Highland Copper announces positive PEA results and mineral resource estimate for the White Pine North Copper Project in Michigan
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Highland Copper announces positive PEA results and mineral resource estimate
for the White Pine North Copper Project in Michigan
September 23, 2019 – Longueuil, Québec. Highland Copper Company Inc. (TSXV: HI, OTCQB:
HDRSF) (“Highland” or the “Company”) announces results of a preliminary economic assessment
("PEA") and a mineral resource estimate for the White Pine North Copper Project (the “Project”)
located in the historical copper range district of the Upper Peninsula of Michigan, U.S.A.
The PEA provides a base case assessment of mining the mineral resources of the White Pine Project.
The PEA considers White Pine North as a stand-alone project and utilizes existing infrastructure to
minimize initial capital expenditures. The Project is the extension of the historical White Pine mine
which operated from 1953 to 1995. The PEA was prepared in connection with the Company’s ongoing
strategic review process. The PEA and mineral resource estimate have been prepared by G Mining
Services Inc. (“GMSI”).
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.
PEA Highlights
• Base case using a copper price of $3.00/lb and a silver price of $16.00/oz
• After-tax internal rate of return (“IRR”) of 16.8%
• After-tax net present value (“NPV”) at 8% of $416 million
• Initial capital expenditures of $457 million, net of pre-production revenue of $56 million
• Life-of-mine (“LOM”) cash costs of $1.40/pound, including royalties
• Indicated mineral resource of 133.4 M tonnes at 1.07% Cu and 14.9 g/t Ag, containing 3.2
billion pounds of copper and 63.8 million ounces of silver.
• Inferred mineral resources of 97.2 M tonnes at 1.03% Cu and 8.7 g/t Ag, containing 2.2 billion
pounds of copper and 27.2 million ounces of silver
• Mineral resources included in the mine plan of 121.4 M tonnes @ 0.98% Cu and 11.80 g/t Ag,
containing 2.6 billion pounds of copper and 46.1 million ounces of silver
• Mine life of 25 years, including one year of ramp-up, with average annual LOM payable copper
production of 89 million pounds and 1.3 million ounces of silver
The reader is advised that a PEA is preliminary in nature and is intended to provide only an initial,
high-level review of the Project potential and design options. The PEA mine plan and economic model
include numerous assumptions and the use of Inferred resources. Inferred resources are too speculative
geologically to have the economic considerations applied to them that would enable them to be
categorized as mineral reserves and to be used in an economic analysis except as allowed for in PEA
studies. There is no guarantee that Inferred resources can be converted to Indicated or Measured
resources, and as such, there is no guarantee the Project economics described herein will be achieved.
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In May 2014 Highland completed the interim closing of the acquisition of the White Pine North Project
from Copper Range Company ("CRC"), a subsidiary of First Quantum Minerals Ltd. The final closing
of the acquisition is subject to several conditions including releasing CRC from certain environmental
obligations associated with the remediation and closure plan of the historical White Pine mine site and
replacing the related environmental bond for an amount expected to be approximately US$1.7 million.
The deadline to complete the acquisition of the White Pine North Project from CRC has been extended
to January 31, 2020. A large portion of the Mineral resources are located on the CRC property. There
can be no assurance that the Company will be able to complete the acquisition of the White Pine North
Project.
White Pine North Project Geology
The White Pine deposit is in the Ontonagon County, Michigan State. The base of the Nonesuch
Formation hosts the bulk of the copper mineralization at White Pine, which consists of cupriferous
siltstone, black shale and fine-grained sandstone beds, and low-grade siltstone, sandstone and red shale
beds.
The copper mineralization in the area of the former White Pine mine occurs in the bottom 6 m (20 ft)
of the Nonesuch Formation at the contact with the Copper Harbor conglomerate. Beds within the lower
21 m (70 ft) of the Nonesuch Formation are laterally persistent and can be correlated across the mine.
The shale and siltstone in the lower part of the Nonesuch Formation are divided into two sedimentary
sequences, the lower “Parting Shale” and the upper “Upper Shale”, separated by the Upper Sandstone.
Copper mineralization at the White Pine deposit occurs as two distinct styles -- very fine-grained sulfide
(chalcocite) and as native copper. Sulfide mineralization is estimated to account for 85-90% of the
copper in the deposit, but both modes of copper are intimately associated throughout the deposit.
