Project Overview
The 100%-owned Copperwood Project is located in Gogebic County in the Upper Peninsula of Michigan, USA within the Porcupine Mountains copper district (Figure CW 1). In June 2018, Highland Copper published the results of a feasibility study prepared by G Mining Services Inc. (Link to Feasibility Study Report) Copperwood is a low cost, low capital intensity located in a Tier 1 jurisdiction with a strong history and support of mining., Highland Copper has received the necessary permits to begin construction activities on site, provided certain permit conditions are met, such as the posting of financial assurance.
Design of the processing facility was completed by Lycopodium Minerals Canada of Toronto, an engineering firm well-known for its skills at designing compact and efficient processing plants. Golder Associates designed the tailings dam and water management systems and provided technical support in the domain of mine geotechnics.
A metallurgical test program at SGS Lakefield in Ontario, Canada is complete, and includes more extensive testing being done on samples from all mineralized zones at the project including the one at the eastern edge of the deposit.
In 2018, Highland Copper filed applications with the Michigan Department of Environmental Quality (“MDEQ”) to either amend, renew, or obtain all permits required to begin mine construction at Copperwood. Highland Copper has since received its Air Discharge, Dam Safety, and Wetland Permits, as well as an approved amendment to the Mining Permit. MDEQ has extended the Wastewater Discharge Permit while renewal of the permit issued to Orvana is being processed. An application to obtain a Lake Superior water intake permit from the US Army Corps of Engineers (COE) is outstanding and a final decision is expected in the near future. To summarize, Highland Copper has received all permits required to break ground.
2018 Feasibility Study Results Highlights:
Initial Capital Expenditure of US$ 275M
After tax internal rate of return (“IRR”) of 18%
3.2-year payback period
After-tax net present value at 8% discount rate: US$ 116.8M
Mechanized underground room and pillar mining
Ore production of 6,600 tonnes/day
Average Cu grade of 1.43% in reserves mined over a 10.7-year life of mine
Proven & Probable Mineral Reserves: 25.4 Mt
Measured + Indicated Resources: 42.2 Mt in LCBS unit, and 7.1 Mt in UCBS unit
Inferred Resources: 34.4 Mt in LCBS unit, and 15.5 Mt in UCBS unit
High lateral geological continuity within stratigraphic units, with the orebody open to the North and East
Well-developed local transportation and energy infrastructure
Project Opportunities
Opportunities to increase project value include:
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Copper Price: Significant leverage
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Resources: Upgrade classification of satellite orebodies from inferred to indicated mineral resources (50 M tonnes)
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Continuous Mining technologies: Potential to increase productivity and reduce costs
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Geotech. Optimization: Increase ore recovery and minimize mining dilution
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Metallurgical Recoveries: Possibilities to increase
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Tailings disposal: alternatives offering significant sustaining capital savings
Project Exploration History
Exploration history on Copperwood dates back to 1954 when a United States Geological Survey map of the area was published and led to the discovery of copper mineralization in the Western Syncline in 1956. An extensive drill program delineated four separate deposits comprised of chalcocite-bearing sedimentary units in the lowermost Nonesuch Formation analogous to the mineralization at White Pine. In 1959, AMAX, who controlled the private mineral leases, decided not to proceed with the underground mine. In 2008, Orvana Minerals Corp. began delineation drilling and environmental baseline studies that led to engineering studies and a proposed mine plan.
Several historical resource estimates for the Copperwood deposit have been issued:
• USMR – Covering larger area that included the Copperwood Project area, prepared in 1959;
• AMAX – Covering larger area that included the Copperwood Project area, prepared in 1974;
• Orvana Minerals (AMEC) – Copperwood area, published April 2010, effective date of April 30, 2010;
• Orvana Minerals (AMEC) – Satellite Deposits, published January 2011, effective date of January 24, 2011;
• Orvana Minerals (Marston) – Copperwood areas, published March 2011, effective date of January 25, 2011;
• Highland (GMSI) – Copperwood Deposit, published June 25, 2015, effective date of April 15, 2015;
• Highland (GMSI) – Copperwood Deposit, published December 5, 2017, effective date of October 18, 2017.
Location
The Copperwood deposit is located in Gogebic County in the Upper Peninsula of Michigan, USA within the Porcupine Mountains copper district and about 23 km to the town of Wakefield and 40 km to the town of Ironwood, both in Gogebic County with the benefit of the following characteristics:
• Logging-mining communities of 10,000
• Long history of copper and iron mining: Copper Range Co. operated the White Pine mine (located 35 kilometers west of Copperwood) between 1953-1997 (44 years) extracting over 4.5 billion pounds of copper
• Locally available infrastructure including power lines, natural gas & rails within 15 miles of the property.
• Strong support for the mining industry
Geology
Copperwood was discovered in 1956 and boasts the highest-grade of all known sediment-hosted copper deposits in the Upper Peninsula. It is geologically very similar to the White Pine deposit.
The Copperwood deposit is located on the southwest limb of the Western Syncline and is buried by approximately 30 meters of unconsolidated glacial sediments. It is characterized by its geologic simplicity. The ore sequence is a sheet-like, tabular body that is 2.3 meters thick on average and dips gently to the north; mineralization occurs exclusively as fine-grained chalcocite, a copper mineral that contains 79.8% copper. The deposit is amenable to room-and-pillar.
Chalcocite is the only ore mineral at Copperwood. It is very fine-grained and forms continuous seams parallel to laminations but is also disseminated throughout the LCBS. Chalcocite formed as a replacement of pre-existing pyrite at low temperatures. Thus, the deposit does not contain potentially acid-forming pyrite, which not only simplifies beneficiation of copper, but also mitigates the risk of acid-rock drainage. The Copperwood host rocks are in fact acid neutralizing.
