Highland Copper Announces Positive Feasibility Study Results FOR Its Copperwood Project IN Michigan - IRR of 18% After Tax, Capital Cost of $275 M and an Average Payable Copper Production of 61.7 M Lbs PER Year
NEWS RELEASE
HIGHLAND COPPER ANNOUNCES POSITIVE FEASIBILITY STUDY RESULTS
FOR ITS COPPERWOOD PROJECT IN MICHIGAN -
IRR OF 18% AFTER TAX, CAPITAL COST OF $275 M AND AN AVERAGE PAYABLE
COPPER PRODUCTION OF 61.7 M LBS PER YEAR
Longueuil, Canada, June 15, 2018. Highland Copper Company Inc. (TSXV: HI; OTCQB: HDRSF)
(“Highland” or the “Company ”) is pleased to announce the results of a feasibility study (the
“Feasibility Study”) for its 100%-owned Copperwood project located in Gogebic County, in the
Western Upper Peninsula of Michigan, U.S.A. (the “Copperwood Project”).
Highlights of the Copperwood Project Feasibility Study
(All amounts in this news release are in US dollars, unless otherwise indicated. Due to rounding, numbers presented
throughout this release may not add up precisely to the totals provided.)
• After-tax internal rate of return (“IRR”) of 18%
• Initial capital expenditures of $245 million, net of pre-production revenue of $30 million
• Life-of-mine (“LOM”) cash costs of $1.53/lb, including royalties and $1.29/lb in the first
five years of production
• Proven and Probable Reserves of 25.4 M tonnes @ 1.43% Cu and 3.83 g/t Ag, containing
801.8 M lbs of copper and 3.1 M oz of silver
• Additional Mineral Resources of 49.9 M tonnes @ 1.15 % Cu and 3.42 g/t Ag in the Inferred
category, containing 1.3 B lbs of copper and 5.5 M oz of silver using a 1% Cu cut-off
• Average annual LOM payable copper production of 61.7 M lbs and 100,570 oz of silver
• Initial copper production expected in early 2021
“A major step forward for the Copperwood Project” said Denis Miville-Deschênes, President and
CEO of Highland Copper. “The Feasibility Study demonstrate s the significant potential of this
project located in a great historic mining jurisdiction. Based on the results of the study, we can now
focus on putting in place a comprehensive financing package.” He added “The development of a
mine at Copperwood represents a tremendous opportunity to create hundreds of jobs in the region.”
The Feasibility Study was conducted by, and under the supervision of, G Mining Services Inc.
(“GMSI”) in collaboration with SGS Canada Inc. (Lakefield), Lycopodium Minerals Canada Ltd,
Golder Associates and Foth Infrastructure and Environment. The s tudy provides a comprehensive
overview of the Copperwood Project and defines an economically feasible, technically and
environmentally sound project.
Opportunities to Increase Copperwood Project Value
Highland and its consultants have identified a number of opportunities to increase the value of the
Copperwood Project. T hese include upgrading inferred mineral resources , i ncreasing mine
productivity utilizing innovative continuous mining technologies , conducting further geotechnical
studies to optimize ore recovery and minimize mining dilution , reviewing tailings disposal
alternatives, and conducting additional testing to maximize metallurgical recoveries.
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Copperwood Project
The Copperwood Project property is located, by road, approximately 22.5 km to the north of
Wakefield and 40 km from the town of Ironwood, both in Gogebic County, w estern Upper
Peninsula, Michigan. The project area is at the south edge of the Keweenaw Copper province and
underlain by c lastic sediments of the Oronto Group, including the Copper Harbor, Nonesuch and
Freda Formations.
The Copperwood and its “s atellite” deposits are hosted by the limbs of the northwe st dipping
Presque Isle Syncline within the Nonesuch Formation. The Nonesuch Formation contains two
mineralized sequences, one located at the base, the Lower Copper Bearing Sequence (“LCBS”) and
a stratigraphically higher one, the Upper Copper Bearing Sequence (“UCBS”), separated by poorly
mineralized sediments with a variable thickness of 0.5 m to 6.0 m.
Chalcocite is the only copper sulfide bearing mineral, occurring principally as disseminations within
shale and siltstone. Individual disseminated grains of chalcocite are most commonly very fine grain,
approximately 5 to 50 microns in diameter. The Copperwood deposit is relatively sub- horizontal
with a thickness that varies from 1.6 m to 3.7 m.
