Prophecy Platinum Corp. ("Prophecy Platinum" or the "Company") (TSX
VENTURE:NKL)(OTCQX:PNIKF) reports the release of its unaudited
interim consolidated financial statements for the three and nine
month periods ended December 31, 2012 (the "Q3 Financial
Statements") and the related management's discussion and analysis
(the "Q3 MD&A"). The Company is also pleased to provide an
update on its Wellgreen PGM-Nickel-Copper project in the Yukon
Territory and its Shakespeare PGM-Nickel-Copper project in Ontario,
Canada. Further information about the Company, including the Q3
Financial Statements, Q3 MD&A and technical information on each
of the Company's projects, are available on the Company's website
at www.prophecyplatinum.com and on SEDAR at www.sedar.com.
President's Message
In early February, Prophecy Platinum released the final results
of its 11,000 metre 2012 exploration drill program at the Company's
100%-owned Wellgreen project. Some of the best results to date on
the project were seen, with fourteen of fifteen drill holes showing
significant mineralization across approximately two kilometres of
the existing mineral resource area.
The results from our 2012 drill program indicate wide intervals
of impressive mineralization on a grade and thickness basis. Six of
these drill holes exceeded a grade thickness value of over 500
gram-metres of platinum equivalent and two drill holes returned
nearly 1000 gram-metres, highlighting the strength of the Wellgreen
system. In addition, the majority of these zones remain open to
further expansion at depth and along trend.
Over the past several months our Wellgreen team has been
integrating the geologic information from the 2012 drill program
and updating the geologic model for the project. We are finding a
nearly continuous zone of disseminated Platinum Group Metals
("PGM"), nickel and copper mineralization in ultramafic intrusive
rocks of up to 200-500 metres in thickness, with a higher grade
package of ultramafics lower in the section of up to 150-300 metres
that contains substantially higher PGM content. This work will
continue over the coming months ahead of the 2013 field season and
will allow for the development of priority targets for testing in
2013.
In addition, geochemical and geophysical surveys have
highlighted targets both to the west and to the east of the
existing resource area which are of similar size to the Wellgreen
system itself. Concurrent exploration drilling is planned for these
areas which include the Far West, Quill, and Burwash areas. These
targets are completely outside of the existing resource area and we
believe they have the potential to significantly add to the
existing substantial open pit resources defined at the Wellgreen
project.
The primary objectives of our 2013 drilling program at the
Wellgreen project are to upgrade Inferred category resources to
Measured and Indicated and test priority expansion targets that
have potential to add near surface higher grade material to the
life of mine plan.
Ongoing metallurgical test work will focus on optimizing PGM,
nickel and copper recovery, enhancing concentrate grades and
determining the economic contribution of the rare PGMs that are
present in the deposit. In addition, 2013 engineering studies will
determine if the life of mine plan and economics can be further
optimized by extracting higher grade portions of the resource early
in the production schedule and utilizing a staged construction
process that would defer pre-production capital requirements. These
additional metallurgical and engineering studies will support an
updated resource and economic assessment on the project planned for
early 2014.
In parallel with exploration, metallurgical and engineering
programs, the Company will continue to consult with the Kluane
First Nation and the White River First Nation, as well as advance
its 2012 Environmental Baseline data collection program.
The Company also believes that there may be a number of
opportunities to decrease operating costs utilized in the technical
report entitled "Wellgreen Project, Preliminary Economic
Assessment, Yukon Canada" dated August 1, 2012 (the "2012 PEA") and
prepared by Andrew Carter, C.Eng., Pacifico Corpuz, P. Eng., Philip
Bridson, P.Eng., and Todd McCracken, P.Geo., of Tetra Tech Wardrop
Inc. One of the underlying assumptions in the 2012 PEA was the use
of diesel fuel for power generation. The 2013 engineering program
will look at potential significant cost reduction associated with
liquefied natural gas (LNG) power generation. The Company will also
evaluate the potential for other power alternatives such as
hydro-electric in cooperation with the Kluane First Nation. The
2012 PEA is available under the Company's profile on SEDAR at
www.sedar.com.
Baseline environmental studies continue on the Wellgreen
project, including collection of meteorological data, surface water
flows, surface water quality and analysis of recent wildlife
studies. These baseline studies are being conducted with the
assistance of the Kluane First Nation as part of our cooperation
and benefits agreement with them that we announced on August 2,
2012. Under this cooperation and benefits agreement we will seek
ways to facilitate local economic and business development
opportunities through the various stages of project
implementation.
