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VANCOUVER, BC, Nov. 25, 2020 /CNW/ - Western Copper and Gold Corporation ("Western" or the "Company") (TSX: WRN) (NYSE American: WRN) is pleased to report that the Yukon Government and Little Salmon/Carmacks First Nation have reached an agreement (the "Agreement") to upgrade three bridges along the Freegold Road, which will benefit access to the Casino Project. The Agreement provides funding for Little Salmon/Carmacks First Nation to effectively participate in the planning, design, regulatory processes and construction activities of the project.
This Agreement represents the second project agreement for the Yukon Resource Gateway Project (the "Gateway Project") on the Freegold Road. The Gateway Project includes funding for upgrading the initial 82 km of the existing access road to standards required for the Casino Project and 30% funding for the additional 126 km of new access road to the Casino site secured through commitments from the Yukon Government and the Federal Government.
The first project agreement on the Freegold Road was reached in April 2019 on the initial segment of the Freegold Road – the Carmacks Bypass. The Carmacks bypass will ensure the safety of Carmacks residents by redirecting industrial traffic away from the community and has recently moved through the Environmental Assessment process and has been recommended to proceed. Construction of the Carmacks bypass will begin following the issuance of required permits.
Paul West-Sells, President and CEO commented: "This Agreement is another important step forward in the development of the Casino Project. I am pleased to see that the Agreement enables the Little Salmon/Carmacks First Nation to gain opportunities through potential contracting, education and training benefits associated with the project."
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Western Copper And Gold: Extremely Cheap Copper And Gold
Feb. 07, 2021 2:43 PM ETWestern Copper and Gold Corporation (WRN)AEM, KGC, NEM...1 Comment5 Likes
Peter Arendas profile picture.
The Casino deposit contains measured, indicated, and inferred resources of 45.148 million toz of gold equivalent (using the current metals prices).
The value of contained metals is $82 billion, while the enterprise value of Western Copper and Gold is $140 million.
The market attributes value of only $3.1 to 1 toz of gold equivalent.
The PEA (Q2) and updated feasibility study (probably late 2021/early 2022) should be the main near-term catalysts.
Western Copper and Gold (WRN) is a small company with a market capitalization of slightly over $160 million that controls the world-class Casino copper-gold-silver project. It contains resources of copper, gold, and silver with a market value of over $80 billion at current metals prices. Although it will take many more years before the mine gets into production, the company offers huge upside potential at its current valuation.
Western Copper's Casino Project is located in Yukon, approximately 300 km to the northwest of Whitehorse. It borders with Newmont's (NEM) Coffee Project. Casino is a large copper-gold-silver deposit that contains measured and indicated resources of 7.6 billion lb copper, 14.5 million toz gold, and 113.5 million toz silver. The inferred resources contain further 3.3 billion lb copper, 6.6 million toz gold, and 55.2 million toz silver. At the current metals prices of $3.6/lb copper, $1,815/to gold, and $27/toz silver, the combined measured, indicated, and inferred resources contain 45.148 million toz of gold equivalent.
Source: Western Copper and Gold
The 2013 feasibility study outlined reserves of 8.9 million toz gold, and 4.5 billion lb copper. However, back then, the resources were nearly 50% lower. Therefore, it is reasonable to expect that the new reserves, outlined in the updated feasibility study, will be even larger.
It is also important to note that although the resources are already large, they should keep on growing. As can be seen in the map below, the main mineralized zone is surrounded by several other mineralized zones and exploration targets including Ana, Casino B, Casino West, or Northern Porphyry. Moreover, the drill results keep on coming and they look very promising. Only last week, Western Copper released results from the eastern Gold Zone that included 0.74% copper, 0.83 g/t gold, and 6 g/t silver over 44.41 meters, or 0.52% copper, 0.77 g/t gold, and 7.9 g/t silver over 48.3 meters.
Source: Western Copper and Gold
The 2013 feasibility study envisioned an open-pit mining operation, consisting of milling and a heap leaching segment. The milling throughput rate should be 120,000 tpd and the heap leaching facility should be able to process 25,000 tonnes of ore per day. The production volumes were projected at 171 million lb copper, 266,000 toz gold, 1.43 million toz silver, and 15.5 million lb molybdenum per year, over the 22-year mine life. It equals approximately 813,000 toz of gold equivalent.