Mineral Resources
GMSI prepared a Mineral Resource estimate for the Copperwood Project based on data provided up
to and including April 12, 2018. The resource estimate was prepared in accordance with CIM
Standards on Mineral Resources and Reserves (adopted May 10, 2014) and is reported in accordance
with National Instrument 43 -101 (“ NI 43-101”) Standards of Disclosure for Mineral Projects .
Classification, or assigning a level of confidence to Mineral Resources, has been undertaken with
strict adherence to CIM Standards on Mineral Resources and Reserves. In the opinion of GMSI, the
resource evaluation reported herein is a reasonable representation of the global Mineral Resources
found at the Copperwood Project at the current level and spacing of sampling.
The mineral estimate was prepared under the supervis ion of Réjean Sirois, P. Eng. of GMSI, an
independent “qualified person” as defined in NI 43-101. Geovia GEMS™ and Leapfrog Geo™
software were used to facilitate the resource estimation process.
Total Measured and Indicated Mineral Resources of the Copperw ood deposit are reported at
49.3 million tonnes grading an average of 1.54% Cu and 3.76 g/t Ag, containing 1.68 billion pounds
of copper and 5.9 million ounces of silver using a cut-off grade of 1.0% Cu for the combined LCBS
and UCBS. Inferred Mineral Reso urces are reported at 1.6 million tonnes grading an average of
1.18% Cu and 1.55 g/t Ag, containing 43 million pounds of copper and 0.1 million ounces of silver
using a cut-off grade of 1.0% Cu.
Total Inferred Mineral Resources located in the satellite deposits are reported at 49.9 million tonnes
grading 1.15% Cu and 3.42 g/t Ag, containing 1.27 billion pounds of copper and 5.5 million ounces
of silver using a cut-off grade of 1.0% Cu for the combined LCBS and UCBS.
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Mineral Resource Estimate
1.0% Cu Cut-off Grade – April 30th, 2018
Deposits
Resource
Category
Tonnage
(M t)
Copper
Grade
(%)
Silver
Grade
(g/t)
Copper
Contained
(M lbs)
Silver
Contained
(M oz)
LCBS
Measured 27.3 1.68 4.58 1,009 4.0
Indicated 14.9 1.46 2.47 479 1.2
M + I 42.2 1.60 3.84 1,488 5.2
Inferred 1.6 1.18 1.55 43 0.1
UCBS
Measured - - - - -
Indicated 7.1 1.21 3.26 189 0.7
M + I 7.1 1.21 3.26 189 0.7
Inferred - - - - -
Satellite LCBS Inferred 34.4 1.17 2.29 888 2.5
Satellite UCBS Inferred 15.5 1.12 5.92 384 3.0
Notes on Mineral Resources:
1) Mineral Resources are reported using a copper price of $3.00/lb and a silver price of $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 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.
Mineral Reserves
The Mineral Reserves estimate was prepared by Carl Michaud, P. Eng. of GMSI, in accordance with
the CIM Standards on Miner al Resources and Miner al Reserves. Mineral Reserves are based on
Measured and Indicated Mineral Resources dated April 30, 2018 and do not include Inferred Mineral
Resources. Measured and Indicated Mineral Resources are inclusive of Proven and Probable
Reserves.
The Proven and Probable Reserves stated below were estimated based on these unconstrained
Measured and Indicated Resources, noted above and the work carried out for the Feasibility Study.
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Mineral Reserve Estimate
Reserve by Category Tonnes
(M t)
Cu
Grade
(%)
Ag
Grade
(g/t)
Cu
contained
(M lbs)
Ag
contained
(M oz)
Proven 17.5 1.50 4.43 579.6 2.5
Probable 7.9 1.28 2.50 222.2 0.6
Proven & Probable 25.4 1.43 3.83 801.8 3.1
Notes:
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 $3.00/lb and a silver price of $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 Carl Michaud, P. 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.
Mine Operations and Services
It is proposed to mine the deposit with a conventional highly mechanized, drill and blast room-and-
pillar mining method. The method consists of the extraction of a series of entries and cross -cuts in
the ore, leaving pillars in place to support the back. The entries, cross cuts and pillars have been
sized using geotechnical analysis of the local host rocks, and experience from other mines sharing
similar ground conditions.
The mine will be accessed via covered box -cut to establish a portal at the mine entrance from the
surface, located at the central -west part of the deposit. The mine c onsists of two mining sectors:
West and East. The western part, being higher grade with a thicker mineralized zone, will be mined
in priority.
