Highland Copper’s mine development projects have the potential to supply the US with 75,000 tons of copper per year.
Optionality is key in mining development and Highland Copper is fortunate to have some great options for developing its Michigan assets.
The Copperwood mine development project is the smaller of the two assets and is the most advanced from a technical and permitting perspective. Because they are smaller, the initial capital cost is more manageable if Highland chooses to build Copperwood first. This could provide quick access to production and cash flow, while also providing a strong foundation on which to build White Pine North.
White Pine North is a former mining development of considerable scale. Building White Pine North after Copperwood will create a strong medium-term growth profile that will enable Highland to develop into a medium-sized copper producer.
The first option may be most appropriate if access to capital is more difficult. However, there is much reason to believe that copper developers will be prioritized from a capital perspective. The fundamental case for a strong copper price over the long term is clear. S&P Global recently published a study identifying the current and growing imbalance in the US copper supply.
In the right environment, Highland Copper has options to scale up production faster. Highland could choose to reverse the order of development and choose to build the White Pine North mine development first. This would prioritize the larger, more robust project.
The potentially most attractive option is to jointly develop White Pine North and Copperwood. This could have the potential to create a production profile of 75,000 tonnes per annum with an initial mine life of 20 years. This option would potentially deliver significant capital and operational synergies, as well as a minimal environmental footprint. This is the option Highland Copper aims to better understand with a Preliminary Economic Assessment (PEA) they recently initiated.
The development of the Copperwood mine
The development of Copperwood could represent a meaningful step up in manufacturing at a reasonable cost of capital and capital intensity. Copperwood has three billion pounds of copper that is defined in measured, indicated, and derived categories. According to the 2018 feasibility study, the initial capital cost is $244.6 million (excluding pre-production revenue), which equates to an average annual copper production of 31,000 tons over an initial mine life of 11 years. This represents a manageable capital intensity of $7,890/kt. Highland Copper is currently updating its feasibility study and while inflationary cost increases can be expected, capital intensity should remain favourable. The updated study will also benefit from higher copper prices.
Copperwood has all the major state permits it needs and is working on the remaining federal water intake permit needed for operations. Overall, the project is very advanced from a technical and permitting perspective. As such, it is well positioned for near term mining development.
The mining development of White Pine North
The White Pine North project is a big step forward in scale. White Pine North has defined 5.4 billion pounds of trapped copper in measured, indicated and inferred categories. According to the 2019 PEA, the initial cost of capital is $456.7 million (excluding pre-production revenue), representing an average annual copper production of 40,000 tons over an initial mine life of 21 years.
Highland will launch an infill drilling program in late 2022, with the goal of converting a significant portion of the derived tonnage into the measured and declared categories.
While the two projects represent excellent standalone options, a combined mine development and production scenario may be the most robust. Given the geographic proximity of the projects – approximately 60 km apart – along with many similarities in deposit type, mining method and processing, Highland is considering developing a single central processing facility at White Pine North.
The company has initiated a PEA to better define the potential of this combined scenario, which is expected to be completed in the first half of 2023. concentrate will be studied. The potential appeal of this scenario is a minimal environmental footprint and significant capital and operational synergies.
In this development scenario, the need for a processing facility, tailings storage and other infrastructure at Copperwood would be eliminated. As an underground mine, surface disturbance would be minimal. A single processing facility would be built at White Pine North on land that has already been disturbed. White Pine North also has significant tailings storage capacity in the disturbed area.
The capital and operational synergies of this scenario will be determined as part of the PEA. Assuming there will be a single processing plant, general and administrative team and technical team, there is the potential for significant cost savings over an initial 20-year mine life.
In addition, the company has analyzed the possibility of economically leaching the concentrate and producing copper cathodes as an end product. This broad vision would allow the sale of copper to Michigan manufacturers. This would align the company’s interests with the state of Michigan and potential business partners seeking to secure domestic supplies of critical metals.
The big picture
The US needs domestic copper supplies. While demand continues to increase, particularly due to the importance of electric vehicles and green energy, US copper production and supply is growing at a significantly slower rate. This requires the importation of copper for domestic use or an increase in US copper mine developments coming into production. The latter is probably preferable from an American perspective.
This environment promotes the development of Highland’s Michigan-based assets: Copperwood and White Pine North. In particular, the combined scenario has the potential to create a production profile of 75,000 tonnes/year with an initial mine life of 20 years. If copper fundamentals lead to a higher copper price, Highland will be well positioned to advance its assets, especially given the mining development options available to it.
Note, this article also appears in our twelfth edition quarterly publication.
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