Giant mine development looms on horizon

In the shadow of two new producing mines and startup of a gold mine on the near-horizon, a mega-mine project is quietly taking shape in a remote area of central Yukon Territory.

The sprawling Casino property, where Western Copper and Gold Corp. has spent the past five years aggressively exploring and defining a huge copper-gold-molybdenum-silver resource, is proving to be an attractive venture that could transform the territory's mining industry, delivering within the next few years 1,800 construction jobs over four years and up to 600 mine jobs for at least 23 years.

The Vancouver-based junior is hoping to put finishing touches on its development plans in 2012 and bring the Casino Project before Yukon regulators for permitting.

"We're pushing toward completing a feasibility study and getting our permitting application in to YESAB by the end of 2012 or at least by early 2013," Western President and COO Paul West-Sells told Mining News Jan. 12.

YESAB, or Yukon Environmental and Socio-economic Assessment Board, is the regulatory body that oversees the environmental and socio-economic assessment process for mine projects under Yukon's laws. The permit application would be the first step in Yukon's environmental assessment process, which, if all goes well, is expected to require two years to complete.

Clarified focus

Western's new sense of purpose may be a product of its decision in August to split its assets into three separate companies, spinning out the nearby Carmacks Copper Project and the Redstone Project in Northwest Territories into Copper North Mining Corp., and several assets in southern British Columbia into NorthIsle Copper and Gold Inc., while retaining and intensifying its focus on the Casino Project.

"This spin-out arrangement should work to better define the value of the excellent portfolio of assets we have in Western Copper (Corp.)," Dale Corman, the company's chairman and CEO, said when he announced the spin-out agreement Aug. 19. "And after the spin-out, with Casino as the sole asset in the company, we believe that a name change to 'Western Copper and Gold' better reflects the significant amount of gold contained in Casino and the high percentage that gold contributes to the project's revenue."

Big mine potential

The Casino project is indeed big. As currently envisioned, it will be the largest mine in Yukon Territory and one of the largest of its kind in Canada when it achieves full production. It is also considered one of a handful of large copper-gold deposits in the world.

"It's an astounding asset that the Yukon has, and we're really excited about bringing it to production," said West-Sells.

Yet Casino also has been described as being a "baby Pebble," a moniker that reflects the similarity of its mineralization to that of the mammoth Pebble copper-gold-molybdenum project located in Southwest Alaska. Pebble currently boasts at least 11 billion metric tons of measured, indicated and inferred resources, containing 80.2 billion pounds of copper, 107.4 million ounces of gold and 5.6 billion pounds of molybdenum, along with commercially significant amounts of silver, rhenium and palladium.

Casino, on the other hand, hosts about 1 billion metric tons of proven and probable reserves within some 2.7 billion metric tons of mineable material that contains roughly 10 billion pounds of copper, 18 million ounces of gold, 500 million pounds of molybdenum and 61 million ounces of silver, according to West-Sells.

At a mill rate of 90,000 metric tons per day, the mine would produce average annual output of 252,000 metric tons of copper-gold-silver concentrate and 10,000 metric tons of molybdenum concentrate, along with gold doré from about 44 million metric tons of ore. Altogether, Casino is expected to produce about 500,000 ounces of gold annually.

Yet there may be even more value in the project.

"We're actually currently working toward an engineering study that looks at deeper material that couldn't be included in the prefeasibility study," West-Sells said.

Engineers believe this deep resource could more than double Casino's mine life, extending it to 50 years from the 23 years currently outlined in the prefeasibility study.

Feasibility study under way

Western formally initiated a bankable feasibility study for the Casino project Jan. 16 by announcing that M3 Engineering & Technology Corp. of Tucson, Ariz., will perform the work. M3 is the same firm that updated a 2008 prefeasibility study for the project in May 2011.

The feasibility study will rely on the updated findings, but it will further update and better define costs outlined in the prefeasibility study, which forecasts that the Casino project will have an after-tax, 8 percent discounted net present value of C$963 million and an after-tax internal rate of return of 16.2 percent at conservative long-term commodity prices. The feasibility study also will incorporate an option for obtaining a supply of liquefied natural gas from Fort Nelson, B.C., to power the mine project and results of new metallurgical testing that is currently under way. The feasibility study will cost an estimated C$5 million.

"Western's plan is to progressively de-risk the Casino project, and this will continue with the feasibility study, expected to be complete in 2012," Corman said in announcing the start of the feasibility study.

A comprehensive geotechnical field program to support the feasibility study was completed by Knight Piesold over the past summer. The program included geotechnical site investigations for the mine site facilities (plant site, tailings management facility, and heap leach facility), open pit, air strip and access road. About 3,300 meters of drilling, some 180 test pits, and a geophysics program were carried out as part of the work.

A metallurgical test program got under way at the beginning of November at G&T Metallurgical under the direction of International Metallurgical and Environmental Inc. and FLSmidth, Inc. It is on track to be completed during the first quarter of 2012. The goal of the metallurgical program is to provide engineering data to support preparation of the feasibility study, optimize the process design, and reduce the project capital and operating costs.

LNG supply advantages

One of the major feasibility study focus areas is defining a liquefied natural gas supply for the Casino project. Western has partnered with Yukon Energy Corp., Yukon's crown energy utility, to evaluate alternative strategies to supply LNG to the Yukon and the Casino project.

