We would not expect that the removal of the strike would significantly change the overall fundamentals, and in fact, you’ve taken about a million ounces of platinum off the market this year from the strikes, so potentially with that lack of production taking away additional sources of supply for the market, I think analysts are expecting looking to see continued increase in prices looking forward to at least 2020.
PIN: Well, that’s good news. Did you have anything else to add?
GJ: The other point that we would make is that this is a very large property position. The deposit that we’re working on in the main Wellgreen area is about 2.5 kilometers long and has about 800 drill holes that define the resource, so it’s quite well understood. But that is just one part of an 18-kilometer-long overall geologic system. There has been modest historic work done on those other areas, where the host rocks come to surface, but that’s one of the things we’re also looking at and we’re certainly open to the possibility that this could be more of a district scale operation or play.
Securities Disclosure: I, Teresa Matich, hold no direct investment interest in any company mentioned in this article.
Editorial Disclosure: Interviews conducted by the Investing News Network are edited for clarity. The Investing News Network does not guarantee the accuracy or thoroughness of the information reported. The opinions expressed in these interviews do not reflect the opinions of the Investing News Network and do not constitute investment advice. All readers are encouraged to perform their own due diligence.