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Vol. 13, No. 30 Week of July 27, 2008
Providing coverage of Alaska and Northwest Canada's mineral industry

Mining News: Junior chases Pebble-like deposit

Western Copper envisions developing Casino Project as large open-pit copper-gold-molybdenum mine with 30 years of production

By Rose Ragsdale

For Mining News

CARMACKS — Western Copper Corporation said its Casino copper-gold-molybdenum deposit in central Yukon Territory has the potential to be developed economically as a sizable open-pit mine.

The porphyry deposit at Casino is the latest in a long line of precious- and base-metal zones of mineralization in the area to be considered for extraction. It is considered unique among Canadian porphyry deposits, with a substantially preserved oxide gold leach cap, a well-developed supergene or near-surface, copper-enriched zone, and a hypogene, or deeper, copper-gold zone.

Geologically, it is somewhat similar to the Pebble copper-gold-molybdenum deposit in Southwest Alaska, but about one-tenth of Pebble’s size, according to Yukon officials.

“Frankly, I think Casino is much better situated for development than Pebble,” said Jonathan Clegg, P. Eng., vice president, engineering for Western Copper, said during a recent visit to the Carmacks copper project, a sister venture 120 kilometers, or 75 miles, to the southeast.

History of lucrative mineralization

Prospectors staked placer gold claims in the area in 1911, and placer gold production continued on and off for decades until 1985. In 1917, the Geological Survey of Canada recognized huebnerite (MNWO4) in the heavy mineral concentrates of the placer workings. A small amount of tungsten was recovered during World War II.

In 1936, silver-lead-zinc veins were discovered 3 kilometers, or about 2 miles, from the placer workings. Over the years, veins were explored and developed intermittently and a total of 372.5 metric tons of hand-cobbed argentiferous galena, assaying 3,689 g/t silver, 17.1 g/t gold, 48.3 percent lead, 5 percent zinc, 1.2 percent copper and 0.02 percent bismuth, were sent to a smelter.

Casino’s porphyry potential was first noticed in 1963 and the deposit was discovered in 1969 by a Teck Cominco predecessor company, based on earlier exploration by A. Archer of Archer Cathro.

Casino also is believed to be the largest gold deposit in the Yukon, according to Mike Burke, head of mineral services at Yukon Geological Survey.

The deposit’s discovery actually sparked exploration in Yukon that led to subsequent discoveries of the Minto and Carmacks Copper deposits as well as others in the 1970s, Burke said.

Gold recovery first

The pre-feasibility study estimates an initial capital cost of $2.1 billion for the project, which would produce 3.6 billion pounds of copper, 320 million pounds of molybdenum and 5.1 million ounces of gold over a 30-year mine life.

The pre-feasibility study recommends development of Casino as a conventional, electrified truck-shovel operation that initially focuses on the deposit’s oxide cap as a heap leach operation to recover gold in Dore form.

“This will give us cash flow from the project before we complete the mine,” Clegg said.

The main sulphide deposit will be processed using a conventional concentrator to produce copper-gold and molybdenum concentrates. The mill will have a nominal production rate of 90,000 metric tons of sulphide ore per day averaged over the life of the mine, while the heap leach will nominally process up to 30,000 metric tons per day for seven years.

Including low-grade and stockpile ore, the average annual stripping ratio is estimated at 1to1 over the life of the mine and 0.7 to1 for years 1-6.

The study estimates an NI-43-101 compliant proven and probable mill ore reserve of 914 million metric tons grading 0.21 percent copper, 0.024 percent molybdenum and 0.24 g/t gold. The compliant proven and probable heap leach ore reserve is estimated at 78 million metric tons grading 0.43 g/t gold.

New infrastructure in Alaska

Of the initial capital investment, $1.56 billion would develop transportation and port infrastructure. The remaining $550 million would cover the cost of a complete mine site power plant.

Western Copper would like to ship concentrates produced at Casino to smelters in Asia, using oceangoing barges that would be loaded in Haines or Skagway. Because the volume of concentrates would be so large, a new shipping terminal likely would be constructed.

Because milling costs will be relatively high, Western Copper hopes to use a coal-fired circulatory fluidized bed boiler to be fed hopefully by a nearby source of coal.

Clegg said several coal mines, including Usibelli Coal Mine near Fairbanks, were contacted about a possible supply for the mine, but Western Copper did not get a quote from Usibelli.

He said the Alaska mine is a relatively short haul to Casino compared to some possible coal sources. A proposed rail line from Fairbanks through Yukon Territory and linking with existing rail links in southern Canada also could provide another solution.

Operating costs are estimated to be $9.72 per metric ton of sulfide ore over the life of mine, based on a 95-cent-per-kilowatt-hour estimated power rate.

Prepared by Arizona-based M3 Engineering & Technology Corp., the study indicates that development of the Casino deposit will produce a pretax internal rate of return of 20.4 percent and an undiscounted net present value of $7.5 billion, based on 100 percent equity. After-tax figures indicate an IRR of 14.9 percent and an undiscounted NPV of $4.5 billion.

The payback of initial capital investment would be achieved in 3.8 years due to significant cash flow generated by higher ore grades and plant throughput during the early years of production, according to the study.

Permitting next step

With a positive pre-feasibility study in hand, Western Copper will immediately begin permitting the Casino Project with the help of Gartner Lee, an international environmental consulting firm, Chairman and CEO Dale Corman said.

“Over the last two years, Western Copper has worked closely with the Yukon Environmental and Socio-economic Assessment Board and Yukon Energy, Mines and Resources in permitting our Carmacks project, and has found them to be fair and professional. We look forward to working with them again on the Casino Project,” Corman said.

Western Copper hopes to secure initial permits for construction by 2012, and begin production of gold Dore from a heap leach in mid-2013 and production of concentrate from a sulphide mill in late 2015.

Clegg said M3 Engineering was mindful of the difficulties that developers encountered last fall with the Galore Creek copper-gold deposits in northern British Columbia and took that into consideration in preparing the pre-feasibility study. But unlike the remote Galore Creek Project, the Casino Project has several important advantages.

One, Western Copper anticipates lower costs of development and obtaining permits because it has a relatively simple mine plan.

“I believe having Galore Creek ahead of you, you look twice at things,” he said.

In addition, M3 Engineering did not include estimates in the pre-feasibility study for:

• Benefits from converting Casino’s inferred resource into the measured and indicated category and/or increasing the overall resource at Casino;

• Potential revenue from recovery of a significant silver resource at the Casino;

• Savings gained from sharing infrastructure development costs with other parties;

• Benefits from refined engineering during the feasibility study; and

• Savings from locating local sources of lime for wastewater or tailings treatment and coal for power generation.

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