Berger-ABAM and Breamar-Wavespec, have been engaged as lead consultants to evaluate LNG supply chain options. The study has established that the best-value supply chain alternative is to construct a fit-for-purpose LNG liquefaction facility in the vicinity of Fort Nelson, B.C., and to truck LNG to the Yukon from this facility. The estimated cost of LNG delivered to Casino, as determined by the recent study, is consistent with the cost of fuel used as the basis for the pre-feasibility study.

The proposed mine project includes a power island consisting of two gas turbine generators complete with heat recovery boilers and a single steam-driven generator, and internal combustion engine-driven generators for a total installed generation capacity of 149 megawatts. LNG will be imported to the site and gasified to provide natural gas to fuel the power generation plant.

In the event that an Alaska-Canada natural gas pipeline is constructed, the project may elect to connect to this pipeline to supply natural gas directly for power generation.

West-Sells said importing LNG to Casino for power will cost about 11 cents per kilowatt-hour, and that compares favorably with a cost of 20-30 cents/kwh to use diesel to generate power.

LNG is also "a low-carbon option" that fits well with the recent "groundswell" of LNG development activities in western Canada," he observed, after noting that new LNG facilities have been built recently, or are being developed in Kitimat, B.C., and Calgary.

West-Sells said providing energy for big projects in the North has always been a challenge, but potential gas suppliers can assess providing an LNG supply for both Yukon Energy and the Casino project together, which should improve the economics by combining the two loads.

Western and Yukon Energy recently held encouraging, exploratory discussions with potential natural gas and LNG providers, including several large gas suppliers in northeastern British Columbia. Western received four formal expressions of interest, West-Sells said.

The opportunity to out-source the supply of LNG will continue to be explored through the first quarter of 2012, and Western expects to include a cost estimate for the LNG supply based on a proposal from one of the four companies in the feasibility study.

Consulting the First Nations

Western is also stepping up the engagement process with the three First Nations in Yukon likely to be most affected by the Casino Project. They are the Selkirk First Nation, which holds as traditional territory the 13,124 hectares (32,249 acres) where Casino's 705 full and partial active claims are situated. The Minto copper-gold mine is also located in Selkirk traditional territory.

The Tr'ondëk Hwëch'in First Nation holds traditional territory directly to the north of the Casino property, and the Little Salmon River First Nation, holds traditional territory to the southwest across which Western is building a 120-kilometer (74.5 miles) all-weather service road to connect the project to the existing Freegold Road. Among other functions, the road will be used to truck concentrate to the Port of Skagway in Alaska where it will be loaded onto oceangoing carriers for transport to refining facilities.

Western has retained Knight Piesold Ltd. to lead the final preparation of an application to YESAB, and Knight Piesold will direct the team of consultants that have worked with the project since 2008, collecting baseline environmental data and developing the project description, closure plans, and other key information that will form the basis of the YESAB application.

Though the exploration company has been working with the First Nations since 2008, especially with the Selkirk First Nation, West-Sells said Western intends to intensify its activities in 2012 in preparation for the permitting process by listening to the concerns of the First Nations and addressing those concerns. He said this process will likely include the drafting of impact and benefits agreements with the three First Nations.

"We see 2012 as a bigger year for this process," he said.

Ambitious mine design

The Casino Project is designed to become an open-pit mine and concentrator complex with sulphide ore facilities capable of processing 120,000 dry metric tons per day or 43.8 million dry metric tons per year.

About 859 million metric tons of ore will be mined and processed through the concentrator directly in the first 20 years, after which an additional 117 million metric tons of lower grade material will be reclaimed from stockpile and milled during the last four years of the mine's current 23-year life for a total of 975.8 million metric tons of reserves processed through the concentrator over the life of the mine. Ore grade to the sulphide process plant is estimated to average 0.202 percent copper, 0.238 grams per metric ton gold, 0.0229 percent molybdenum, and 1.73 g/t silver.

Ore to be milled will be transported from the mine to a primary crusher by off-highway haulage trucks. Mineral concentrates of copper and molybdenum will be produced by conventional flotation technology. The gold and silver will report in the copper concentrate and will be recovered in the smelting process resulting in credits to Western. Gold contained in the sulphide fraction of the flotation tailings will be recovered by leaching and CIL processing.

In addition to the concentrator, there will be a separate carbon column operation for oxide ore. Oxide ore will be trucked from the mine to a run-of-mine heap leaching facility, from which gold and silver bullion (doré) produced will be produced and shipped by truck to metal refineries.

The design basis for oxide ore processing is 25,000 t/d. About 81.6 million metric tons of ore (reserves) will be mined during the seven years of the heap leach project. The overall oxide ore grade is estimated to average 0.370 g/t of gold, 2.55 g/t of silver, and 0.041 percent copper. Copper will be recovered, as a precipitate, by the SART process to control the quality of the leach solution. This precipitate will be shipped to smelters with concentrate from the sulphide processing.

Tailings deposition will begin with two high-capacity tailings thickeners with gravity flow to a sand plant at a tailings management facility. The tailings will be cycloned and the coarse fraction used for dam construction. A starter dam will be constructed from borrowed material, mine overburden, and material from site development.

The prefeasibility study assumes fresh water will be sourced from wells and segregated fresh water impounded in the tailings facility.

In addition to the service road, Western intends to build a new airstrip for the mine to accommodate appropriately sized aircraft. The existing airstrip will be razed in preparation for grading for process facilities.

Western hopes to complete the permitting process in 2015 and has targeted heap-leach gold production in 2017 and mill production by 2019.