The feasibility study didn't provide the AISC estimate. But the operating costs were projected at C$8.52 ($8.1) per tonne of milled ore. Therefore, at the base-case metals prices of $3/lb copper, $14/lb molybdenum, $1,400/toz gold, and $25/toz silver, the operating costs should equal approximately $600/toz of gold equivalent. The sustaining capital was projected at C$362 million ($344 million), which leads to an AISC slightly below $620/toz of gold equivalent. The initial CAPEX was estimated at C$2.46 billion ($2.34 billion). It all resulted in an after-tax NPV(5%) of C$2.99 billion ($2.84 billion) and an after-tax IRR of 20.1%. However, it is important to remind once again that the feasibility study is 8 years old.
Various variables have changed since then, including the CAD/USD exchange rate, which moved from 0.95 to 0.8, the metals prices, the material and equipment prices, etc. Moreover, the resources are much bigger now, which may lead to higher production volumes or longer mine life. As the feasibility study is significantly outdated, Western Copper decided not to simply go and update the old study. It decided to prepare a new PEA first. It was initiated in December, with completion scheduled for Q2. It should be followed by the feasibility study update. According to Paul West-Sells, Western Copper's CEO:
Starting with a PEA will allow the Company to quickly assess changes to the project and outline updated economic returns of the Casino Project before launching a full updated feasibility study.
Risks and opportunities
Western Copper and Gold's upside potential is huge. The market value of the metals contained in the resources is nearly $82 billion (this number doesn't take into account molybdenum, which was included in the production plan of the 2013 feasibility study but isn't included in the current resource estimate). The market value of the company is only slightly over $160 million. Moreover, the company has no debt and it held cash of approximately $25 million as of the end of December. It means that the enterprise value is less than $140 million. It also means that the market values 1 toz of gold equivalent only at $3.1, which is really an extremely low value.
On the other hand, there are also some meaningful risks. First of all, the initial CAPEX is very high, definitely out of Western Copper's reach. The old feasibility study projected it at $2.34 billion, and it is hard to expect that the PEA and updated feasibility study will lead to a major reduction. Quite the opposite, it is possible that the CAPEX estimate will increase further.
It is almost 100% sure that Western Copper won't be able to build the mine on its own and even if it finds a JV-partner, it will most probably not be able to avoid a significant share dilution in order to fund its share of CAPEX. Probably the best outcome for Western Copper's shareholders would be an acquisition of the company, but, certainly, at a significantly higher share price. The risk is that the company will get acquired too soon, at a too low share price. There are several big companies active in the area (map below), including Newmont (NEM), Teck (TECK), Agnico Eagle Mines (AEM), and Kinross Gold (KGC). Any of them could be interested and capable of acquiring the Casino Project or a part of it.
Source: Western Copper and Gold
Another problem is related to mine permitting. The feasibility study was completed 8 years ago, but the permitting process still hasn't been completed. Although Western Copper has prepared several modifications to the original development plan, including a reduction in the height and slope of the embankment, reduced water storage during operations and at closure, or relocation of PAG tailings, the process is far from over and the company hasn't provided any more specific schedule yet. It is reasonable to expect that the permitting process will take several more years.
The chart indicates that Western Copper and Gold's share price should keep on slightly declining in the near future. The company tested the $1.5 level three times over the last seven months. However, in early December, it started moving in a downwards channel and this movement still lasts. Moreover, two weeks ago, the 10-day moving average declined below the 50-day one, which is a bearish signal. The share price stands at $1.22, close to the upper boundary of the short-term channel. If it bounces back down, it may retest the support in the $1 area. If it doesn't hold, the next one is around $0.8. The problem is that another major catalyst, the PEA, is expected only in Q2 (probably towards the end of Q2). Therefore, it is hard to expect any major sustainable upwards movement over the next 3-4 months. Unless the gold and copper prices experience significant growth.
Despite not so positive short-term outlook, the longer-term perspectives of the company look very good, given the vast resources and small enterprise value of only around $140 million. The measured indicated, and inferred resources contain 45.148 million toz of gold equivalent. It means that an enterprise value of only $3.1 is attributable to 1 toz of gold equivalent. It is an extremely low value that shows the huge upside potential of Western Copper and Gold. However, it will take years for the potential to fully unlock. The first step should be the PEA expected in Q2, followed by the updated feasibility study probably in late 2021 or early 2022. The possible near-term weakness may present a good opportunity to accumulate a position before the PEA is released. However, given the riskiness of the company, it is important to keep the bets at reasonable levels.
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