Western Copper and Gold announces positive feasibility study on Casino
$1.8 billion After-Tax NPV (8%) at long term metal prices
After-Tax IRR 20.1% at long term metal prices
Long term metal prices: Cu: US$3.00/lb, Au: US$1,400/oz, Ag: US$25/oz,
Mo: US$14/lb
8.9 million ounce gold reserve – an increase of 0.5 million ounces
4.5 billion pound copper reserve
VANCOUVER, Jan. 7, 2013 /PRNewswire/ – Western Copper and Gold Corporation
(“Western” or the “Company”) (TSX:WRN; NYSE MKT:WRN) is pleased to
release the results of its definitive feasibility study (the
“Feasibility Study”, or “Study”) on its wholly-owned Casino
copper-gold-molybdenum deposit in the Yukon (“Casino” or the
“project”). This Study recommends that the project be constructed as
an open pit mine, with a concentrator processing nominally 120,000
tonnes per day and a gold heap leach facility processing nominally
25,000 tonnes per day. Under the Study these facilities would produce
an average of 399,000 ounces of gold, 245 million pounds of copper, 15
million pounds of molybdenum, and 1.8 million ounces of silver per year
during the first four years of production.
The Study succeeds the pre-feasibility study dated May 17, 2011 (the
“Pre-Feasibility Study”). The Study incorporates an updated reserve,
significant updated engineering, particularly in the areas of energy
supply, metallurgy, and flow sheet design, and brings the engineering
on the project to a feasibility level.
“We are enormously pleased with the Casino Feasibility Study”, said Dale
Corman, Chairman and Chief Executive Officer. “This Study establishes
Casino as one of the very few world-class, long life, copper-gold
projects with robust economics at a feasibly study level. The Yukon is
a top mining district, and we look forward to securing permits as our
next step of development.”
In this news release, unless otherwise indicated, references to “$” are
to Canadian dollars and references to “US$” are to United States
dollars.
HIGHLIGHTS
Initial Capital Investment $2.46 billion
Payback period* 3.0 years
NPV pre-tax* (8% discount) $2.82 billion
NPV after-tax* (8% discount) $1.83 billion
IRR pre-tax* (100% equity) 24.0%
IRR after-tax* (100% equity) 20.1%
Total Reserve 1.12 billion tonnes
Mill operation 22 years
Heap leach operation 18 years
*Based on Long Term metal prices (discussed under “Financial Results”
below).
KEY CHANGES FROM PRE-FEASIBLITY STUDY
A significant amount of engineering, field work, and test work was
completed between the issuance of the Pre-Feasibility Study and the
Feasibility Study. This work resulted in the following key changes
between the two studies:
Heap Leach
The operation of the heap leach has been changed from a run-of-mine
operation to a coarse crush and conveyer stack operation in order to
achieve a higher gold recovery of 66%. The heap leach reserve has
increased from 82 million tonnes to 157 million tonnes in part as a
result of the increased gold recovery.
Metallurgy & Flow Sheet
An extensive metallurgical test work campaign was completed in 2012,
including test work on fresh ore obtained from the field specifically
for this campaign. The improved metallurgical recoveries obtained in
the recent test work are reflected in the Study.
The results of comminution test work conducted in 2012, which examined
the ore characteristics of the major rock types and alterations,
indicates that an average concentrator design throughput of 124,000
tonnes per day can be obtained compared to 120,000 tonnes per day
reported in the Pre-Feasibility Study. Annual production varies
slightly from year to year based on ore hardness and this variation has
been accounted for in the financial model.
A pyrite leaching circuit for gold recovery was included in the
Pre-Feasibility Study. A cost-benefit analysis of this facility during
the feasibility study has resulted in this circuit being removed from
the project, but may be incorporated at a later date.
Power
Electrical power for Casino will be provided by a gas fired power plant
based on liquefied natural gas (“LNG”) sourced from a new facility to
be constructed by a third party near the existing gas processing
facilities currently in operation at Ft. Nelson, BC. The LNG supply
chain used in the Study is based upon various engineering studies
undertaken by Western and its consultants and as a result of extensive
discussions with potential third party suppliers in the Ft. Nelson
area.
LNG will be hauled by over-the-highway tankers to an on-site LNG storage
facility, then vaporized and fed to the power plant to generate
electrical power.
LNG Fueled Mining Fleet
The LNG infrastructure required for the power plant will also be
utilized to enable LNG to fuel the mine haulage fleet, including
over-the-highway tractors hauling concentrates, lime, grinding media,
and LNG. The technology to fuel mine haul trucks of the class required
for Casino is still in development, but haul truck suppliers have
publically stated that they are targeting 2017 to make this technology
commercially available, which is well before the date required for
Casino.
