Patience with Yukon’s Next Giant Copper/Gold Mine Goes with the Territory

Western Copper & Gold (WRN) is up about 50% so far this year. But if Ottawa puts one particular project on its priority list to develop, the stock may go a lot higher sooner than later.

WRN’s Casino Project in the Yukon just as easily could have been called Western Gold & Copper (instead of Copper & Gold) because its deposit is roughly 46% copper and 34% gold. Nevertheless, both commodities are high in demand.

We expect copper usage to double over the next decade. This will be driven by data centers to power artificial intelligence, infrastructure, and electrification. At the same time, the gold price has surged nearly 80% over the last twelve months.

Once developed, Casino will become Canada’s largest copper mine, with 11 billion pounds of copper and 21 million ounces of gold in reserve. Mining projects often carry geopolitical risk. For example, Panama shut down Cobre Panama in 2023 and Mongolia seized greater control of Oyu Tolgoi after years of tension with its owner. The Casino Project, however, is located in the Yukon—a stable and mining-friendly jurisdiction.

WRN trades below one-tenth its net asset value using conservative gold ($2500/oz) and copper ($4.50/lb) prices. As the project progresses further through the permitting process, this valuation multiple will greatly expand. Before late October, WRN will file a project proposal (called an Environmental and Socio-economic Assessment) with the Yukon Environmental and Socio-economic Assessment Board, moving it one step closer to its permit.

The company is debt-free with $65 million in cash, though production is not expected to begin until early next decade. We anticipate Casino will eventually be developed by a larger mining company or consortium. Notably, Rio Tinto holds a 9.5% stake and has bought more shares on five separate occasions, while Mitsubishi Materials owns 5%

Ottawa released its first batch of major national projects last week, with a second round of announcements anticipated by the Grey Cup in November. Among the 32 mega projects under consideration is a connection between the Yukon and British Columbia power grids. This would be a significant undertaking, involving almost 800 kilometres of new transmission lines and additional generation capacity. Ottawa has already invested $40 million to advance further study of this project.

Although WRN’s feasibility study assumed electricity would be generated using liquefied natural gas (LNG), a future connection between the Yukon and British Columbia power grids would significantly alter the company’s cost structure, as power costs for the Casino project could fall by roughly 50%.

As the project moves toward development, we expect its valuation multiple to expand. However, like any mine not yet in production, it has much greater risk than the other stocks we own for clients. There’s no revenue, capital expenditure estimates could expand, and permitting delays are possible. Before you consider a purchase, please reach out to us to ensure this opportunity is right for your unique risk profile and investment objectives.

-written by Jeff Pollock