BURWASH LANDING, YUKON -- While the Yukon is back in the spotlight for its gold prospects, Prophecy Resource (PCY-V, 1P2-F, PRPCF-O) has taken a foothold in the territory with the nickel-centred polymetallic Wellgreen property.
Acquired through a takeover of Northern Platinum (NTH-V), Wellgreen becomes another somewhat low-cost addition to Prophecy's nickel sulphide and platinum group exploration properties in Canada with upside potential.
For the acquisition, Prophecy will issue half a share and 0.1 warrant for each Northern Platinum share, with the deal valuing Northern Platinum at roughly $11 million.
In exchange, Prophecy secures a 13.7-sq-km block of 91 claims staked in 1952 and 1953, and an 8.4-sq.-km block of 48 claims staked in 1986 and 1987.
Within those claims sits an indicated resource of 6.4 million tonnes grading 0.45% copper, 0.43% nickel, 0.31 gram palladium per tonne and 0.38 gram platinum per tonne. The project also hosts an inferred resource of 23.9 million tonnes grading 0.28% copper, 0.29% nickel, 0.27 gram palladium and 0.38 gram platinum.
"We felt that by taking on this project we could add a lot of value," says John Lee, CEO of Prophecy. "Both in terms of our fundraising capabilities to advance this property faster and, at the same time, making the story and making the deposit known to a broader investor base."
The property sits in the Kluane Range of southwest Yukon, not far from the St. Elias Icefields and Canada's tallest peak, Mount Logan. The hill that contains the deposit climbs out of a flat stretch of boreal forest before it, with exploratory roads criss-crossing its steep slopes. Not far beyond Wellgreen, the hills turn into true mountains that would make any road access a daunting prospect.
But Wellgreen is only at the edge of the range, and the camp is accessible through a seasonal 13-km gravel road that snakes through the valley floor. Though further work would be needed to fortify the road against spring runoff and make it all-season.
The access road is, in turn, 317 km northwest of Whitehorse along the Alaska Highway. An airstrip at Burwash Landing, roughly 30 km away, provides a much faster jump from the territorial capital. Haines, Alaska, provides the closest deep-sea port roughly 410 km to the southeast. Haines Junction, 125 km to the southeast, is the closest significant town and marks the end of the nearest power grid.
Prophecy adopts a property with a mixed past. In 1995, when The Northern Miner covered Northern Platinum's acquisition of the property, the story reported that "the history of the property is somewhat spotty." The subsequent 15 years have hardly improved its record.
The deposit was first discovered by Wellington Green in 1952, and later that year HudBay Minerals (HBM-T) started exploring the property. The company did extensive drilling and underground development that culminated in a single year of production in 1972. HudBay then shut the mine due to low metal prices, excessive dilution and unexpected erratic distribution of massive sulphide lenses.
Only 172,000 tonnes were mined, at grades of 2.23% nickel, 1.39% copper, 1.3 grams platinum, and 0.92 gram palladium. The company then permanently wrapped up its operations there and sent the mill parts to Manitoba.
Wellgreen then saw little activity until 1986, when an All-North and Chevron (CVX-N) joint venture started exploring. A year later, Galactic Resources bought a controlling interest and took over All- North. By 1989 the company had completed roughly 11 km of drilling, established historical reserves of 55 million tonnes and took the project to the prefeasibility stage.
Galactic then got tangled up in the liability of its Summitville heap-leach mine in Colorado and was forced to restructure its corporate operations.
Blackhawk Resources was brought on to earn a 50% stake of Wellgreen in 1992 to share development costs, but after conducting due diligence on the project the company pulled out.
By 1993, Galactic Resources had filed for bankruptcy and Wellgreen was in need of a new operator.
Northern Platinum then came along, optioning the property in 1994 with a requirement to spend $4 million in exploration by 2002. The company drilled almost 4,000 metres in 1996, but then, other than a limited 2001 drill program, only conducted some sampling, trenching and surveying over the next decade.
Northern then optioned the property to Coronation Minerals (now Guyana Precious Metals [GPM-V]) in 2005, with the intention of selling the project for $25 million. But after some management shuffling at Coronation, and problems with a co-financing with Jinchuan Nickel, the company pulled out of the partnership, and ended the property purchase in late 1998.
Before leaving Wellgreen, however, the company conducted several drill programs and established the current resources estimate.
