The Yukon’s largest undeveloped copper gold project

POSTED ON August 31, 2015 BY Andrew Nelson
CATEGORY Copper, Gold, Site visits, Western Copper and Gold, Yukon,

We are nearing the end of the Yukon site visits, but still have two more interesting projects to discuss. To catch up on last week’s site visits see here: ATC, AXR, WG, KAM, RK.

The Yukon Media Tour has been all about mining, but the real focus has been on the de-risked development stage projects the Territory has to offer. The Territory has experienced 2 of the 3 producers, the Wolverine zinc mine and Alexco silver mine, suspend operations due to low metal prices. This has left Capstone’s Minto copper mine as the last mine standing in the Yukon.

Western Copper & Gold Casino Location (Source: WRN)

To provide new jobs, business opportunities, and benefits from tax revenues the Government of the Yukon has created a reasonable permitting environment for responsible and environmentally focused miners with advanced-development stage projects. One such project that will contribute significant economic benefits to the Yukon and Canada is Western Copper and Gold’s (TSX: WRN) (NYSE: WRN) Casino project.

On top of the proposed Casino open pit. Click panorama for full size. To the right of the valley floor is the outer edge of the pit! It's big. (Source: CEO.ca)

Dr. Paul West-Sells, PhD, President & COO began by stating to the group, “We are positioned differently than most projects in the Yukon. We are not an exploration company, we are a development company. What we are doing at Casino is working towards bringing it into production. Casino is a very large and very important project to the Yukon. It will employ 1,000 individuals during construction and require 600 full time staff to operate the mine. This project over the Life of Mine will contribute $9.7B in GDP to Canada which is significant. For the Territory that would be $274M of GDP, $130M in taxes, $60M in royalties every year for the first 22 years of the project.”

Paul West-Sells, PhD, President & COO, Chris Donaldson, Manager Corporate Development explain the mineralogy in the core shack.

Big numbers like that require big reserves and resources. The Casino project is a giant copper-gold porphyry which hosts a copper deposit of 4.5B lbs reserves and a 5.4B lbs inferred resource. The gold contained is 8.9M Oz in reserves and a 9.0M Oz inferred resource. There will be a combination of extraction processes to produce the concentrate and dore. The two processes used will be a mill and flotation operation for sulphides and a heap leach operation for oxidized ore. Approximately 86% of the ore will be processed through milling and flotation.

Management believes the mineral reserve grade is in line with that of its peers. Casino is calculated to be approximately 0.50% CuEq. Comparable projects located just south in British Columbia chosen were Copper Mountain ≈ 38% CuEq (CUM), Highland Valley ≈ 36% CuEq. (TCK), Gibraltar ≈ 38% CuEq. (TKO), Mt. Milligan ≈ 45% CuEq. (TC), and Red Chris ≈ 53% CuEq. (III).

Green is good for copper in rocks. My 2 cents on the Casino geology. (Source: CEO.ca)

The Casino project is situated on the Traditional Territory of the Selkirk First Nation, Little Salmon Carmacks First Nation, and Tr’ondëk Hwëch’in. All First Nations and WRN have signed Co-Operation Agreements. The Agreements outline the involvement of both WRN and the respective First Nation who are to work cooperatively to review, evaluate and discuss the advancements of Casino.

In the March 12, 2014 press release Selkirk First Nation Chief Kevin McGinty commented: “This Agreement provides Selkirk with a central role in working with Casino management to ensure that the plans for this Project meet Selkirk’s expectations for environmental performance while also providing long-term economic and other benefits and opportunities for our First Nation and our Citizens.”

With Casino being an advanced-development stage project the management group are working towards fully permitting the project. As of now, the Yukon Environmental and Socioeconomic Assessment Act are performing a screening review to determine the eligibility of Casino. After an approval from YESAB, WRN will be looking to receive a quartz mining and water use license. The approximate decision will be in early 2016. Management are optimistic both licenses will be received as all the right steps were taken before making the application.

The Casino camp was only saved by the airstrip from a wild fire which ravaged the forest. Note the charred forest to the right of the airstrip. In background to the right is the Casino deposit. The Panorama above shows the right side, we are viewing from the left here. (Source: CEO.ca)

Other major tasks at hand include arranging a suitable partner to provide a significant portion of the $2.46B CAPEX the company requires to build the mine. Management explained that the most likely partner would be an Asian refiner/smelter from China, Japan, or Korea who would have a direct interest in purchasing the copper/gold and molybdenum concentrate.

