Wellgreen Platinum (TSX-V:WG, StockForum), a Vancouver-based mining company engaged in the acquisition and development of platinum group metals projects in politically stable, mining-friendly jurisdictions, received accolades from mining analysts at Fincom Investment Partners yesterday, pushing shares up 43% in two days.
According to the analysis, Fincom had completed a 5-month investigation concluding that Wellgreen possessed the best Risk vs Reward in the platinum/palladium sector that, at current prices, presented a multiple opportunity.
The coverage stated, "we are pleased to 'put forward' Wellgreen, which actually contains more Palladium than Platinum ounces, as a unique, timely and special opportunity; a best-of-breed combination of excellent management, near term re-rating catalysts, and a chart which has been quietly basing for 10 months."
Wellgreen's new management, headed by president and CEO, Greg Johnson, is the number one reason analysts are keeping their eye on the company. Since he was appointed in late 2012, Johnson and the board have de-risked the Wellgreen PGM-Ni-Cu project from a Capex of $900 million to a far friendlier $300-$400 million.
The analysis was not kind to prior manegement, which it said, "at least to us, [they appear] to have been better promoters than actual mine builders and "rookie" mistakes were made. Greg Johnson & company (including John Sagman who has PGM experience in northern regions, including the Yukon, and built/ran mines for Vale, Xstrata and Capstone) have basically re-done everything 'the right way' - and now advancing towards production."
Other near-term improvements included halving power costs by replacing more expensive diesel with LNG, releasing a new PEA in the first half of 2014 showing IRR moving into the 30% range and providing further assay results to increase confidence in the project's resource as it moves from Inferred to M&I.
The coverage anticipates Wellgreen will be adequately de-risked over the next six months to draw in a larger partner, who would then pay to advance the mine. Therefore it is felt that there would be a potential buyout before any “official” word on production at the project. However, there is no acquisition imminent.
Using a Capex of $300 million and an IRR of 30%, there is an expectation that the mine will have an annual $105 million return and at Wellgreen's present value of $50 million, that's a 200% return on just the initial stage of the project.
Things look even brighter for the company with Indonesia's recent ban on exporting unprocessed minerals, leaving China without a substantial supply of nickel. Fincom analysts predict China's processing plants won't want to shutter facilities and will want to take advantage of the two billion pounds of nickel at Wellgreen.
Analysts were also quick to point out that their report didn't cover Wellgreen's fully permitted, production-ready PGM-Ni-Cu mine in Ontario.
Wellgreen was in the news recently when the company granted stock appreciation rights to certain employees, directors, officers and other company personnel.
Shares were up from $0.66 Tuesday to as high as $1.07 per share Thursday on the news.
Currently there are 81.9m outstanding shares with a market cap of $73.7 million.