Western Copper and Gold Corp. (WRN:TSX; WRN:NYSE.MKT) achieved a major permitting milestone by delivering an environmental and socioeconomic effects (ESE) statement for its Casino copper-gold-silver-molybdenum project to the Yukon Environmental and Socioeconomic Assessment Board (YESAB), reported Heiko Ihle, analyst at H.C. Wainwright & Co., in an Oct. 7 research note. Submitting the ESE launches the panel review process by YESAB.
"This should ultimately become a catalyst for the firm as the submission represents a key step in the panel review process under the Yukon Environmental and Socioeconomic Assessment Act," Ihle wrote.
99% Upside Potential
H.C. Wainwright reiterated its CA$4.25 per share on Western Copper and Gold, trading at the time of Ihle's report at about CA$2.14 per share, the analyst noted. The difference between these two prices implies a potential return for investors of 99%.
The Canadian explorer-developer is still a Buy.
The company has 201.6 million shares outstanding, a market cap of CA$431 million (CA$431M) and a 52-week range of CA$0.90–2.14 per share.
About the ESE Statement
Ihle explained what the ESE Statement is and what Western Copper and Gold's version showed. It is a document containing a detailed assessment of a prospective mining project's potential environmental and socioeconomic impacts on the region. Ultimately, WRN's ESE should "serve as the company's basis for panel reviews while establishing a clear path toward production."
The environmental impacts addressed in the ESE management measures like mitigation, management and monitoring plans, and an adaptive approach to management. For Casino, the assessment concluded that its impact, with respect to every valued environmental and socioeconomic component, will be "not significant."
Regarding socioeconomic impacts, noted Ihle, the ESE statement showed that over its 27-year life of mine, Casino could contribute more than CA$44 billion (CA$44B) to Canada's gross domestic product and pay out CA$12B in wages. Ihle noted, however, these metrics are based on long-term assumptions of US$3.60 per pound copper and US$1,700 per ounce gold, prices well below those in H.C. Wainwright's deck and well below each commodity's spot price.
Further, Casino is expected to employ 700 workers and indirectly support another 2,000 jobs. Also, it is expected to contribute "impressive" annual tax revenues of CA$175M to Yukon and CA$231M to Canada.
"Casino may eventually become Canada's second-largest copper mine and largest molybdenum producer, increasing national output by 15% and 500%, respectively," noted the analyst.
Because Western Copper and Gold did a significant amount of work in preparation for the ESE, any pushback to come out of the YESAB panel review on core environmental and socioeconomic issues should be resolvable, Ihle pointed out.
What Happens Next
Ihle presented the next steps in the panel review process, noting they should further derisk and advance Casino. YESAB will publish Western Copper and Gold's ESE statement to its online registry after the preliminary review period ends. The board's executive committee will review the ESE statement to determine whether or not it meets the guidelines. Also, the committee will prepare for finalizing members of the review panel, ultimately for a thorough assessment of all aspects of Casino.
Strong Cash Situation
According to Ihle, Western Copper and Gold has sufficient liquidity to see it through the panel review process. The company has CA$60.9M in cash, cash equivalents, short-term investments and marketable securities.
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