The use of LNG for mine haulage, and indeed for power generation,
represents a significant reduction in greenhouse gases as compared to
other alternative fuels. The use of LNG also has a significant impact
in lowering the unit cost for mine haulage.
FINANCIAL RESULTS
The Feasibility Study indicates that the economic returns from the
project justify its further development and securing the required
permits and licenses for operation.
The financial results of the Study were developed for three different
metal price scenarios. Long term prices (“Long Term”) were based on
long term copper price projections from Wood Mackenzie, and typical
analyst projections of long metal prices for the other metals and of
the long term CAN$:US$ exchange rate. United States Securities and
Exchange Commission (“SEC”) pricing guidance uses LME three-year
historical rolling average prices as of the end of December 2012. The
Long Term prices used in the Study are consistent with, or more
conservative than, the prices using the guidelines of the SEC. Spot
prices (“Spot”) are the spot prices from December 31, 2012.
Note that an exchange rate of CAN$:US$ of 1.0 was used for the capital
cost estimation for all metal price scenarios.
The following table summarizes the financial results from using three
metal price scenarios:
Long
Term SEC Spot
Copper(US$/lb) 3.00 3.67 3.57
Molybdenum(US$/lb) 14.00 14.67 11.80
Gold(US$/oz) 1,400 1,488 1,658
Silver(US$/oz) 25.00 28.80 29.95
Exchange Rate(C$:US$) 0.95 1.00 1.00
NPV pre-tax (5% discount, $millions) 4,430 5,330 5,300
NPV pre-tax (8% discount, $millions) 2,820 3,470 3,460
IRR pre-tax (100% equity) 24.0% 26.8% 27.1%
NPV after-tax (5% discount, $millions) 2,990 3,620 3,600
NPV after-tax (8% discount, $millions) 1,830 2,290 2,280
IRR after-tax (100% equity) 20.1% 22.5% 22.7%
Payback period(years) 3.0 2.7 2.6
Net Smelter Return($/t milled) 22.59 24.62 24.27
Copper Cash Cost*(US$/lb) (0.81) (0.85) (0.90)
*Net of byproduct credits.
Higher grade ore is fed to the concentrator during the first four years
of the concentrator operation. This factor, combined with the
concurrent heap leach facility operation, results in higher yearly cash
flows and other metrics during this period and contributes
significantly to the project’s financial performance.
Years 1-4* Life of Mine*
Average Annual Pre-tax Cash Flow
($millions) 773 531
Average Annual After-tax Cash Flow
($millions) 682 400
Average NSR ($/t ore milled) 31.59 22.59
% of Revenue - Copper 48 46
% of Revenue - Precious Metals 40 37
% of Revenue - Gold 37 34
% of Revenue - Silver 3 3
% of Revenue - Molybdenum 12 17
*Based on Long Term metal prices.
CAPITAL COSTS
Total initial capital investment in the project is estimated to be $2.46
billion, which represents the total direct and indirect cost for the
complete development of the project, including associated
infrastructure and power plant. The following table shows how the
initial capital is distributed between the various components.
Sustaining capital for the project is $362 million.
Costs $ millions
Direct Costs
Mining Equipment & Mine Development 454
Concentrator (incl. related facilities) 904
Heap Leach Operation 139
Camp 70
Subtotal Direct Costs 1,566
Indirect Costs 295
Infrastructure Costs
Power Plant 209
Access Road 99
Airstrip 24
Subtotal Infrastructure 332
Contingency 218
Owner's Costs 44
TOTAL CAPITAL COST 2,456
OPERATING COSTS
Operating costs for the milling operation were calculated to average
$5.47 per tonne of ore processed through the mill over the life of
mine:
($/tonne)
Milling $5.13
General & Administrative $0.34
Total $5.47
Heap leach operating costs average $4.04 per ton of ore processed
through the heap leach over the life of the heap leach.
($/tonne)
Heap Leach Operation $1.31
ADR/SART $2.73
Total $4.04
Mining costs were calculated to average $1.66 per tonne of material
moved and $2.63 per tonne ore due to the low strip ratio of 0.59:1:
($/tonne)
Cost per tonne material (ore + waste) $1.51
Cost per tonne ore (mill + heap ore) $2.63
Cost per tonne mill ore $3.05
The combined mining and milling costs are $8.52 per tonne ore milled.
MINERAL RESERVES
The mineral resource estimate first reported in November 2010 was used
unmodified for this Feasibility Study.
The Feasibility Study estimates a National Instrument 43-101 (“NI
43-101″) compliant proven and probable mill ore reserve of 965 million
tonnes and a proven and probable heap leach ore reserve of 157 million
tonnes, as outlined below. Total contained metal in the combined
proven and probable mineral reserve is equal to 4.5 billion pounds of
copper, 8.9 million ounces of gold, 483 million pounds of molybdenum,
and 65 million ounces of silver. The effective date of the mineral
reserve estimate is January 7, 2013.
