Kutcho Copper eyes feasibility study in mid-2020
Kutcho Copper (TSXV: KC; US-OTC: KCCFF) says it can complete a feasibility study on its namesake Kutcho project in north-central B.C. within roughly seven months if it can raise $3 million.
Earlier this year, the aspiring base metal developer tabled an updated resource estimate on the copper-zinc project, delineating a global measured and indicated resource within the Main and Esso deposits of 17.3 million tonnes grading 2.6% copper equivalent (1.85% copper, 2.72% zinc, 0.49 gram gold per tonne and 33.9 grams silver per tonne). Inferred resources add 10.7 million inferred tonnes averaging 1.67% copper equivalent (1.18% copper, 1.76% zinc, 0.26 gram gold per tonne and 21.5 grams silver per tonne).
Kutcho Copper acquired the project, 200 km east of Dease Lake, from Capstone Mining (TSX: CS) in late 2017 for $28.8 million and a 9.9% share position, after a revised prefeasibility study (PFS) presented encouraging economics.
“The first thing we did was a desktop exercise of going through the (previous) prefeasibility study,” the company’s chief operating officer, Rob Duncan, said in an interview. “The Capstone prefeasibility study was 2010-2011. We went through it and updated commodity prices, revised capex up a little bit, and opex up a little bit as well.”
Kutcho Copper’s revised 2017 PFS, based on probable reserves of 10.4 million tonnes grading 2.0% copper, 3.2% zinc, 34.6 grams silver and 0.37 gram gold, showed an after-tax net present value (NPV) at an 8% discount rate of $265 million and a 27.6% internal rate of return (IRR) based on a 12-year mine life.
Water-quality sampling at Kutcho Copper’s namesake project in British Columbia. Credit: Kutcho Copper.
The study modelled a 2,500-tonne-per-day operation averaging annual production of 33 million lb. copper and 42 million lb. zinc. Capital costs for the mine were pegged at $221 million ($287 million including sustaining capex) and unit operating costs were US$1.60 per lb. copper excluding byproducts, and US59¢/per lb. copper net of byproducts. Post-tax payback of capital was forecast at 3.5 years.
“That [PFS] is what we went out and financed the acquisition of the project on,” Duncan says, “so we did some equity and Wheaton Precious Metals (TSX: WPM; NYSE: WPM) came in for a big commitment on the project with a streaming component.”
Wheaton provided a $100-million financing package in 2017, linked to a precious metals stream on the project. The stream was structured to fund US$7 million towards the feasibility study, US$58 million in development capital, and up to an additional US$20 million of development capital if Kutcho expands to a 4,500-tonne-per-day operation. Additionally, Wheaton completed a $20 million convertible debenture loan and a $4 million equity investment in the company.
Wheaton will also pay Kutcho Copper 20% of the spot price for all delivered precious metal by-products until 5.6 million oz. silver and 51,000 oz. gold are delivered, upon which the stream will drop to 66.67% of silver and gold production.
Management points out that the precious metal by-products represent just 8% of projected metal revenue, with copper and zinc representing 61% and 31%, respectively.
This year the company has pushed optimization initiatives to further bolster the project’s economics.
Recent metallurgical test work, designed to feed into next year’s feasibility study, has shown increased recovery rates above those projected in the now two-year-old PFS. Lock-cycle tests on composite samples of the Main deposit lens delivered recoveries of up to 92.3% for copper (to produce a 26.6% copper concentrate) and 84.2% for zinc (to produce a 59.7% zinc concentrate), with gold and silver recoveries coming in at 36% and 71%, respectively.
Composite sample testing of the Esso deposit lens returned recoveries of up to 94.5% for copper (to produce a 27.9% copper concentrate) and 89.3% for zinc (to produce a 58.2% zinc concentrate), with gold and silver recoveries coming in at 40.8% and 71.2%, respectively.
A closer look at copper-zinc mineralized material at Kutcho Copper’s namesake project in British Columbia. Photo credit: Kutcho Copper.
Improved zinc concentrate grades and the rejection of zinc from the copper concentrate are seen as value adds, and will generate a cleaner, higher-value copper concentrate. Silver recovery was also improved significantly in the latest metallurgical testing, the company says.
In its development scenario, Kutcho Copper envisions initial production coming from the Main deposit, then transitioning to a 50:50 blended ratio with the Esso deposit during the mid-years of production.
“We’ve done throughput trade-off studies — mining methods trade-off studies,” Duncan says. “In the PFS, it was about 30% stoping and the rest was cut and fill. We relooked at that, and it can all be stoped, either by retreat or transverse, and so, from our point of view, that can put the throughput up to about 3,000-3,500 tonnes per day instead of the 2,500 tonnes per day in the PFS.”