Northern SecuritiesNorthern Securities:
Event
Initiating coverage.
Highlights
1 Game changing bulk minable resource – Prophecy Platinum’s
100%-owned Wellgreen deposit contains 12 million ounces of
combined PGM plus gold, 2.4 billion lbs of nickel and 2.2 billion
lbs of copper. In situ gross metal value is $53 billion and
Wellgreen is minable by open pit.
2 Significant upside potential – We derive our target price for
Prophecy Platinum by comparing the Wellgreen in situ valuation to
other large, bulk-tonnage PGM, gold and nickel deposits. Our
$6.40 target price indicates a potential return of 55%, with further
upside potential as the project is expanded and de-risked. This
upside potential is supported by our preliminary development
model for Wellgreen, which suggests robust economics with a pre
tax NPV10% of $1.3 billion.
3 Ideal location near infrastructure – Far from remote, the
Wellgreen deposit can be accessed by a 14 km gravel road off the
Alaska Highway in mining-friendly Yukon.
4 Scarcity premium – The Wellgreen deposit contains higher grades
of platinum than other North American PGM deposits. About 76%
of the global platinum supply comes from South Africa where
labour disruptions, inflation, electricity supply and a rising Rand
threaten to restrict output and drive up the price of platinum.
5 Considerable exploration upside – The current strike length of
Wellgreen is 2.6 km but a geophysical anomaly extends an
additional 2.3 km, which suggests further exploration could double
its size. In addition, Prophecy owns 17.5 km of mineralized trend.
6 Metallurgy problems solved – Metallurgy was a challenge at
Wellgreen and similar polymetallic deposits in the 1980s and 1990s.
Advancements in ore processing technology are expected to
provide high recoveries and could produce a directly saleable metal.
7 Resource supports sizable operation – Using the figures
supplied by the recent Wardrop report, historical data and
comparables, we estimate a mine at Wellgreen could produce
annual LOM production of 236,000 ounces combined Au+PGM,
59 million lbs of Cu and 54 million lbs of Ni.
Investment Conclusion
We are initiating coverage of Prophecy Platinum with a BUY
recommendation and a 12-month target price of $6.40 per share
based on our NAV Valuation.