Summary
- Western Copper and Gold has entered into a LOI with M3 Engineering for its Casino copper-gold project.
- This wasn’t expected, and the formal agreement will likely be signed next year.
- The investment thesis remains unchanged as I don’t think this will have an impact on the valuation of the company.
Western Copper and Gold (NYSEMKT:WRN) has released an update wherein the company is explaining its approach to continue to advance the Casino copper-gold project in Canada's Yukon Territory. The company has signed a letter of intent with M3 Engineering whereby the latter will operate the Casino mine. M3 will be the operator of both the heap leach phase and the concentrator processing facility at Casino and it will provide EPCM services as it will have to manage all the day-to-day aspects of the mine.
Western Copper has outlined the advantages of such an agreement as it claims it will -amongst others- reduce the start-up risks, improve the financial flexibility and enhance the cost control, as M3 has a lot of experience. This is just a letter of intent, and a formal agreement is expected to be finalized in the summer of 2015.
Even though the Casino project is located in quite a remote area in the Yukon Territory, I quite like the project because it will produce copper at a very low cash cost. The initial capex is relatively high, but quality ounces of gold and pounds of copper will always be more appealing to senior producers than any project in more dodgy countries like the DRC.