The mine is split into panels, which consist of at least 12 rooms that provide multiple headings where
all activities of the mining cycle can be done in parallel to achieve high productivities , as opposed
to activities in series as is the case in a single heading. The mining cycle consists of drilling ,
explosives loading and blasting, mucking, scaling and bolting.
Mining operations are planned with two 10-hour shifts per day, 360 days per year to achieve a
production target of 2.4 M tonnes per year, or 6,600 tonnes per day . To achieve this production, a
total of 7 to 9 panels must be in production at any given time.
The mining operation begins with drilling of the working face , which is accomplished with two -
boom hydraulic-electric jumbo drills. Each round is drilled 4.25 m (14 ft) in length with an effective
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break of 4.00 m. The rooms are 6.1 m wide with a height tha t varies according to the ore column
thickness. The height dimension dictates the productivity, which varies from panel to panel.
Mucking will be done with 10 tonnes load-haul-dump (“LHD”) units that will load muck at the mine
face and transport it to the conveyor loading point established for the production panel. The LHD
performance will be a function of dip of the stope and distance. The conveyor loading points will be
regularly moved as production advances in the panel to be less than 250 m from the headings.
Scaling of the rooms is planned with a smaller low -profile LHD unit equipped with a scaling arm
that rubs the roof to remove any loose rocks.
Bolting will be done by a mechanized bolter to install roof support and wall bolts. In the stopes,
1.8 m rebar bolts are required on a 1.2 m by 1.2 m pattern with wire mesh. In addition, 1.8 m friction
bolts are planned in the pillars (i.e. walls) on a 1.5 m by 1.5 m pattern with wire mesh. At room
intersection rebar bolt length is increased to 2.4 m.
Ventilation for the mine will be provided by a 400 m3/s fresh air raise and two exhaust raises at the
eastern and western end of the mine. The dewatering system will consist of six pumping stations
capable of evacuating 2,220 l/min of underground water inflow and mine water.
Highland continues to study the use of tailings as back- fill in the open stopes . If this approach is
selected, it would provide cost savings for tailing disposal and closure costs.
Life-of-Mine (LOM) Metal Production
The LOM production for the Copperwood Project is shown below. Payable c opper production is
estimated at 300,000 tonnes (660 million pounds) with an annual average of 28,000 tonnes (61.7
million pounds) over the 10.7- year mine life which includes a 3 -month commissioning and ramp-
up period. The average payable rate is 95.8% which includes a 0.2% concentrate loss. Payable silver
production over the LOM is 1.10 million ounces with an annual average of 101 thousand ounces of
silver.
Production Physicals Total
Concentrate k of dmt 1,264
Cu con. Grade % Cu 24.7
Cu metal production M lbs 690
Ag metal production k oz 2,296
Cu payable metal M lbs 660
Ag payable metal k oz 1,077
Processing and Metallurgy
The process plant design for the project is based on a metallurgical flowsheet designed to produce
copper concentrate with a nominal throughput of 6,600 tpd and a planned availability of 91.3%.
The flowsheet consists of semi -autogenous grinding in closed circuit with a ball mill targeting a
primary grind of 40 microns, rougher flotation with concentrate regrind, cleaner flotation using three
stages of cleaning, concentrate thickening, filtration and tailings disposal.
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The primary observation of variabilit y testwork showed that the copper recovery varies from 77%
up to ~ 90% with a concentrate grade from 20% up to 29% Cu. The overall average copper recovery
is 86% with a weighted average copper concentrate grade of 24.7%. Studies show that copper
recovery might be further increased by concentrate grade and reagents optimization.
Studies are underway to evaluate the optimal destination and transport option for the Copperwood
concentrate.
Environment and Permitting
Environmental baseline studies were done for the Copperwood Project from late 2008 through the
spring of 2011. These studies were used to identify existing and historical conditions in the P roject
area and select potential siting of infrastructures based on an environmental management and permit
approvals perspective.
An Environmental Impact Assessment was prepared to comply with the State of Michigan
requirements of Part 632 of Act No. 451 of the Public Acts of 1994 as amended. This document
outlines the baseline monitoring and studies conducted for the Copperwood Project including the
natural, social, economic, cultural, and historical aspects of the environment that may be potentially
impacted by the Project design.
In order to construct and operate the Copperwood P roject, a number of permits m ust be obtained
and agreed upon between Highland and environmental regulatory agencies on both the state and
federal levels. Highland maintain s an open and proactive approach with both state and federal
regulators.