The Shakespeare project recorded operational cash flow of $11.2
million on the sale of metals from the project from the year ending
January 2012. In January 2012, all operations at the Shakespeare
project were temporarily suspended due to low metal prices. The
project is currently on care and maintenance with all permits in
good standing.
Prophecy Platinum is also currently completing a comprehensive
review of the opportunities for cost reduction on the Shakespeare
PGM-Nickel-Copper project in the Sudbury mining district of
Ontario. Our review has focused on decreasing operating costs in
three key areas: contract mining; concentrate haulage; and toll
milling/smelting, with the objective of returning the project to
sustainable economical production. This includes participation with
the Sagamok Anishnawbek First Nation as per the criteria
established in our Impact Benefit Agreement. With operating cost
improvements, the Shakespeare project has the potential to generate
meaningful cash flow for the Company with minimal additional
capital investment. In operation, the project is projected to
produce 25,000 ounces of PGM+Au, 8 million pounds of nickel and 10
million pounds of copper on an annual basis.
The Company anticipates providing regular news updates over
coming quarters as we undertake exploration programs and complete
resource and engineering updates that should deliver meaningful
milestones for increasing shareholder value. Prophecy Platinum
offers compelling value and leverage to platinum and palladium with
nearly 0.1 ounces of platinum equivalent from precious metals,
equating to more than $150 worth of platinum, palladium and gold in
the ground per share.
Current Market and Economic Conditions
The challenging market conditions for the resource sector in
general, and precious metals equities in particular, continued from
2012 into the first two months of 2013. This includes PGM-focused
equities despite the relative strength of platinum and palladium
prices and favourable supply/demand conditions. However, global
economic policy continues to have an expansionary and inflationary
bias that should be positive for commodities in the long term. The
fundamentals for platinum and palladium remain strongly positive
with the market expected to be in a deficit situation in 2013.
The junior mining sector is off to a difficult start in 2013
with the S&P TSX Venture Composite Index down 9% year-to-date
and the Market Vectors Junior Gold Miners Index down 23%
year-to-date. Prophecy Platinum's share price has been relatively
stable averaging just over $1/share during this period of negative
market sentiment towards junior mining stocks.
Over the past few months, however, the fundamentals associated
with our key focus metals, platinum and palladium, have turned
significantly more positive toward likely higher future prices.
After trading at a discount to the gold price for almost a year and
a half, platinum resumed trading at a premium to gold in January of
this year. In fact, platinum and palladium have been the best
performing precious metals thus far in 2013, with each up 5%,
whilst gold is down 5%. The strength in PGMs relative to gold is
primarily attributable to an increasing market awareness of the
supply threats to platinum and palladium, particularly in South
Africa and Zimbabwe.
Compared with gold or silver, the platinum and palladium markets
are significantly smaller and mine production is heavily
concentrated in high political risk countries. South Africa, Russia
and Zimbabwe combined produce over 92% of the world's platinum and
84% of the world's palladium, but this supply has been in decline
since 2006. According to Johnson Matthey, a total of 5,840,000
ounces of platinum was mined in 2012, with South Africa accounting
for 73% of production and Russia 16%(1) with North America
accounting for only 6% of global production. South African platinum
production in 2012 fell to its lowest levels in 11 years as
violence and unrest between mining unions and demands for higher
wages disrupted production. The recent and ongoing labour unrest is
adding to the challenges already faced by South African platinum
mining companies, in terms of depletion and a corresponding
increase in deposit depth. The result has been increased production
costs and the shutdown of mines that are no longer economical. In
January, Anglo American Platinum (Amplats) announced that it would
cease operations at two of its South African platinum mines and put
another up for sale, resulting in the loss of 14,000 industry
jobs.
The decline in platinum production in South Africa is likely to
continue as cost pressures force even more mine closures and as
companies refrain from investing capital into new projects and mine
expansions. Social unrest and lower tax revenue also have the
potential to further increase the pressure on the South African
government to nationalize platinum mines. While the ruling African
National Congress party rejected proposals to nationalize mines in
favour of higher taxes at its national conference last December,
political maneuvering in the lead up to the 2014 general election
in South Africa could see this issue be revisited.