Tonnes Copper Gold Moly Silver
(millions) (%) (g/t) (%) (g/t)
Mill Ore
Reserve
Proven
Mineral
Reserve 91.6 0.336 0.437 0.0275 2.23
Probable
Mineral
Reserve 873.6 0.190 0.219 0.0222 1.68
Total Proven
& Probable
(Mill) 965.2 0.204 0.240 0.0227 1.74
Heap Leach
Reserve
Proven
Mineral
Reserve 31.8 0.051 0.480 n.a. 2.79
Probable
Mineral
Reserve 125.7 0.032 0.244 n.a. 2.06
Total Proven
& Probable
(Heap) 157.4 0.036 0.292 n.a. 2.21
DEVELOPMENT PLAN
The Feasibility Study evaluates the development of the Casino deposit as
a conventional open pit mine, concentrator complex, and heap leach
operation. The initial production will focus on the deposit’s oxide cap
as a heap leach operation to recover gold and silver in doré form. The
main sulphide deposit will be processed using a conventional
concentrator to produce copper-gold-silver and molybdenum
concentrates. Key metrics of the processing plant are shown below:
Years 1-4 Life of Mine
Strip ratio 0.49 0.59
Nominal Throughput
Mill (tpd) 120,000 120,000
Heap (tpd) 25,000 25,000
Average Annual Metal Production
Copper (Mlbs) 245 171
Gold (kozs) 399 266
Silver (kozs) 1,777 1,425
Molybdenum (Mlbs) 15.3 15.5
Average Annual Mill Feed Grade
Copper (%) 0.307% 0.204%
Gold (g/t) 0.371 0.240
Silver (g/t) 2.103 1.74
Molybdenum (%) 0.025% 0.023%
Recovery (Mill)
Copper (%) 83.7% 86.4%
Gold (%) 67.7% 67.1%
Silver (%) 55.8% 53.4%
Molybdenum (%) 64.8% 70.7%
Recovery (Heap)
Gold (%) 66.0% 66.0%
Copper (%) 18.0% 18.0%
Silver (%) 26.0% 26.0%
Annual Concentrate Production
Cu (dry ktonnes) 395 275
Mo (dry ktonnes) 12 13
Average Concentrate Grade
Copper Concentrate
Cu (%) 28.0% 28.0%
Au (g/t) 27.3 25.6
Ag (g/t) 127.7 147.8
Molybdenum Concentrate
Mo (%) 56.0% 56.0%
INFRASTRUCTURE
A new 132 km, all weather access road will be developed extending from
the end of the existing Freegold Road and generally following the
alignment of the existing “Casino Trail” to the mine site. Concentrates
will be transported, stored and loaded on ships via upgraded facilities
provided by the Port of Skagway, Alaska. The project operating cost
estimate includes the anticipated concentrate handling service charges
based on use of the upgraded facilities.
SCHEDULE
The next step in the development of the project, which is submitting the
initial applications in the permitting process, is anticipated to occur
by the end of 2013. It is expected that permitting will take
approximately two years. Subject to securing the necessary permits and
project funding on acceptable terms, construction is anticipated to
commence in early 2016 with production from the heap leach expected in
2017 and from the concentrator in 2019.
OPPORTUNITIES
The economics of the Feasibility Study do not take into account the
opportunity for improvement based on sharing Freegold Road extension
and other project infrastructure costs with other parties.
In addition, the project contains a significant inferred mineral
resource estimate as disclosed in the technical report dated May 17,
2011.
LOOKING FORWARD
Based on the positive results of the Feasibility Study, Western plans to
finalize its application for environmental assessment under the Yukon
Environmental and Socioeconomic Assessment Act (“YESAA”), the first
step in the permitting process.
CONFERENCE CALL
Western will hold a conference call on Tuesday, January 8, 2013 at 10 am Pacific Time (1 pm Eastern Time) to discuss the Feasibility Study. To access the
conference call, please dial:
Toronto and International: 1-416-764-8688
Toll Free North America: 1-888-390-0546
An archived recording of the conference call will be available on the
Company’s website at www.westerncopperandgold.com
TECHNICAL REPORT
M3, a full service Engineering, Procurement, Construction & Management
firm, is recognized for its experience in copper processing and
capabilities in the development and construction of mines and mineral
processing plants. The executive summary of the Feasibility Study,
prepared by M3, will be posted on the Company’s website (www.westerncopperandgold.com as well as on Sedar www.sedar.com), in the form of a NI 43-101 compliant technical report, and Edgar
within 45 days.
