Greg Johnson, the President & CEO of Wellgreen Platinum, chats with Cambridge House Live anchor Vanessa Collette about the accelerating pace of Wellgreen's activities as the company develops a massive platinum discovery in the Yukon. A must-see for serious investors.
Vanessa Collette: Welcome to Cambridge House Live. I’m Vanessa Collette here at the Sprott Symposium–I’m joined by Greg Johnson, President & CEO of Wellgreen Platinum, which is a platinum development company. Welcome Greg , it’s good to see you again.
Greg Johnson: It’s good to be here, thank you.
VC: Now Greg, last time we spoke you gave us an update on the company, where does the Wellgreen project stand now in terms of development?
GJ: Well it’s been an exciting kind of half of the year for us, the first half of 2014, we raised 6.9 million dollars in financing. As most of your listeners know, it’s been a challenging market, but we have been able to continue to attract investors. We’ve raised about 25 M dollars in the last 18 months, so there’s a lot of interest, particularly in the platinum space and there are not a lot of platinum and palladium companies outside or South Africa and Russia, so we are getting a fair bit of attention. In addition our technical studies are advancing nicely, and we are looking to release a major resource update here in July, and then follow that with a metallurgical update and follow that with an updated economic assessment in the next two months. So it’s an exciting period for us at Wellgreen and everyone is pretty busy.
VC: That’s very exciting! You have your next milestones all lined up in terms of getting to this updated PEA – which is a MAJOR achievement for the company.
GJ: Yes it’s been a lot of work that has gone into that – there’s been about 2 years of exploration work, about 40,000 meters of new drilling, new studies on metallurgy and new engineering concepts that were bringing to bear on this so we’re all excited and we think this is going to be a pretty substantive update that is going to give the market a better sense of the project that we are looking at, at Wellgreen.
VC: You were about to raise almost 7 million dollars last month, this is a tough market to raise money in, so where was the money mostly coming from?
GJ: Well we saw a variety of interest, we have a very strong existing shareholder base that participated in this round, then we brought in a number of new institutional investors who are focused in the resource space, recognizing the qualities of this asset and wanting to be a part of it going forward. So, it was a mix of those two sources, we would anticipate as we advance the project with these new studies, there will be increased interest with future financings or just in the market.
VC: Right. The platinum sector is so small in terms of how many companies, it’s kind of similar to the silver space perhaps before it started to get attention. Why do you think platinum has become such a buzz word in the sector?
GJ: Well the fundamentals are probably, of all the precious metals, the strongest right now in platinum and palladium. We’ve had a trend of increasing demand, really since the 1980s – in both platinum and palladium – the largest single use of which for both is catalytic converters- so that increasing demand year on year has resulted in a need for more metal production, which up until about the mid 2000s was happening – we were seeing increasing mine supply. However since 2006, for platinum, and since 2004 for palladium, we have actually seen global mine supply falling out of South Africa for Platinum, and out of Russia for Palladium, and so this has created a situation, on a fundamental basis, where today we have a deficit in terms of total demand vs. mine supply coming out of the ground. And in fact, if we didn’t have the recycling industry, we wouldn’t be able to meet just the need for catalytic converters – so it is very strong fundamentals that we may continue to see these metals move higher as they seek to kind of balance out the supply/demand equation.
VC: And, Palladium just hit a 13 year high, which is pretty huge. Is this mostly because of what has been going on in Russia?
GJ: It’s really this long term trend – the strikes announced in South Africa has been a factor, the Russia-Ukraine has been a factor, but most significantly this has been in place since 2004-2006 because of falling mine supply, so what that deficit in production has done is it has effectively created surplus supplies have come into the market to meet that demand level, and so we are seeing shrinking levels of readily available metal – and that’s resulted in a rising price dynamic. Both platinum and palladium are looking very positive, they seem to have come out of the bear market, seem to have hit their lows, and are seeking higher prices. With those fundamentals and with the challenges in mining, many of these deep high cost underground mines, in places like South Africa, this is something that is long term issue, not something that is short term, news driven.
VC: Well speaking of platinum supply, what is your timeline for the project – when are you going to be supplying platinum to the market?
GJ: Well the thing that is exciting about our Wellgreen project is that it is located in Alaska just off of the highway so we have paved highway access to the project, two existing port facilities, that are year round shipping ports, so that is going to facilitate this project being advanced quite rapidly, we’re looking to deliver the project towards feasibility in the next year or two, and to be able to start construction shortly after that. So this is really a kind of a 2-3 year timeline on this project to see it go from growth, early development stage moving into production. And that’s quite a rapid clip for a North American project.
VC: Absolutely. How do you plan on funding the development?
GJ: We would expect there would be some additional equity raises, we would expect our existing shareholders to participate in those, but we also have built-in money that is going to be coming in through the exercise of warrants tied to past financings, so that is already baked into the total outstanding, fully diluted share capital. So looking at our needs going forward, they are relatively modest, until the time when we need to raise capital to build the mine we are looking at tens of millions, not hundreds of millions, and then when we look at actual construction of the mine, because we’re focusing on a smaller capital concept in terms of the startup, we have a number of opportunities such as working with smelting groups to do offtake arrangements, potential partnerships and other approaches that can facilitate reducing dilution and maximizing the exposure for our investors to this world class asset.
VC: You said that the infrastructure on site was quite good – Power has traditionally been a big issue in the Yukon so what is your plan for power?
GJ: There are some big changes in the works in the Yukon. Historically 90% of their grid is electri and the other 10% is made up of diesel power generation. The Yukon is currently in construction of two new LNG fired power plants that they have put in place, and on our own project we have alrady negotiated an MOU with a natural gas supplier out of the state of Alaska. So we are looking at a much lower cost alternative to diesel, and that should be very positive for our upcoming economic study, and we’ve already signed that supply MOU to get that process started.
VC: And how are relations with the First Nations?
GJ: We have an excellent First Nations group that we are working with, our project sits in the core treaty area for the Kulani First Nation. So they have selected lands for mining adjacent to our project and are really strong supporters of the work that we are doing. We are very pleased, we have a nice cooperative relationship working with them, we have an exploration cooperation agreement already in place, and they are strong supporters of the development of the project.
VC: Where do you see the platinum market going forward?
GJ: Well, it’s hard to always judge on these markets but it’s been a long bear market for precious metals themselves, we’ve seen that bottom – we believe – put in place, the fundamentals argue for higher metal prices, many of the top analysts are projecting prices to exceed 2,000 an ounce for both metals, potentially, so we are quite bullish – we of course are using conservative metal prices in our assessments, typically around the 3 year average price level – but that doesn’t mean we are not bullish for where the prices could go from here.
VC: Well it is very exciting, we certainly will be watching with interest. Thank you so much for stopping by, Greg.
GJ: It was a pleasure, thank you.