In Zimbabwe, the government announced in mid-February that it
was nationalizing platinum reserves owned by Zimplats and handing
them over to other investors. In addition, the government has given
platinum miners two years to build a refinery within Zimbabwe for
processing platinum ores. This follows the announcement last year
that platinum mining companies would be forced to transfer 51%
ownership to local groups. With the hostile investment climate in
Zimbabwe, which has the second highest platinum reserves after
South Africa, it seems unlikely that significant expansion of
production or development of new mines in Zimbabwe is probable.
The palladium market also faces significant supply risks. Russia
is currently the largest producer of palladium, accounting for 43%
of global production in 2012, with South Africa second at 37% of
the 6,570,000 ounces of palladium mined globally in 2012. The
majority of Russian palladium production was from Norilsk Nickel,
but sales from Russian stockpiles were estimated to be 250,000
ounces in 2012 with indications that the state stockpiles of
palladium are close to being depleted. From 2008 to 2011, palladium
sales from Russian stockpiles averaged over 900,000 ounces per
year, or about 13% of annual global supply. If that supply is
exhausted, the palladium market deficit could significantly exceed
the deficit currently projected by analysts.
The market had largely ignored this decline over the past
several years as PGM demand for use in autocatalysts (a.k.a.
catalytic converters) dropped substantially as a result of lower
automobile demand following the 2008 financial crisis. Now,
however, with automobile demand recovering, supply deficits, that
were projected for both platinum and palladium in 2012, are
expected to continue into 2013.
From 1980 to 2008, platinum demand grew at an average rate of 5%
per year. Demand then dropped 15% in 2009 due to the global
economic crisis, primarily because of the decreased demand for
autocatalysts. Autocatalyst consumption rebounded in 2010 but is
still well below levels from 2008 due to lower automobile demand in
Europe. The European automobile market is important for platinum
demand due to the much higher proportion of diesel engines which
tend to use more platinum than palladium. Rapid growth in
automobile sales from emerging economies is anticipated to result
in increased platinum and palladium consumption, and is expected to
be bolstered by the increased adoption of stricter environmental
standards in Asia. Strong automobile demand growth continues in
China, which reported a 46% increase in automobile sales in January
2013. Platinum jewellery demand has also been strong due to demand
from China and investment demand is also increasing due to investor
interest in ETFs like Sprott's recently launched Physical Platinum
and Palladium Trust. Due to falling supply the platinum market is
anticipated to see a reported 400,000 ounce deficit in 2012 or
approximately 7% of global platinum supply.
While platinum demand increases have been somewhat moderated by
lower European automobile sales, palladium demand has shown strong
growth since 2002 and is now at record levels due in particular to
autocatalyst demand and Johnson Matthey estimates the market was at
a 915,000 ounce deficit in 2012, or approximately 14% of global
palladium supply. Autocatalyst manufacturers have been substituting
palladium for platinum as much as possible in the past decade due
to the pricing disparity between platinum and palladium.
Accordingly, palladium use in autocatalysts is now more than double
the amount of platinum used and growth is strong due to the
strength in automobile demand in China. That demand is expected to
continue to grow rapidly as the number of cars per capita in China
increases (it is currently about 85 cars per 1000 people, compared
to about 812 cars per 1000 people in the United States), as
emission standards improve and as more cars are sold to China's
burgeoning middle class. Palladium prices have moved from around
20% of platinum prices to 40% in the past four years due to demand
growth for palladium in autocatalysts. This price convergence could
continue if Russian palladium stockpiles are close to being
depleted.
Based on these factors, we view the fundamentals for the PGM
market as being the strongest of all the precious metals. Demand is
likely to continue to improve, while supplies are likely to
continue the declining trend in response to the structural
challenges in South Africa, Russia and Zimbabwe. This background
suggests the potential for significant spikes in PGM prices that
could be amplified by speculative investments in this relatively
small market. Given the lack of substitutes for PGMs in
autocatalysts and the relatively low cost of PGMs compared to the
total cost of an automobile, demand for PGMs is not likely to
subside even with a dramatic increase in platinum and palladium
prices.