Project Economics
Based on the 2018 Feasibility Study, the life-of-mine is projected to be 10.7 years. The production rate of the mine will be 6,600 mtpd of ore, with an average payable copper production of 28,000 mtpy. The project initial CAPEX is $244.6 M (USD), and the operating cost per lb. of payable copper is $1.53/lb. Using an annual discount rate of 8%, the after-tax IRR, NPV, and Payback Period are 18%, $116.8 M (USD), and 3.2 years, respectively.
Mineral Resources and Reserves
The updated Mineral Resource estimate used by G Mining in the 2018 Feasibility Report estimates 42.2 Mt Measured + Indicated mineral resources in the Lower Copper Bearing Sequence at an average grade of 1.60% Cu and 3.84 g/t Ag. The Measured + Indicated Mineral Resource in the Upper Copper Bearing Sequence is estimated to be 7.1 Mt at an average grade of 1.21% Cu and 3.26 g/t Ag. There remains 1,272 M lbs. Cu and 5.5 M oz. Ag in the Inferred Resource category that Highland intends to explore further and potentially convert to Measured and Indicated Resources.
The Mineral Reserves for the Copperwood Project are estimated at 25.4 Mt, at an average grade of 1.43% Cu and 3.83 g/t Ag, as summarized in Table 2. The mine design targets mineralization above a 1% copper grade which generates an NSR near the breakeven cost of US $48/t of ore which includes provisions for sustaining capital.
LINK TO CW2018 FEASIBILITY STUDY
Table 1- Copperwood Project
Mineral Resource Estimate - June 14th, 2018
Notes on Mineral Resource Estimate
1) Mineral Resources are reported using a copper price of US$ 3.00/lb and a silver price of US$ 18/oz.
2) A payable rate of 96.5% for copper and 90% for silver was assumed.
3) The Copperwood Feasibility Study reported metallurgical testing with recovery of 86% for copper and 73.5% for silver.
4) Cut-off grade of 1.0% copper was used, based on an underground “room and pillar” mining scenario.
5) Operating costs are based on a processing plant located at the Copperwood site.
6) Assuming a $3.00/lb Cu price, a sliding scale 3.0% NSR royalty on the Copperwood Project is payable to leaseholders. Assuming closing of the acquisition of the White Pine Project, a 3% NSR royalty on the Copperwood Project payable to Osisko Gold Royalties Ltd is reduced to a 1.5% NSR royalty.
7) Measured, Indicated and Inferred Mineral Resources have a drill hole spacing of 175 m, 250 m and 350 m, respectively.
8) No mining dilution and mining loss were considered for the Mineral Resources.
9) Rock bulk densities are based on rock types.
10) Classification of Mineral Resources conforms to CIM definitions.
11) The qualified person for the estimate is Mr. Réjean Sirois, P.Eng., Vice President Geology and Resources for GMSI. The estimate has an effective date of 30th April 2018.
12) Mineral Resources that are not mineral reserves do not have demonstrated economic viability. The estimate of Mineral Resources may be materially affected by environmental, permitting, legal, title, taxation, sociopolitical, marketing, or other relevant issues.
13) LCBS: Lower Copper Bearing Sequence.
14) UCBS: Upper Copper Bearing Sequence.
15) The quantity and grade of reported Inferred Resources in this estimation are uncertain in nature and there has been insufficient exploration to define these Inferred Resources as Indicated or Measured Mineral Resources.
Figure CW 1: Location map of the Copperwood deposit, Upper Peninsula, Michigan
Figure CW 2: Copperwood Project area showing distribution of copper deposits (from Bornhorst and Williams, 2013)
Figure CW 3: Strategic sections at Copperwood Project
Figure CW 4: Photograph of Copperwood ore (drill core 33 mm in diameter)
Table 2-Copperwood Project
Mineral Reserve Estimate - June 14th, 2018
Notes on Mineral Resource Estimate
1) The Mineral Reserves were estimated using the Canadian Institute of Mining, Metallurgy and Petroleum (CIM) Standards for Mineral Resources and Reserves, Definitions and Guidelines prepared by the CIM Standing Committee on Reserve Definitions and adopted by CIM Council May 10th, 2014.
2) Mineral Reserves are estimated at a cut-off grade of 1% Cu. The cut-off will vary depending on the economic context and the operating parameters.
3) Mineral Reserves are estimated using a long-term copper price of US$ 3.00/lb and a silver price of US$ 16.00/oz.
4) Assuming a $3.00/lb Cu price, a sliding scale 3.0% NSR royalty on the Copperwood Project is payable to leaseholders. Assuming closing of the acquisition of the White Pine Project, a 3% NSR royalty on the Copperwood Project payable to Osisko Gold Royalties Ltd is reduced to a 1.5% NSR royalty.
5) Mineral Reserves are estimated using an ore loss of 3%, a dilution of 0.1 m for the floor and a 0.25 m for the back of the stope and the development.
6) The economic viability of the mineral reserve has been demonstrated.
7) A minimum mining height of 2.1 m was used.
8) The copper recovery was estimated at 86%.
9) The qualified person for the estimate is Mr. Carl Michaud, Eng., Underground Engineering Manager for GMSI. The estimate has an effective date of May 25, 2018
10) The number of metric tonnes was rounded to the nearest thousand. Any discrepancies in the totals are due to rounding effects; rounding followed the recommendations in NI 43-101.