Few things can move a stock as quickly as merger and acquisition talk. Resource Maven’s Gwen Preston outlines three companies that majors may be eyeing.
One of the projects I toured this summer when I was in the Yukon was Western Copper and Gold Corp.’s (WRN:TSX; WRN:NYSE.MKT) massive Casino deposit. The resource is estimated to total an eye-popping 18 million ounces gold and 11 billion pounds copper. The feasibility study outlines annual production of 171 million pounds of copper and 266,000 ounces of gold. This is a project with serious scale.
Building the mine of this size is estimated to cost US$2.4 billion, of which about US$1 billion is for the mill. A power plant, an access road and heap-leach and tailings facilities will also need to be constructed. The capital costs are big but so are the returns, as it should result in a 19% post-tax IRR at US$1,335 gold and US$2.15 copper.
Permitting for the project is about 50% completed; it should take about another 2.5 years to reach shovel-ready state, a timeframe that could work out well with the copper cycle.
Given the excesses of the last bull market, such large projects have fallen out of favor. However, at some point it will attract the attention of a gold or copper miner. Majors need to build a very large project once every cycle or two to maintain their overall production numbers. And Casino would make sense for a gold or copper major, as its value is divided almost evenly and mining one metal will help offset the costs of the other.
Rumor has it that Western is in talks with several majors. The Casino project has several aspects that make it especially attractive. The first is location; after Goldcorp bought out Kaminak for its Coffee project, the Yukon …read more