Kutcho Copper (KC) - Open Pit Plans Improve Economics

Kutcho Copper is a Canadian resource development company focused on expanding and developing the Kutcho high grade copper-zinc project in northern British Columbia. Committed to social responsibility and the highest environmental standards, the company intends to advance the Kutcho Project through feasibility and permitting to a positive construction decision.

Kutcho Copper is in the middle of completing their Feasibility Study on their Kutcho asset and they are looking forward to advancing their project through permitting, construction and eventual production.

We met up with Vince Sorace, President & CEO of Kutcho Copper who has been in the capital markets for about 25-years and, specifically in the last 15-years, resource companies: putting together opportunities to advance. Kutcho Copper was a project that they saw about 3-years ago as an advanced-stage asset that needed some attention to progress forwards. 

Company Overview

Kutcho Copper is a resource development company. The Company focuses on expanding and developing copper-zinc projects. Kutcho Copper is based in British Columbia and their asset is located in a mining friendly jurisdiction in north east British Columbia proximal to a number of other operating or development stage companies.

Representative Background, Small Scale Projects & Getting To Success

The Kutcho asset was discovered some years ago but was originally a fragmented land position. This was consolidated by a junior resource company called Western Celtic in the early 2000s who started advancing the project with its first PEA.  The Kutcho project was then acquired by Sherwood Copper from Western Celtic to add to their portfolio so passed through a few owners in its time and hasn’t progressed further until now.

This asset passed through lots of hands over the years and was never brought to a point of fruition where people could understand the project. Kutcho Copper saw an opportunity in the ability to grow or scale the asset and they were initially attracted to the asset by the high grade that was reported in the 10Mt in reserves at just under 3% Copper equivalent, in a mining-friendly jurisdiction. 

Kutcho Copper saw opportunity in everything from enhancing metallurgical performance to growing the project to scale and loved the fact that it had the grade and it was low Capital too.

Kutcho Copper negotiated a price of around CAD$28M in cash and in order to facilitate the purchase, they brought in partner Wheaton Precious Metals. Kutcho agreed a Stream with Wheaton on the precious metal component of the asset, which was about 8% of the revenue of the project. Wheaton participated in the equity round and also agreed a USD$20M convertible loan to Kutcho to help acquire the assets in December of 2017 when the transaction closed.

The strategy employed by Kutcho Copper is the quickest path to Feasibility Study, permitting and production.  They spent 2018 in the field closing all the gaps, re-engaging on the permitting side and getting the baseline studies ready for the permitting process. They did some resource expansion drilling and the required metallurgical drilling and geotechnical drilling to feed into the Feasibility Study. In 2019 Kutcho started putting all that data together, working towards the Feasibility Study.

Kutcho raised enough money and prepared the company to move to the next phase of the company's life cycle and really got going in the middle of last year when the markets came back online post covid. 

Kutcho has employed CSS Global to complete the Feasibility Study which should be complete and published by October and will finally show this asset in a very comprehensive, final light that's never been shown before to be a significant shift for the company.

Potential Issues, Deferred Payments &  Recent Press Release

Wheaton is interested in owning the stream rather than in equity ownership and the deferred interest payments are deferred to the end of 2023. 

A recent press release from Kutcho has highlighted a move to an open-pit scenario on the main lens, which is most of the tonnage and so Kutcho is able to increase throughput. They are now targeting 4,500t/day production which kicks in about a USD$20M bonus with Wheaton Precious Metals. Kutcho intentionally modelled the throughput to stay below 5,000t/day because that only requires provincial permitting. Above that threshold of 5,000t/day and a federal review process is required in Canada.  

Economics, Press Reactions, New Ratios & Versions  

The Feasibility Study is not going to look anything like the previous PFS and Kutcho Copper thinks the project will be robust at cheaper Copper prices and extremely robust at current Copper prices. Looking at the combined measured and indicated of 28.2Mt at 2.6%, it is very exciting but the market reaction to the press release was muted. Kutcho believes this information is being digested as it is very new, especially the open-pit scenario. The project has been marketed for 20-years as an underground-only scenario, so the open-pit scenario is a significant change as the mining costs come down significantly. When moving to open-pit, the first market response is regarding permitting concerns.

Kutcho Copper has had to consider both their First Nation partners and also the government when considering the open-pit element. When they first looked at the potential benefits of open-pit, they needed to make sure that they weren’t going to run into any roadblocks with their First Nations partners and/or government with permitting. From a conceptual standpoint, it’s not a problem and in the jurisdiction, there are a number of companies up there running open pits in Tahltan Nation territory which is a very friendly mining jurisdiction within British Columbia so they don't expect pushback on the permitting side.

Over the next 6-weeks Kutcho plans to discuss their big pivot in the open pit and what it means for exploration opportunities, not only around the pit but greenfield exploration as well.  

Kutcho Copper believes the project will be more financeable and attractive as they have increased throughput. Part of the Wheaton Stream is to pay USD$70M-$75M dollars in development capital money to help finance the build.   

Economic Production, Reassessing Next Moves & Timeline

Kutcho Copper is focused on getting into economic production first of all and at the moment they are not concerned with drilling, exploration or resource building, to get the scale. Once into production they will then look at the upside potential going forward. 

Kutcho Copper raised USD$4.1M in June to get them to the point where the Feasibility could be published. There was also a press release with respect to the Royalty buy-back and the off-take which has cost USD$3.5M over staged payments.

The company has a good cash position to get through the Feasibility Study stage then they will look to raise some money as they expect a significant re-rate for the company once the Feasibility Study is released as investors are looking for good copper stories in this current climate. They aim to minimize dilution and maximize opportunity with the right investor or a combination of strategic investors.

Institutions are looking for big Copper stories and it is hard to find decent Copper stories. There are a handful of obvious ones, but there's a lot of re-treads and try-hard stories and not a lot of good stories out there. If Kutcho Copper gets the Feasibility Study right they are confident they can present it to the institutional market to find the right investment, be it institutional investors, strategic investors or corporate opportunities. 

Kutcho believes it has a very clear path to production with an advanced-stage asset. They have de-risked the asset significantly and the Feasibility Study will be a significant de-risk point. From there, there is further opportunity to make the asset bigger and better with exploration upside too.

We are looking forward to catching up with Kutcho Copper again in a few weeks to talk numbers once the Feasibility Study has been published at the end of October.  

To find out more, go to the Kutcho Copper Website