The Ellis Martin Report Interview with Greg Johnson Of Wellgreen Platinum Ltd.
TEMR: I'm Ellis Martin. In this segment I'll be speaking with Greg Johnson, the President and CEO of Wellgreen Platinum Limited, trading on the TSX under the symbol WG and in the U.S. as WGPLF. Wellgreen Platinum is a Canadian mining exploration and development company entirely focused on the active advancement of its 100% owned Wellgreen PGM nickel-copper project and taking it toward production. Located in the Yukon Territory of Canada, the Wellgreen project is one of the largest undeveloped PGM or platinum group metals deposit, outside of southern Africa and Russia. Greg welcome to the program. It's great to have you back.
Greg Johnson: It's great to be back. It's been a while I think.
TEMR: As I stated in the open, your company holds one of the largest PGM deposits outside of southern Africa and Russia. How important is this fact, especially during these trying geopolitical times?
GJ: Well, it's quite significant in the platinum metals space in particular. Geologically the kind of rocks that host our deposit are quite rare on the earth. The biggest concentration, as you mentioned, are in southern Africa and Russia. It happens though that there are a couple of areas in North America, one in Ontario and Montana, and then in the Yukon there are large and very perspective terrains for this type of exploration. Our project is actually a historic producer. It was put into production--- It was found in the 1950s and put into production in the 1970s as a high-grade underground mine. Since the late eighties it's been looked at as a potential for open pit development. Our work over the last several years with Wellgreen has basically demonstrated the incredible potential with that approach.
TEMR: Wellgreen has recently completed a $9.1 million dollar equity financing. Congratulations. As far as I know, much of that money is flow through. Where will these funds be allocated?
GJ: We were able to do that financing at a premium to the share price, about a 11% premium. The way that works is that a tax incentive type of investment in Canada that encourages exploration investment and so that money will ultimately go into the ground over the next 18 months on our Yukon-based project. Those funds will go towards drilling and other exploration activities as we advance the Wellgreen project into prefeasibility and feasibility over the next couple of years.
TEMR: It certainly isn't easy for a resource company to raise money right now. How do you account for your success in that area?
GJ: You're right, it's been a very difficult market. Most people say that the peak in the sector was probably early 2011 so we've had a 3 going on 4-year bear market in the sector. PricewaterhouseCoopers does an annual assessment of the junior mining space and they pointed out that there were only 26 companies in all of 2014 that raised $10 million dollars or more. It's a pretty small slice when you consider there are about 1,700 listed junior mining companies in Canada. I think our success has really been based on both the kind of deposit we have, because of the platinum and the nickel and copper, it's a fairly rare type of deposit to have outside of, as we mentioned, the South Africa and Russia, and secondly, the fact that we're so close to infrastructure and that our project has been a past producer it's really resonated on a low political risk point of view scale of the deposit and the success that we've been able to have doubling the size of the resource here over the last 2 years. All of those factors have really culminated in a project that stands out from many others. It's not unusual for junior companies today to just really be hibernating trying to survive the bear market. Wellgreen is a company that's been building on its success and advancing actively the project towards production because though most gold projects are struggling with today's low prices, these are very attractive prices for us to be looking with our particular project and the fact that it's open pit mineable and it has that low-cost structure.
TEMR: Well, typically the price of platinum is speculative and tracks gold. The metal itself is unlike gold in that platinum is an industrial metal used all the time in the automotive industry. That growth or use has not slowed down, has it?
GJ: Platinum and palladium are quite distinctively different then the other precious metals. Though, as you point out, they tend to track often times on a shorter term basis the movement in gold, platinum and palladium. The largest single uses is in catalytic converters for automobiles and trucks. The fundamentals have been basically year-on-year growth since about the mid-eighties. 4% or 5% a year growth in demand on the supply side up until 2006 for platinum and 2004 for palladium. We saw mining supply increase, but over the last 8 to 10 years we've actually been seeing the mine supply falling each year pretty much consistently because of the high-cost nature of these old high-cost deposits, particularly in South Africa on the platinum side and in Russia on the palladium side.
TEMR: Does that mean until companies, such as yours, go into production there might not be enough platinum and palladium worldwide to meet the demand for the automotive industry and beyond?