Mineral Resources
GMSI prepared a Mineral Resource estimate for the White Pine North Project based on data provided
up to and including March 2015. No new scientific or technical data has been acquired since March
2015, therefore this mineral resource can be considered as current and effective as of August 30, 2019.
Database used by GMSI which had been validated by an independent arm’s-length consultant includes
526 drill holes from available historical drilling by CRC and an additional 42 diamond drill holes in
HQ and NQ diameter core completed by the Company in 2014 and 2015, totaling 274,914 meters and
15,743 assays.
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 Canadian National Instrument
43-101 - Standards of Disclosure for Mineral Projects (“NI 43-101”). 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 White Pine North Project at
the current level and spacing of sampling.
The Mineral Resource estimate was prepared under the supervision 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.
The modelling of the copper mineralization horizons was based on the footwall and hanging wall of the
three selected “columns” (sedimentary sequences), namely the Parting Shale, the Full Column and the
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Upper Shale. These columns were modelled with a minimum true thickness of 2 m. In instances where
the columns were less than 2 m, dilution was applied in the footwall to ensure that the 2 m thickness
was honored. Only the Parting Shale column was reported as a Mineral Resource.
Copper and silver assays were composited to the full thickness of the column. Grade distributions were
reviewed, and assay capping was not deemed necessary.
Grade estimation was undertaken using Ordinary Kriging (OK) and Inverse Distance Squared (ID2)
into a percentage block model based on the wireframes of the three columns. A three-pass estimation
strategy was adopted, with increasingly large search ellipses and relaxed estimation parameters.
The block model was validated visually and statistically and was found to be a good representation of
the composites. Mineral Resource classification was based primarily on estimation pass, and other
considerations such as drill spacing, quality of historical data and confidence in grade continuity.
A 300 m buffer zone around existing workings was excised from the Mineral Resource.
Total Indicated Mineral Resources of the White Pine North deposit are reported at 133.4 M tonnes
grading an average of 1.07% Cu and 14.9 g/t Ag, containing 3.2 billion pounds of copper and
63.8 million ounces of silver using a cut-off grade of 0.9% Cu for the Parting Shale column only.
Inferred Mineral Resources are reported at 97.2 M tonnes grading an average of 1.03% Cu and
8.7 g/t Ag, containing 2.2 billion pounds of copper and 27.2 million ounces of silver using a cut-off
grade of 0.9% Cu.
Mineral Resource for the Parting Shale Column – White Pine North Deposit
0.9% Cu Cut-off Grade – August 30, 2019
Resource
Category
Tonnage
(M tonnes)
Copper
Grade
(%)
Silver
Grade
(g/t)
Copper
Contained
(M lbs)
Silver
Contained
(M oz)
Indicated 133.4 1.07 14.9 3,154 63.8
Inferred 97.2 1.03 8.7 2,210 27.2
Notes on Mineral Resources:
1) Mineral Resources are reported using a copper price of US$ 3.00/lb and a silver price of US$ 16/oz
2) A payable rate of 96.5% for copper and 89.3% for silver was assumed.
3) Metallurgical recoveries of 88% for copper and 76% of silver were assumed.
4) A cut-off grade of 0.9% Cu was used based on an underground “room and pillar” mining scenario
5) Operating costs are based on a processing plant located at the White Pine site.
6) A flat NSR royalty rate of $0.05/lb Cu payable was applied, which incorporates two royalties on the project
(Osisko Gold Royalty and Great Lakes Royalty)
7) The Parting Shale Column was modelled using a minimum true thickness of 2 m
8) No mining dilution or mining loss was considered for the Mineral Resources
9) Mineralized rock bulk density is assumed at 2.7 g/cc
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 Resource
for GMSI. The estimate has an effective date of August 30, 2019
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) Parting Shale: Interval defined from the base of the Lower Transition to the top of the Tiger units
14) 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.
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Mining Plan
The PEA envisions that the deposit will be mined 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 mineralization, leaving pillars in place to support the back. The entries, cross cuts and
pillars have been sized using geotechnical analysis and experience from historical mining at White Pine.
The mine will comprise three sectors; the Eastern, Center and Western parts. The mine will be accessed
via a new covered box-cut to establish a portal at the mine entrance from the surface, located at the
western side of the deposit. The pre-production period requires 41,512 m of development to establish
the main entry panel requiring four to six drifts according to the ventilation requirements. Ground
conditions are expected to be good to excellent, similar to the historical White Pine mine. The ground
support consists a 1.8 m rebar bolts on a 1.2 m by 1.2 m pattern.
