Western Copper & Gold - Major Copper-Gold Project Attracts Rio Tinto with Competitive Tension Building

• Western Copper & Gold is developing the Casino copper-gold project in Yukon. The last year has been particularly significant with Rio Tinto investing C$25.6 million into the company for roughly an 8% stake.
• The agreement with Rio Tinto lasts for 18 months, after which Rio Tinto loses certain rights, unless they choose to extend the period for another year. Discussions on next steps and potential partnership models are ongoing.
• A strong asset in terms of copper and gold reserves.
• The company believes that getting the project permitted is the key to driving value.

Western Copper and Gold is developing a large-scale Casino copper-gold project in Canada's Yukon territory. With copper fundamentals looking increasingly positive long-term, the company has attracted major miner Rio Tinto as a key partner to advance the project. However, Western Copper is also focused on creating competitive tension with other potential partners as Rio completes its due diligence.

Rio Tinto Partnership Nearing Key Decision Point

In May 2021, Western Copper and Gold signed an investment and strategic partnership deal with global major Rio Tinto. Rio invested C$25 million into the company for an 8% stake and the right to conduct due diligence activities on Casino. The deal originally had an 18-month term ending November 2022.

Rio's due diligence work, including drilling and metallurgical testing, is now 99% complete according to CEO Paul West-Sells. Results have confirmed the project's strong fundamentals. Rio also seems pleased with the progress to date. Importantly, Rio is not requesting an extension of the due diligence period or more work at this stage.

Discussions are underway on potential "next steps" with Rio when the 18-month period expires. While nothing is guaranteed, Rio letting their exclusivity rights lapse would indicate they don't see a long-term partnership opportunity. Rio has the option to extend by one year, which West-Sells says would likely signal promising ongoing discussions.

Beyond an extension, Western will aim to negotiate a full buyout or joint venture deal with Rio. However, Western is also focused on creating competitive tension and knocking on "all doors", not just Rio's. This includes conversations with major and mid-tier miners.

Large-Scale Project Offers Compelling Value Proposition

The Casino project offers district-scale potential with a long 27-year initial mine life from only one-third of the known deposit. The recently completed Feasibility Study outlines a conventional open pit mine with heap leaching to produce copper and gold concentrates. Average annual production is estimated at:

• 178 million lb copper
• 231,000 oz gold
• 1.4 million oz silver

Over the mine life, Casino is projected to produce 4.5 billion lb copper and 4 million oz gold. The study estimates an after-tax NPV of C$2.3 billion and 18.1% IRR at base case metal prices. The initial capex is estimated at C$3.6 billion.

Notably, the project is designed to maximize NPV, rather than minimize upfront capex. The approach uses a higher-grade core zone to generate strong early cash flow and a fast payback period of only 3 years. This is remarkably short for a large-scale mining project.

The large upfront investment is industry standard for a top-tier copper asset. As CEO West-Sells notes, recent comparable projects have seen over C$5 billion in capex. However, the superior grades and cash flow generation give Casino a clear advantage.

Permitting Progressing Steadily in Mining-Friendly Yukon

Western Copper is now about one-third of the way through the permitting process for Casino. The company aims to submit its final application in mid-2023. Permitting has become more lengthy and costly across Canada in recent years due to increased environmental requirements.

However, the Yukon's well-established regulatory system has always incorporated First Nations consultation from the start. This covers key issues like tailings management and waste rock handling. The territory is considered more stable and mining-friendly compared to other jurisdictions.

While any large mine permitting takes time, CEO West-Sells notes they expect to get through the process successfully over the next 1-2 years. Receiving the key permits would significantly de-risk Casino and boost its appeal to potential partners.

Strong Cash Position Funds Advancement

Thanks to Rio's investment and other cautious spending, Western Copper is in a solid financial position. The company had nearly C$40 million in cash as of mid-2022, providing over 2 years of funding at current burn rates. This covers permitting work, ongoing engineering, and general corporate costs.

The healthy balance sheet allows Western Copper to continue advancing Casino without needing to raise more capital soon. The stock appears reasonably valued trading at a fraction of the NPV. Permitting progress and RIo's decision in late 2022 could act as share price catalysts.

Major Copper Development Opportunity

Casino represents one of the world's largest undeveloped copper-gold deposits not already controlled by a major mining company. With Rio Tinto completing due diligence, and Western Copper focused on competitive tension and de-risking, the project checks several boxes for investors:

• Premier mining jurisdiction in Canada's Yukon territory
• World-class deposit with long mine life, excellent metallurgy, low costs
• Solid base case economics with fast payback and robust margins
• Phase 1 utilizes high-grade core for early cash flow
• Experienced management team with track record
• Strategic partnership and investment from Rio Tinto
• Healthy balance sheet funds key work programs

As the world continues to decarbonize and copper demand grows, new large-scale projects will be needed. Casino can help fill that gap in a top mining location. With the next step in Rio's decision process approaching, Western Copper offers strong leverage to higher copper prices. The near-term upside potential, long-term tailwinds, and sound financial position make the stock compelling for investors betting on the copper super-cycle.

Investment Thesis

Strong fundamentals of the Casino project

The large size, long mine life, excellent metallurgy, and low costs of the Casino copper-gold project provide a solid value proposition. The Feasibility Study shows robust economics even at conservative metal price assumptions.

Experienced management team‍

The company's management has a proven track record of advancing and monetizing mining assets. This provides credibility in their ability to successfully permit and surface value from Casino.

Strategic backing from major miners‍

Rio Tinto's partnership and investment validate the quality of the deposit and project. Rio's technical expertise and financial capacity also derisks development.

Healthy balance sheet

With around $40M in cash, Western Copper is funded for key activities like permitting over the next 2 years without dilution risk. This allows advancing the project on solid footing.

Strong leverage to copper

Global copper demand is forecast to grow significantly driven by decarbonization trends. As a large-scale copper project, Casino provides excellent exposure to this upside.

Competitive tension being created

By engaging with other majors and mid-tiers beyond just Rio, Western Copper aims to catalyze interest and get full value.

Permits would be major de-risking milestone

Receiving the key permits over the next 1-2 years would make Casino "shovel-ready" and significantly enhance its appeal.

Current valuation does not reflect upside potential

At current levels, Western Copper trades at a fraction of the Casino project's NPV. Near-term catalysts could help realize value.

Premier mining jurisdiction:The mining-friendly and stable Yukon territory provides security of tenure and a clear permitting process.

For investors bullish on the copper market and looking for leverage to higher prices, Western Copper represents an attractive development play with a huge upside compared to the current valuation. The Casino project checks all the boxes and strategic progress continues to be made.