Coronation's drilling was largely designed to twin holes from All- North's work for the new estimate, not for exploration. In the program, hole 144 hit 38.7 metres grading 0.64% copper, 0.27% nickel, 0.85 gram platinum, 0.41 gram palladium and 0.27 gram gold. Hole 145 cut 158.8 metres averaging 0.54% copper, 0.25% nickel, 0.61 gram platinum, 0.3 gram palladium and 0.19 gram gold. Hole 149 cut 92.2 metres carrying 0.38% copper, 0.26% nickel, 0.61 gram platinum, 0.4 gram palladium and 0.11 gram gold.
Once the property was returned to Northern, Mel de Quadros, who became a director of Northern in 2003, unexpectedly took on the role of president as something of a retirement project.
"I had this project kind of thrown into my lap," says de Quadros. "I had to run around to figure out what to do. I got it started anyway."
He raised over a million dollars through MineralFields Group in both 2009 and 2010 to carry out a limited drill program.
In 2009, Northern Platinum drilled 10 holes to explore updip of the East zone and east along strike. Results from the program included hole 170 that hit 154.4 metres grading 0.34% nickel, 0.21% copper, 0.24 gram platinum and 0.27 gram palladium; hole 172 that cut 142.2 metres carrying 0.27% nickel, 0.21% copper, 0.16 gram platinum and 0.22 gram palladium; and hole 174 that returned 447 metres grading 0.17% nickel, 0.04% copper.
Then John Lee, president of Prophecy, swooped in earlier this year with capital and the promise of developing the project. Northern shareholders voted 99.9% in favour of the takeover in early September.
"It fits really well into what I'm looking for as a deposit," says Lee. "Where there is a high-grade area, we can commission to production and get our capital expenditures back, and at the same time there is a historical resource of 50 million tonnes."
Now Prophecy must figure out how to avoid the pitfalls of the past while establishing a big enough resource to justify developing the deposit.
The main deposit spans 4.2-km long and up to 700-metre wide within an Upper Triassic ultramafic- mafic body known as the Qull Creek complex. Mineralization has so far been separated into four gabbroic massive and disseminated zones known as the East, West, Central and North zones, with the East zone seeing the most development.
A recently updated technical report outlined the potential on the Wellgreen property to be in the range of 19 million to 51 million tonnes at similar grades to the resource.
But with the East and West zones both open, the report also outlined the potential within the Quill Creek Ultramafic to be in the range of 77 million to 254 million tonnes at 0.26-0.39% nickel, 0.26-0.36% copper, 0.32-0.47 gram platinum and 0.23-0.38 gram palladium, based on a specific gravity of 3.22, strike length range of 4 km to 7 km, depth of 200-250 metres and a width of 30-35 metres.
As well, high-grade platinum and palladium samples have Lee and others excited to explore elsewhere on the property. Exploration on the North zone in 2005 returned a 0.75-metre chip sample that graded 77.3 grams Pt, 70.1 grams Pd and 0.78 gram rhodium, with several other high-grade short samples elsewhere in the area. The property has also shown to contain ruthenium, rhenium, iridium and osmium.
The East zone has seen substantial historic development, with almost 4,300 metres of underground development on seven levels, three internal shafts and over 500 surface and underground drill holes. Underground there are still a number of rusting carts, tracks, machines and even pop cans from when it was mined in the early 1970s.
All-North discovered the West zone in 1987, establishing it over a strike length of 600 metres and to a depth of about 200 metres. The Central zone sits between the two, and could possibly connect them at depth, though limited drilling has been done on this target.
Northern Platinum had struggled to raise enough capital for a bigger drill program to better explore these other zones.
"If I had my second rig, I would have drilled in the West (zone)," said de Quadros with longing. Northern's geologist said that "every time we drill here, we drill for the market."
Prophecy loaned Northern Platinum $50,000 in early August to get the team through the drilling season, but a bigger cash injection does not look to be coming soon.
Instead, Prophecy is concentrating efforts on getting its sizable Ulaan Ovoo coal project in Mongolia up and running before spending capital elsewhere. Development on that project has been delayed by slower-than-expected permitting.
However, once the coal project is generating cash flow, Prophecy will be able to turn its attention to its Canadian nickel projects and better define the potential of Wellgreen.
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