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Copperwood feasibility shows promise for Highland Copper

A feasibility study on Highland Copper Company’s (TSXV: HI) Copperwood project, in the Western Upper Peninsula of Michigan, has outlined an economically feasible venture.
Copperwood feasibility shows promise for Highland Copper Copperwood feasibility shows promise for Highland Copper Copperwood feasibility shows promise for Highland Copper Copperwood feasibility shows promise for Highland Copper Copperwood feasibility shows promise for Highland Copper

Feasibility study 'demonstrates significant potential' of Copperwood

Staff reporter

Despite financial metrics not hitting the ball out of the park, the study outlines a feasible project based on relatively high copper grades and low production costs. The study calculates a respectable after-tax internal rate of return, at an 8% discount rate, of 18%, and a base case net present value of US$116.8 million.

"The feasibility study demonstrates the significant potential of this project located in a great historic mining jurisdiction. Based on the results of the study, we can now focus on putting in place a comprehensive financing package," CEO Denis Miville-Deschênes said.

Pre-production costs are pegged at $275 million, which can be paid back in 3.2 years. Life-of-mine (LOM) sustaining costs are projected to total $156.5 million.

Copperwood, 22.5km north of Wakefield and 40km from the town of Ironwood, is expected to generate undiscounted after-tax cash flow of $316 million over the 10.7-year mine life. Production follows a 27-month construction period, which, subject to securing financing and receiving all required permits, could start in January 2019 and first production is slated for April 2021.

Highland, with a market capitalisation of C$37.84 million, says the operation is expected to produce 61.7 million pounds of copper and 100,000oz of silver per annum. LOM C1 cash costs, net of by-product, are calculated at $1.75/lb, which is below the industry average of about $2/lb of copper produced.

Mill throughput is based on 6,600 metric tonnes per day, with recoveries coming in at 86% for copper and 73.4% for silver.

The operation entails a highly mechanised enterprise and will employ a drill and blast room-and-pillar mining method. The mineralisation comprises chalcocite in a relatively sub-horizontal orientation, with thickness varying from 1.6m to 3.7m.

The study assumes an average copper price of $3.15 per pound and $16/oz of silver.

The feasibility study is based on proven and probable reserves of 25.4 million tonnes grading 1.43% copper and 3.83 grams per tonne silver, containing 801.8 million pounds of copper of copper and 3.1 million ounces of silver. Copperwood also hosts 49.9Mt grading 1.15% copper and 3.42gpt silver in the inferred resource classification, for an estimated 1.3 billion pounds of contained copper and 5.5Moz of silver, at a 1% copper cut-off grade.

These grades also come in above the global average, as the average copper ore grades for copper mines is about 0.62% copper. This number is expected to decrease as mines with higher ore grades become exhausted.

Should all go to plan, the project's development timeline could dovetail into a modest forecast copper supply deficit on the back of peak production in 2021, as chronic underinvestment in recent years result in a looming mine supply gap.

Highland's equity on Friday gained as much as a quarter to C10c, before losing steam and closing down 3% - slightly below the opening price of C8c, as a lower copper price Friday weighed on sentiment.