Large PGM deposits are scarce outside of South Africa, Russia
and Zimbabwe. With the improving fundamentals, investor interest in
the PGM sector has been increasing, particularly over the past six
months. We believe that the market will need to look for alternate
sources of PGM supply in geopolitically stable and predictable
environments. This may present a positive dynamic for PGM equities
in the junior mining sector and particularly companies like
Prophecy Platinum with large resources in politically stable
countries like Canada, which was ranked 8th in the world in the
Fraser Institute's 2012/2013 Survey of Mining Companies.
While Prophecy Platinum's primary focus is on developing its PGM
resources, the Company also has significant exposure to nickel and
copper. Nickel prices deteriorated for much of 2012 due to economic
concerns globally, but especially due to concerns of a hard landing
in China, combined with market expectations that the nickel market
surplus would increase as several large nickel projects commence
production. In the past few months, however, the nickel price has
moved well off its August 2012 lows and technical challenges
associated with large nickel laterite projects have resulted in
less nickel production than expected. These technical challenges
along with proposed export restrictions by Indonesia will likely
curb new low cost laterite production and drive up marginal
production costs. Another implication of the low nickel price
environment is that there have been very few new nickel sulphide
deposits being developed, which some analysts believe could create
a dramatic shortfall for nickel sulphide smelter feed in the next
few years. Therefore, while nickel prices remain weak in the
short-term, they are not as poor as predicted in 2012 and could
lead to a nickel deficit situation in the next several years due to
a lack of development.
The copper market has remained fairly balanced and prices have
remained in the $3.40-3.80/lb range for the past six months. Copper
prices rose to their highest levels since October 2012 in early
February of this year in response to improving economic data from
China and the United States, before pulling back with markets and a
typical slowdown in activity seen around the Lunar New Year. In
addition to our positive outlook for platinum and palladium, we
remain bullish over the long-term for both copper and nickel in the
context of high demand growth from China and the rest of the
developing world.
Looking Forward
With our new, experienced senior management team in place, 2013
should be a transformational year for Prophecy Platinum. Our
Wellgreen technical team is currently updating geological model
based on all of the historical exploration at the Wellgreen project
and is targeting a significant drill program for 2013 that will
include confirmatory drilling as well as test the resource
expansion potential of several high priority targets. Infill
confirmatory drilling will be done to upgrade Inferred Resources to
the Indicated Resource category with a target to issue an updated
resource model by Q1 2014.
The Company also expects to provide an updated preliminary
economic assessment on the Wellgreen project in calendar Q1 2014
that will build on the 2012 PEA by evaluating the potential of
further optimization of PGM and base metal recoveries, higher
concentrate grades and developing a better understanding of the
economic contribution of the rare PGMs. Our engineering activities
will optimize surface infrastructure, determine if pre-production
capital can be decreased and/or deferred and look to enhance cash
flows by decreased operating costs.
At our Shakespeare project, we will continue our evaluation of
potential cost savings opportunities to assess restarting mining
operations there. This work will include discussions and
negotiations with contract mining companies, trucking firms and
milling operations in the Sudbury area.
With the scarcity of large PGM projects outside of southern
Africa and Russia we believe that the scale of Prophecy Platinum's
projected North American PGM production will become of interest to
potential investors in the sector. Our business strategy will be to
demonstrate the full potential of the Wellgreen project and to
de-risk the project through the next steps of engineering toward
feasibility, which should support higher valuations in the market
and expand our investor base. We look forward to reporting on the
exciting developments ahead for the Company and its projects as we
remain focused on delivering increased shareholder value.
(1)
http://www.platinum.matthey.com/publications/pgm-market-reviews.
About Prophecy Platinum
Prophecy Platinum Corp. is a growth-focused PGM exploration
company with projects in the Yukon Territory, Ontario and Manitoba,
Canada. The Company's 100% owned Wellgreen PGM-Ni-Cu project,
located in the Yukon, is one of the world's largest PGM deposits
and one of few significant PGM deposits outside of southern Africa
or Russia. The Company's Shakespeare PGM-Ni-Cu project is a
fully-permitted, production-ready mine located in the Sudbury mine
district of Ontario, and its Lynn Lake project is a former
operating mine located in Manitoba, Canada. The Company's
experienced management team has a track record of successful large
scale project discovery, development, operations and financing
combined with an entrepreneurial and collaborative approach to
working with First Nations and communities. The Company's shares
are listed on the TSX-Venture exchange under the symbol "NKL" and
on the US OTC-QX market under the symbol "PNIKF".
Further information about the Company and its projects can be
found at www.prophecyplatinum.com.