With respect to economics, it was encouraging to see WRN management use recent commodity spot rates. Using $2.35/lb copper, $1,180/oz gold, $6.00/lb molybdenum, $15.00/oz silver, and a $0.76CAD/USD FX rate resulted in an after-tax NPV of $1.44B and IRR of 18.2% with a payback period of 3.2 years. The project is economic even in the current market environment which makes it that much more appealing to a major producer or smelter.

In the CEO Chat this AM I was fortunate to have the input on Casino from Tim Oliver, P.Eng, a NI 43-101 specialist. Mr. Oliver was the project manager at Casino in 2011. He had commented, “ I've always liked this project. Having managed the first pre-feasibility study, I know the project and the company well. First, WRN management is strongly engineer-oriented with deep experience building major mines. Also, they are straight-shooters in every respect. They don't sugar-coat the fact that Casino is a big bite in terms of initial capital. A lot of that is infrastructure. WRN meets these challenges head-on. With each hurdle crossed, the project comes closer to reality. Also, each increment of progress on infrastructure benefits the territory as much as the company. That's win-win.”

Camp dog and core storage (Source: CEO.ca)

Management and Board members also have skin in the game, owning 8% of the stock. According to the June 30, 2015 financials the company has over $9M in cash and a positive working capital of $12.61M. Management has budgeted to spend $6M this fiscal year. The cash will be used strictly on permitting and covering general and administrative expenses which were said to be approximately $1.5M/year. The remaining cash will provide 3 to 4 years according to management to remain solvent as they advance Casino and find a suitable partner for financing.

The Casino project has the size to be of interest to major copper producers or smelters across the globe. With many forecasting copper supply deficits in 2019, WRN could be a good call option on the copper price.

The obvious drawback of such a major copper & gold project is the price tag required to build it. Management expects clarity concerning the financing in 2016. Other challenges the project faces are infrastructure and power as it is currently a fly-in camp. A 130 km road requires building and upgrading from Carmacks and power will be supplied by LNG from Ft. Nelson, BC.

Positives for WRN are that the Yukon Government wants to see projects turn into producing mines and therefore may streamline the permitting process. WRN already has good relations with the three First Nation groups the Casino project is on. They also have a sizeable amount of cash, enabling them to wait out this bearish commodity market.

Mr. West-Sells, President & COO holding high grade gold and myself holding a high grade copper specimen.

Upcoming catalysts for WRN will be the receipt of mining and water license permits.

Join me back here at CEO.ca for my final post of the Yukon tour. We will be visiting Victoria Gold which hosts a project with gold reserves in the multi-million ounce range.

Symbol: TSX – WRN
Price: $0.405
Market Cap: $39.56M
Shares Outstanding: 94.19M

DISCLAIMER: The work included in this publication is based on SEDAR filings, current events, interviews, and corporate press releases. It may contain errors, and you shouldn’t make any investment decision based solely on what you read here. This publication contains forward-looking statements, including but not limited to comments regarding predictions and projections. Forward-looking statements address future events and conditions and therefore involve inherent risks and uncertainties. Actual results may differ materially from those currently anticipated in such statements. The views expressed in this publication and on the CEO.CA website do not necessarily reflect the views of Pacific Website Company Inc. or the author. The author holds no shares in Western Copper & Gold and has received no compensation for this article. This publication is provided for informational and entertainment purposes only and is not a recommendation to buy or sell any security. Always thoroughly do your own due diligence and talk to a licensed investment adviser prior to making any investment decisions. Resource companies such as Western Copper & Gold can easily lose 100% of their value so read Western's profile on www.SEDAR.com for important risk disclosures. It’s your money and your responsibility.

Andrew Nelson

Andrew Nelson is pursuing the CPA designation as an auditor at Davidson & Co., the leading service provider for junior mining clients globally. Mr. Nelson has experience working with TSX venture listed explorers in Kazakhstan, Paraguay, Peru, Namibia, Madagascar, West Africa, United States, and Canada reporting under IFRS framework. He is an Executive Officer with Young Mining Professionals a not-for-profit which holds networking events for young professionals in Vancouver's resource sector. His interests are reporting on Canadian precious metal explorers and holding informative interviews with accomplished mining professionals. If involved in junior mining he would love to hear from you at Andrew.GM.Nelson@Gmail.com. More →

Twitter: @https://twitter.com/ANelsonMining

andrew.gm.nelson@gmail.com

Andrew Nelson

Twitter: @https://twitter.com/ANelsonMining

andrew.gm.nelson@gmail.com

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