GJ: Yeah. Both markets, platinum and palladium, are in deficits. In other words, mining supply is falling short of demand each year and has been for the last several years. Most analysts continue to project that going forward. The opportunity for higher prices for the metal is quite significant. In fact about 55% of the producing platinum mines are losing money at today's price. We're likely either to need to see platinum and palladium prices move significantly higher or we're going to see further shutdowns of mines that are going to make that deficit position even more extreme. Short-term, we've seen seeing the price of platinum and palladium, kind of, parallel with the movement in gold, but the fundamentals are so strong I think that's probably a short-term situation that will likely, longer-term, reflect those very, very strong fundamentals.
TEMR: Let's talk about some of the fundamentals for the Wellgreen project in particular. You're not going to have high production costs comparatively because the mine has been active before and you plan doing open pit mining when you get underway. That's not the case necessarily with some of the southern African or Russian mines.
GJ: Yeah. Our Wellgreen project up in the Yukon has the benefit of a highway going right past it and an existing port that currently takes concentrate material to smelters in Asia and elsewhere. A lot of the costs of development are already in place for this project. Because of its very large resource that starts right at the surface, it means that we can approach mining on this project using large-scale open pit techniques and that means our cost structure is going to be very low. The other element is that our grades of nickel and copper that come along with the platinum and palladium when we mine mean that we're producing more cash flow and our cost net of those co-product credits mean that we're going to be probably one of the lowest cost producers in the world in terms of our platinum and palladium costs, dramatically below the current metal prices.
TEMR: During the last year, and correct me if I'm wrong, your share price hasn't quite taken the hit that many of the resource companies have. That is not really reflective of precious metal stocks in general.
GJ: I would say probably not all of our shareholders would agree with that. It's true to say that we've done much better than most of our peers. In terms of performance, I think we're one of the top performers in the PGM and nickel space on a relative basis. We've been trading in a range, kind of, between $0.50 and $1.00 for the last 2 years. That's much better than many of our peers who were off 90%-95% in the same period.
TEMR: What would you say to potential investors listening to this segment that may be considering as an opportunity a company called Wellgreen?
GJ: I think the things that really standout for me are the Wellgreen opportunity is at that stage of development where we have a good handle on what we have and it's become over the last 2 years, we've more than doubled the size of the resource. We've now grown this to one of the world's largest. You're looking in all categories at almost 20 million ounces of platinum and palladium in the open pit and you've got an equivalent value of almost another 20 million ounces in nickel and copper that come along with that. It's become a true giant. The valuations are still reflecting the bear market conditions. The fundamentals for the PGM really couldn't be stronger. I think it's really only a matter of time, coming out of this last 3 to 4 years of bear market, that we're going to see another positive cycle. With a company like Wellgreen that's position so well to basically advance towards construction and the scale of the asset we have, I can't help but believe that over the next 2 to 3 years this is a project that has a chance to significantly outperform the sector.
TEMR: Greg, you've had success in the mining business for many years now. Give us a brief synopsis of your history.
GJ: Myself and the other members of our team all started out our careers with the major mining companies. John Sagman, our chief operating officer in particular, not only started at Placer Dome, like I did, which is now Barrick Gold, but went on to spend two decades working for Xstrata and Vale, the two mining giants that are mining nickel and PGMs in the Sudbury district. This is my third public company. I'm one of the original cofounders of NovaGold. I was there for about a dozen years when we took that company from a similar size market company as we are at Wellgreen today to over a $2 billion dollar company. That was a huge success for shareholders. Likewise on my second public company at South American Silver. We had a terrific success on that project taking it from also a $30 million dollar market to ultimately about a $350 million dollar company. Here at Wellgreen we're about a $60 million dollar value today in the marketplace, but based on the asset we have and the metal in the ground, this is one of those opportunities that with successful development we have the potential to also deliver multiples in terms of the value. I think of the three opportunities I've been associated with over my career, I think that this is one of the most exciting because it combines the scale and low political risk of a NovaGold, but you've got the excellent infrastructure in place and the Yukon is considered one of the best mining jurisdictions globally. It's a pretty exciting time for us at Wellgreen.
TEMR: Greg thanks so much for the update on Wellgreen Platinum. I'll look forward to further conversations with you in the near future. Appreciate your joining me today in the program.
GJ: Well, thanks for having us.
TEMR: I've been speaking with Greg Johnson, president of Wellgreen Platinum. Recently upgraded to Big Board status on the Toronto Stock Exchange under the symbol WG and in the U.S. as WGPLF. Just type in WGPLF as the ticker symbol. Listen to this segment again on the podcast page of our website, ellismartinreport.com.
Wellgreen Platinum is a paid sponsor of The Ellis Martin Report