Forward Looking Information: This news release includes certain
information that may be deemed "forward-looking information". All
information in this release, other than information of historical
facts, including, without limitation, information of potential
mineralization, the estimation of mineral resources, the
realization of mineral resource estimates, interpretation of prior
exploration and potential exploration results, the timing and
success of exploration activities generally, future production
estimates, the timing and results of future resource estimates,
permitting time lines, metal prices and currency exchange rates,
availability of capital, government regulation of exploration
operations, environmental risks, reclamation, title, and future
plans and objectives of the Company are forward-looking information
that involve various risks and uncertainties. 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.
Factors that could cause actual results to differ materially
from the forward-looking information include unsuccessful
exploration results, changes in project parameters as plans
continue to be refined, results of future resource estimates,
future metal prices, availability of capital and financing on
acceptable terms, general economic, market or business conditions,
risks associated with operating in foreign jurisdictions, 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
exploration or other risks detailed herein and from time to time in
the filings made by the Company with securities regulatory
authorities in Canada. Readers are cautioned that mineral resources
that are not mineral reserves do not have demonstrated economic
viability. 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 annual filings which are
available at www.sedar.com. The Company does not undertake to
update any forward looking information, except in accordance with
applicable securities laws.
Cautionary Note to United States Investors: This news release
has been prepared in accordance with the requirements of the
securities laws in effect in Canada, which differ from the
requirements of U.S. securities laws. Unless otherwise indicated,
all resource and reserve estimates included in this news release
have been prepared in accordance with the Canadian Securities
Administrators' National Instrument 43-101 - Standards of
Disclosure for Mineral Projects ("NI 43-101") and the Canadian
Institute of Mining, Metallurgy, and Petroleum Definition Standards
on Mineral Resources and Mineral Reserves. NI 43-101 is a rule
developed by the Canadian Securities Administrators which
establishes standards for all public disclosure an issuer makes of
scientific and technical information concerning mineral projects.
Canadian standards, including NI 43-101, differ significantly from
the requirements of the United States Securities and Exchange
Commission ("SEC"), and resource and reserve information contained
herein may not be comparable to similar information disclosed by
U.S. companies. In particular, and without limiting the generality
of the foregoing, the term "resource" does not equate to the term
"reserves". Under U.S. standards, mineralization may not be
classified as a "reserve" unless the determination has been made
that the mineralization could be economically and legally produced
or extracted at the time the reserve determination is made.
The SEC's disclosure standards normally do not permit the
inclusion of information concerning "measured mineral resources",
"indicated mineral resources" or "inferred mineral resources" or
other descriptions of the amount of mineralization in mineral
deposits that do not constitute "reserves" by U.S. standards in
documents filed with the SEC. Investors are cautioned not to assume
that any part or all of mineral deposits in these categories will
ever be converted into reserves. U.S. investors should also
understand that "inferred mineral resources" have a great amount of
uncertainty as to their existence and great uncertainty as to their
economic and legal feasibility. It cannot be assumed that all or
any part of an "inferred mineral resource" will ever be upgraded to
a higher category. Under Canadian rules, estimated "inferred
mineral resources" may not form the basis of feasibility or
pre-feasibility studies except in very rare cases. Investors are
cautioned not to assume that all or any part of an "inferred
mineral resource" exists or is economically or legally mineable.
Disclosure of "contained ounces" in a resource is permitted
disclosure under Canadian regulations; however, the SEC normally
only permits issuers to report mineralization that does not
constitute "reserves" by SEC standards as in-place tonnage and
grade without reference to unit measures. The requirements of NI
43-101 for identification of "reserves" are also not the same as
those of the SEC, and reserves reported by the Company in
compliance with NI 43-101 may not qualify as "reserves" under SEC
standards. Accordingly, information concerning mineral deposits set
forth herein may not be comparable with information made public by
companies that report in accordance with U.S. standards.
"Neither the TSX Venture Exchange nor its Regulation Services
Provider (as that term is defined in the policies of the TSX
Venture Exchange) accepts responsibility for the adequacy or
accuracy of this release."
Contacts: Prophecy Platinum Corp. Greg Johnson President &
CEO 1-800-459-5583 Prophecy Platinum Corp. Chris Ackerman Senior
Manager, Investor Relationscackerman@prophecyplatinum.com
www.prophecyplatinum.com
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