Monday, December 3, 2012

Yellowhead's Harper Creek Project

Mining Talk
Yellowhead is going to be a mine. Will the share price grow as they head towards production? There will be some gains to be had. Given the abuse non-producers are taking I've lowered my expectations to $1.06 by next year. On a take out I would expect $1.50

about 3.5 billion pounds of copper
about 53 Million shares
about 66 pounds per share
Share Price 66 cents. So about a penny per pound.
The credits do have an impact of about $20 a ton but I'm not going into that much detail. By comparison Copper Fox's Schaft Creek on an eq basis is 50 pounds per share or a value of 2 cents a pound. (CUU has an option agreement with Teck)

Why so cheap?

  • Submission of the Company's Environmental Assessment application for the Harper Creek project;
  • Preparation and submission of the Company's application for a British Columbia Mines Act Permit for Harper Creek;
  • Ongoing consultation with the First Nations and local communities to address any potential environmental and socio-economic impacts of Harper Creek and the Company's mitigation strategies;
  • Continue exploration activities to better define the resource/reserve at Harper Creek;
  • The Company is seeking strategic partners, project financing and equipment financing to facilitate equipment orders and construction financing when permits are in place.

These are the reasons the market isn't responding. The co has to raise big money and get the enviro's through. Just on these two items we see a bargain price in a safe jurisdiction. Looking at this you'd think it was a company in a banana republic but it's in BC. A look at the global copper mining costs shows that BC is one of the better places to mine. Sure there are other very cheap place to mine copper but those come with stability prices. Since copper mines are typically around for a quarter century the small price for stability often outweighs the gains from short term thinking as applied to many other countries.

A lot of people think that when a company comes off the speculation curve that there won't be much to gain. This is wrong. What's at stake is the ability to produce. Even this mine could fail to produce. It's very unlikely but possible. And, this is why a major will pay a premium for a fully permitted operating mine. They will pay more if it's in a safe place. Keep your eye on this co's institutional holdings.

Yellowhead's Harper Creek Project is a copper-gold-silver volcanogenic sulphide deposit located in south-central British Columbia, approximately 150 kilometers by highway north of Kamloops.  Feasibility Study results announced on March 2, 2012 showed a pre-tax NPVof $749.7 million with an IRR of 20.2% based on long-term metal price projections of US$2.50/lb Cu, US$1,250/oz Au and US$20/oz Ag, and a US$:Cdn$ exchange rate of 0.86:1.  The Feasibility Study demonstrated a 28 year project life at a milling rate of 70,000 tpd (25.55Mt/y). The project as designed is expected to produce a total of 3.63 billion pounds of copper, 372,000 ounces of gold and 14 million ounces of silver contained in concentrate.
At a 0.14% Cu cutoff,  Proven Reserves are estimated at 401.18Mt @ 0.272% Cu, 0.031g/t Au and 1.15g/t Ag; Probable Reserves 303.22Mt @ 0.248% Cu, 0.027g/t Au and 1.13g/t for a total Proven and Probable Reserve of 704.4Mt @ 0.262% Cu, 0.029g/t Au and 1.14g/t Ag.
The Feasibility Study is based on an updated resource (refer to news release dated February 16, 2012).  At a 0.20% Cu cutoff Measured Resources are estimated at 348.5Mt at 0.31 % Cu, 0.034g/t Au, 1.3g/t Ag; Indicated Resources at 466.5Mt at 0.28% Cu, 0.03g/t Au, 1.3g/t Ag for a total Measured and Indicated Resource of 815Mt at 0.29% Cu, 0.032g/t Au and 1.3g/t Ag (5.26 billion pounds of copper contained).  A further 80.17Mt at 0.30% Cu, 0.033g/t Au, and 1.4g/t Ag are estimated in the Inferred Resource category (0.53 billion pounds of copper contained) and is reported as waste in the mine production schedule until it can be upgraded by additional infill drilling.
Yellowhead has a 100% interest in the Harper Creek Project (subject to the payment of a 3% NSR royalty capped at $2.5 million, adjusted for inflation and an additional 2.5% NSR royalty on an estimated 1.5 Mt of ore which is expected to be mined beginning in year 16 of the Feasibility Study mine plan).

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