Western Copper updates Casino study

Western Copper (WRN-T, WRN-X) has released an updated prefeasibility study for its sizable but remote Casino gold-copper-molybdenum project in the Yukon, three years and a commodity-price rollercoaster ride after the first.

The new study boosts throughput at the open-pit mine by 33% to 120,000 tonnes per day, switches from coal to natural gas power generation, includes better gold recoveries and, of course, uses different commodity prices.

The update factors in long-term prices of US$2.78 per lb. copper, US$15.56 per lb. molybdenum, US$1,222.22 per oz. gold and US$18.89 per oz. silver, with a simple exchange rate to the Canadian dollar of 1. That compares with US$30.97 per lb. molybdenum, US$647.40 per oz. gold and US$2.95 per lb. copper used in the previous study.

Despite the price swings of gold and molybdenum, the financials are similar to 2008 estimates. The updated study shows an after-tax internal rate of return (IRR) of 16.2% and an after-tax net present value (NPV), using an 8% discount, of US$1 billion. The older study had an IRR of 14.9% and an NPV of US$900 million.

Over the 23-year mill life, average annual production comes in at 157 million lbs. copper, 262,000 oz. gold, 1.4 million oz. silver and 12 million lbs. molybdenum. In the first four years, higher grades and a concurrent heap-leach operation would allow Western Copper to produce an average of 435,000 oz. gold, 234 million lbs. copper, 1.6 million oz. silver, and 13 million lbs. molybdenum per year. 

Since Casino is 380 km northwest of Whitehorse, 560 km from the port of Skagway, Alaska, and 100 km west of the nearest power grid, infrastructure and capital costs have always been big questions. The latest study puts total initial capital costs at $2.13 billion, which, along with the actual mine capital of $1.75 billion, includes a gas-fired power plant at $260 million and general infrastructure such as roads and a port upgrade at $120 million. Sustaining capital costs are estimated at $575 million, which incorporates among other things the cost of trucking in liquefied natural gas from Kitimat. Payback is expected in 3.2 years, thanks in part to the high outputs in the early years of mining.

With a significant resource update last November, reserves for the milling operation stand at 976 million tonnes grading 0.202% copper, 0.24 gram gold per tonne, 0.023% molybdenum and 1.73 grams silver per tonne. For the heap-leachable oxide cap, reserves come in at 82 million tonnes of 0.041% copper, 0.37 gram gold and 2.55 grams silver.

Not factored into the study, however, are the 1.7 billion tonnes of inferred resource at Casino, of 0.14% copper, 0.16 gram gold, 0.019% molybdenum and 1.37 grams silver. Combining all resource classes, the supergene and hypogene zones are home to 9.9 billion lbs. copper, 16.6 million oz. gold, 1.2 billion lbs. molybdenum and 133 million oz. silver.

The copper-enriched supergene layer consists primarily of chalcocite and minor covellite, while the underlying primary mineralization consists of pyrite, chalcopyrite and molybdenite.

Mining and milling operating costs are estimated at $9.70 per tonne while the strip ratio comes in at 0.51 in the first four years and averages out over the life-of-mine at 0.72. Recoveries are almost identical in the first four years as over the life of mine, with copper at 82%, gold at 76%, silver at 50% and molybdenum at 57%. For heap leaching, gold recoveries are 50%, silver 20% and copper 20%.

Western Copper is now moving on to a full feasibility study and permitting for the project.

The company is also securing permits for its Carmacks open-pit heap-leach copper project, also in the Yukon. In May 2010 the Yukon Water Board denied the company a water use licence for the project and the decision was upheld by the Yukon Supreme Court in February 2011. Western Copper has announced that it has filed a notice of appeal with the Yukon Court of Appeal as it considers other options.

Western Copper’s share price was up 28¢ or 8.1% on the day the study was released to close at $3.75. The company has a 52-week trading range between 81¢ and $4.40, and 91.7 million shares outstanding.