Conrad Huss, P.E. of M3 is the qualified person responsible for the
scientific and technical information in this news release in accordance
with NI 43-101. Michael G. Hester, FAusIMM of Independent Mining
Consultants, Inc. is the qualified person responsible for the
preparation of the reserve estimate in this news release in accordance
with NI 43-101.
The following companies also contributed to the Feasibility Study:
-- Knight Piésold and Co: environmental and permitting, water
supply, geotechnical, tailings management facility and heap
leach
-- Associated Engineering Group Ltd.: offsite roads,
transportation and ports
-- Independent Mining Consultants, Inc.: mining and reserves
-- International Metallurgical and Environmental Inc., ALS
Metallurgy, Starkey & Associates, SGS Minerals Services, Metcon
Research: metallurgical test work and interpretation
-- Casselman Geological Services Ltd.: geology
-- Giroux Consultants Ltd.: resource estimate
ABOUT WESTERN COPPER AND GOLD CORPORATION
Western Copper and Gold Corporation is a Vancouver-based exploration and
development company with significant copper, gold and molybdenum
resources and reserves. The Company has 100% ownership of the Casino
project located in the Yukon Territory. The Casino project is one of
the world’s largest open-pit gold, copper, silver and molybdenum
deposits. For more information, visit www.westerncopperandgold.com.
On behalf of the board,
“Dale Corman”
F. Dale Corman
Chairman & CEO
Cautionary Disclaimer Regarding Forward-Looking Statements and
Information
Certain of the statements and information in this news release
constitute “forward-looking statements” within the meaning of the
United States Private Securities Litigation Reform Act of 1995 and
“forward-looking information” within the meaning of applicable Canadian
securities laws. Forward-looking statements and information generally
express predictions, expectations, beliefs, plans, projections, or
assumptions of future events or performance and do not constitute
historical fact. Forward-looking statements and information tend to
include words such as “may”, “could”, “expects”, “plans”, “estimates”,
“intends”, “anticipates”, “believes”, “targets”, “forecasts”,
“schedules”, “goals”, “budgets”, or similar terminology.
Forward-looking statements and information herein include, but are not
limited to, statements with respect to the results of the positive
Feasibility Study on Casino; the technical and financial viability of
mining, leaching and processing operations at Casino; the economic
potential of the Casino mineral deposit; the existence and size of the
mineral deposit at Casino; potential upgrade of inferred resource to
either measured or indicated mineral resources; the productive mine
life of the Casino project; potential expansion and development of the
project; timing and amount of estimated future production;
environmental approvals; permit applications for road and mine
construction; the development schedule for the project; estimated
timeframes to obtain permits, complete engineering, road construction,
site construction and commercial production phases; ability to secure
financing for mine construction and development on acceptable terms;
potential increases in costs, timing and complexities of permitting,
mine construction and development and ability to secure necessary
infrastructure as a result of the remote location of the Company’s
mineral projects and First Nations consultation requirements; planned
mining operations and ore processing; construction of infrastructure,
access roads, power supply and distribution network, communications
infrastructure, airport, and tailing facilities; annual mine production
of ore and waste and waste/ore stripping ratios; power supply for the
project; estimated initial and ongoing mill throughput; the process and
expectations for metal recovery; estimated metal production over the
life of the mine; estimated capital costs; projected future metal
prices. Information concerning mineral reserves and mineral resources
also may be deemed to be forward-looking information in that it
reflects a prediction of the mineralization that would be encountered
if a mineral deposit were developed and mined.
All forward-looking statements and information are based on Western’s or
its consultants’ current beliefs as well as various assumptions made by
and information currently available to them. These assumptions
include, without limitation, the economic models for Casino; estimated
capital costs of the project; costs of production; success of mining
operations; projected future metal prices; engineering, procurement and
construction timing and costs; the timing and obtaining of permitting
and approvals; the geological, metallurgical, engineering, financial
and economic advice that Western has received is reliable, and is based
upon practices and methodologies which are consistent with industry
standards; and the continued financing of Western’s operations.
Although management considers these assumptions to be reasonable based
on information currently available to it, they may prove to be
incorrect. Forward-looking statements and information are inherently
subject to significant business, economic, and competitive
uncertainties and contingencies and are subject to important risk
factors and uncertainties, both known and unknown, that are beyond
Western’s ability to control or predict. Actual results and future
events could differ materially from those anticipated in
forward-looking statements and information. Examples of potential
risks are set forth in Western’s most recently filed Form 40-F with the
U.S. Securities and Exchange Commission and its most recently filed
Annual Information Form with the Canadian Securities Administrators as
of the date of this news release. Accordingly, readers should not
place undue reliance on forward-looking statements or information.
Western expressly disclaims any intention or obligation to update or
revise any forward-looking statements and information whether as a
result of new information, future events or otherwise, except as
otherwise required by applicable securities legislation.
SOURCE Western Copper and Gold Corporation