The production schedule is based on mining a fixed target of 5.4 M tonnes/year. To achieve this annual
production, seven to fourteen production panels must be in production simultaneously. The number of
required panels depends on the tonnage from the development as well as the height of the rooms of each
panel. The mining of the room will be done using a two-pass approach. In the first pass, larger pillars
are left in place. The mining recovery of the first pass is estimated at 40%. Once the first pass is
completed, the size of the pillars is reduced via a second pass to increase the average mining recovery
to approximately 57%.
Life-of-Mine (LOM) Metal Production
The PEA LOM production estimate for the White Pine North Project is shown below. Payable copper
production is estimated at 1 Mt (2.2 billion pounds) with an annual average of 40,000 tonnes (89 million
pounds) over the 25-year mine life which includes a 1-year commissioning and ramp-up period. The
average payable rate is 96.5% which includes a 0.2% concentrate loss. Payable silver production over
the LOM is 31.3 million ounces with an annual average of 1.3 million ounces of silver.
Production Physicals Total
Concentrate k of dmt 3,421
Cu con. Grade % Cu 30.5
Cu metal production M lbs 2,305
Ag metal production k oz 35,012
Cu payable metal M lbs 2,224
Ag payable metal k oz 31,257
Processing and Metallurgy
The PEA envisions a process plant design for the Project that is based on the historical metallurgical
flowsheet to produce copper concentrate with a nominal throughput of 15,000 tpd and a planned
availability of 91.3%. The flowsheet consists of crushing, grinding in closed circuit with a ball mill
targeting a primary grind of 100 microns, rougher flotation with concentrate regrind, cleaner flotation
using three stages of cleaning, concentrate thickening, filtration and tailings disposal.
The copper recovery is estimated at 88% with a concentrate grade of 30.5% Cu. Silver recovery is
estimated at 76%. Studies show that copper recovery might be further increased by concentrate grade
and reagents optimization.
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Power and Surface Infrastructure
The Company envisions building a new natural gas fired power generation plant. The site is currently
serviced with natural gas. The power plant capacity is estimated at 30 MW. The existing tailings
disposal facility will be utilized to deposit tailings from the White Pine North project, which will require
dam raises over the life-of-mine. Water supply is available from an existing Lake Superior pump station.
A new 2 km access road to the project processing and administrative complex is planned from the
Michigan M-64 highway.
Capital and Operating Costs
The initial capital costs, including all direct and indirect costs, are estimated at $512.5 million, including
a contingency of $90.8 million. It is anticipated that pre-production revenue of $55.7 million will reduce
the capital expenditures to $456.7 million.
Initial Capital Expenditure Summary
Initial CAPEX ($M)
General 0.2
Infrastructure 31.2
Power & Electrical 64.1
Water & TDF Mgmt. 15.1
Mobile Equipment 44.5
Mine Infrastructure 39.2
Process Plant 47.4
Construction Indirects 25.7
General Services & Owner's Costs 18.2
Pre-Production, Commissioning 136.3
Sub-Total Before Contingency 421.7
Contingency 21.5% 90.8
Total Incl. Contingency 512.5
Less: Pre-Production Revenue (55.7)
Total Incl. Contingency & Pre-Prod. Revenue 456.7
Sustaining Capital Expenditure Summary
The total LOM sustaining capital is estimated at $459.3 million. The sustaining capital includes the
extension of the conveyor system for extracting ore to surface and replacement of equipment which
typically has a useful life of 50,000 hours.
Sustaining Capital LOM
($M)
Tailings disposal facility expansion 17.6
Process plant 28.5
Mine equipment purchases 291.7
Mine development expenditures 121.5
Total Sustaining Capital 459.3
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Operating Costs Summary
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 $6.4 billion, excluding $55.7 million of NSR generated during pre-
production and presented as a reduction of initial capital expenditures. The average NSR over the LOM
is $2.92 per pound of payable copper. The average operating cost over the LOM is $25.67 per tonne of
ore or $1.40 per pound of payable copper with mining representing 66% of the total operating costs, or
$16.96 per tonne of ore.
Operating Cash Flow LOM $/t ore $/lb Cu
Payable ($M)
Cu Revenue 6,615 55.07 3.00
Ag Credits 496 4.13 0.23
Revenue 7,111 59.20 3.23
Concentrate Transportation Costs (260) (2.17) (0.12)
Treatment & Refining Charges (407) (3.39) (0.18)
Net Smelter Return 6,444 53.65 2.92
Royalties (113) (0.94) (0.05)
Mining Costs (2,038) (16.96) (0.92)
Processing Costs (740) (6.16) (0.34)
G&A Costs (193) (1.60) (0.09)
Total OPEX (incl. royalties) (3,084) (25.67) (1.40)
Operating Cash Flow 3,359 27.97 1.52
Note: Ore tonnage and payable copper unit costs excluding commissioning period.