The major environmental permits required to develop the Copperwood Project include: Part 632
Non-Ferrous Metallic Mining Permit; Part 31 National Pollutant Discharge Elimination System
Permit; Part 55 Air Permit to Install; Part 301 Inland Lakes and Streams Permit; Part 303 Wetland
Permit; Part 315 Dam Safety Permit; Part 325 Great Lakes Submerged Lands Permit; and Section
10 US Army Corps of Engineers Water Intake Permit.
Highland has filed amendment requests, renewals or new applications (as applicable) for these
permits and expects to have all required permits by the fall of 2018.
Power and Surface Infrastructure
The Company is considering a 40 km 115 kV powerline supplied by a well -implemented energy
provider in the state of Michigan. Detailed engineering will begin in the coming months for the best
routing to minimize the impact on the environment. County Road 519 will be upgraded under the
responsibility of the Michigan Department of Transportation.
Capital and Operating Costs
The initial capital costs, including all direct a nd indirect cos ts, are estimated at $275 million,
including a contingency of $22.9 million . Pre-production revenue of $30.35 million reduces the
capital expenditures to $244.6 million.
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Initial Capital Expenditure Summary
Initial CAPEX ($M)
General 1.150
Infrastructure 36.650
Power & Electrical 5.156
Water & TDF Mgmt. 22.875
Mobile Equipment 27.240
Mine Infrastructure 53.529
Process Plant 45.771
Construction Indirects 27.609
General Services & Owner's Costs 22.251
Pre-Production, Commissioning 9.838
Sub-Total Before Contingency 252.069
Contingency 9.1% 22.899
Total Incl. Contingency 274.968
Less: Pre-Production Revenue (30.348)
Total Incl. Contingency & Pre-Prod. Revenue 244.619
Operating costs include mining, processing, G&A services, concentrate transportation and
concentrate treatment and refining charges. The concentrate transportation, treatment charges and
refining are deducted from gross revenues to calculate the net smelter return (“NSR”). The NSR for
the Project during operations is estimated at $1.821 million , excluding $30.35 million of NSR
generated during pre -production and presented as a reduction of initial capital expenditures. The
average NSR over the LOM is $2.80 per pound of payable copper. The average operating cost over
the LOM is $39.84 per tonne of ore or $1.53 per pound of payable copper with mining representing
53.4% of the total operating costs, or $21.26 per tonne of ore.
Sustaining Capital Expenditure Summary
The total LOM sustaining capital is estimated at $156.5 million.
Sustaining Capital LOM
($M)
Tailings disposal facility expansion 28.45
Water treatment plant 6.13
Mine equipment purchases 43.69
Mine development expenditures 78.21
Total Sustaining Capital 156.47
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Operating Costs Summary
Operating Cash Flow LOM $/t ore $/lb Cu
Payable ($M)
Cu Revenue 2,047 81.92 3.15
Ag Credits 17 0.67 0.03
Revenue 2,064 82.59 3.17
Concentrate Transportation Costs 94 3.75 0.14
Treatment & Refining Charges 149 5.96 0.23
Net Smelter Return 1,821 72.88 2.80
Royalties 85 3.39 0.13
Mining Costs 531 21.26 0.82
Processing Costs 308 12.31 0.47
G&A Costs 72 2.88 0.11
Total OPEX (incl. royalties) 996 39.84 1.53
Operating Cash Flow 826 33.03 1.27
Note: Ore tonnage and payable copper unit costs excluding commissioning period.
Sensitivity Analysis
Variance
After-Tax Results
NPV 0%
($M)
NPV 8%
($M)
IRR
(%)
Payback
(yrs)
Metal Price Sensitivities
20% 655.1 318.8 31.9% 2.1
10% 486.1 218.1 25.3% 2.5
0% 316.0 116.8 18.0% 3.2
-10% 145.6 15.4 9.5% 5.2
-20% -31.8 -89.2 0.0% 10.5
Initial Capital Cost Sensitivities
20% 266.1 70.2 13.2% 3.9
10% 290.8 93.3 15.4% 3.5
0% 316.0 116.8 18.0% 3.2
-10% 341.4 140.4 21.1% 2.8
-20% 366.8 164.0 24.7% 2.5
Operating Cost Sensitivities
20% 150.7 22.8 10.3% 4.2
10% 233.5 69.8 14.4% 3.6
0% 316.0 116.8 18.0% 3.2
-10% 398.6 163.9 21.3% 2.9
-20% 481.2 210.9 24.3% 2.6