Casino gets a bit more feasible

LNG will provide Casino’s horsepower.

Yukon-focused Western Copper and Gold on Monday released a feasibility study on its Casino copper/gold/molybdenum deposit in Yukon, and Mineweb’s Kip Keen has a good writeup on the news, which moved the stock 10% higher on Monday.

In 2011, Western Copper spun out assets into 2 companies – Copper North (Carmacks, Redstone) and Northisle Copper and Gold (Island Copper) – and the stock promptly crashed from the $3 level to penny territory. Shares have risen from 68 cents at the end of November to the current $1.45, which values the company at about $136 million. If this is going to become a mine, that’s not much of a MC.

Western’s feasibility study shows an LNG-powered open-pit mine with reserves of 8.5 million ounces of gold and 4.5 billion pounds of copper. The mine would produce, annually, an estimated 399,000 ounces of gold, 245 million pounds of copper, 15 million pounds of moly and 1.8 million ounces of silver during the first four years of production, starting in 2017.

Casino is a massive porphyry deposit that is projected to have a negative cash cost to produce copper; ie. it has enough gold, silver and moly credits to fund the copper production.

The bottom line:
Internal rate of return (after-tax): 20.1%
Capex: $2.46 billion
Payback: 3 years
NPV (after-tax, 8% discount rate): $1.83 billion

The numbers have improved since a 2011 PFS due to factors such as a rising gold price and better gold recoveries, as well as switching from coal to LNG to power the mine, which is in a remote area, off the Yukon grid. The FS includes construction of a 132-km, all-weather access road to the mine.

Mineweb’s Keen also did some good research in this earlier, Dec. 21 piece on the net smelter royalty that Western Copper & Gold effectively sold for $62 million to fund future permitting and planning costs. That’s a big bet on Casino’s future by a major, albeit mysterious, player in the royalty game.

Insiders have also been buying. Several company executives – including Dale Corman, chairman and CEO, and president Paul West-Sells – participated in an October private placement at 80 cents a share, according to data.

Big capex, big mine. And big hurdles to clear, including a plan to use LNG-powered trucks to haul ore – trucks that are on the drawing board but don’t even exist yet. However, so far, investors seem to like what they see.

Disclosure: I own shares in Western Copper and Gold. This is not investment advice; please read my disclaimer.

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