Sensitivity Analysis
After-Tax Results
Variance NPV 0% NPV 8% IRR Payback
($M) ($M) (%) (years)
Metal Price Sensitivities
20% 3,126 832 23.8% 3.6
10% 2,520 626 20.5% 4.2
0% 1,907 416 16.8% 5.2
-10% 1,292 205 12.7% 7.0
-20% 676 -6 7.8% 9.7
Initial Capital Cost Sensitivities
20% 1,845 361 15.0% 5.9
10% 1,876 389 15.8% 5.6
0% 1,907 416 16.8% 5.2
-10% 1,938 443 17.8% 4.9
-20% 1,969 470 19.0% 4.6
Operating Cost Sensitivities
20% 1,772 369 15.9% 5.6
10% 1,839 392 16.3% 5.4
0% 1,907 416 16.8% 5.2
-10% 1,974 439 17.2% 5.0
-20% 2,042 462 17.6% 4.9
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Estimated Timeline
The estimated timeline for the White Pine North Project is shown below. Upon receipt of required
permits and necessary approvals a 48-month mine development, construction and commissioning
period is foreseen followed by 24 years of commercial production.
Project Timeline Total
Mine development (months) 48
Commercial production (yrs) 24
Closure (yrs) 1.5
PEA Assumptions
PEA Assumptions Total
Avg. Copper Price ($/lb) 3.00
Avg. Silver Price ($/oz) 16.00
Treatment Charge ($/t) 70
Refining Charge ( ¢/lb) 7.0
Avg. Copper Payable Rate (%) 96.5%
Avg. Silver Payable Rate (%) 89.3%
Preliminary Economic Assessment
Summary Total
Pre‐tax NPV @ 8% ($M) 557.2
Pre-tax IRR 19.2%
After‐tax NPV@ 8% ($M) 416
After-tax IRR 16.8%
Undiscounted After‐Tax Cashflow (LOM) ($M) 1,907
Payback Period from start of processing (years) 5.2
Initial Capital expenditures ($M) 456.8
LOM Sustaining Capital Expenditures ($M) 459.3
LOM C‐1 Cash Costs $/lb (net of bi‐product) 1.43
Nominal Process capacity t/d 15,500
Mine Life‐years 24.0
Annual Payable Metal Production
Copper (M lbs) 89.0
Silver (M ozs) 1.25
LOM Average Process Recovery Rate
Copper % 88.0
Silver % 76.0
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All-in Cash Cost
LOM Costs LOM $/t ore $/lb Cu
Payable ($M)
Mining 2,038 16.96 0.92
Processing 740 6.16 0.34
G&A 193 1.60 0.09
Offsite costs (transport, TC/RCs) 668 5.56 0.30
By-product credits (496) (4.13) (0.23)
C1 Cost 3,142 26.16 1.43
Depreciation and closure 575 4.79 0.26
Royalty costs 113 0.94 0.05
C3 Cost 3,831 31.89 1.74
Environment and Permitting
The former White Pine mine ceased operation in 1995 and has been the subject of an extensive
remediation program outlined in judicial Consent Decree and Remedial Action Plan agreements
between CRC, Michigan’s Attorney General and the Michigan Department of Environment, Great
Lakes, and Energy. The entire surface area overlying the underground mine along with the associated
surface component area and tailings impoundments are listed as a “facility” under Part 201,
Environmental Remediation, of Michigan’s Public Act 451 of 1994 as Amended, the Natural Resource
and Environmental Protection Act.
Pending final closing of the acquisition of the Project, the Company began mineral exploration and
baseline environmental surveys under an access agreement with CRC. Historical environmental data
for the former White Pine mine site operated by CRC was reviewed and compared with the Company’s
initial project plans and Michigan’s Part 632 regulatory requirements. CRC had compiled extensive
information on surface water, ground water and near-surface soils at the project site. Biological
monitoring data in the Project area was mostly limited to very brief descriptions, e.g. the Remedial
Investigation Report of 1999, or the more thorough description of the 1978 Baker report that is now
over 40 years old. Data from limited nearby stream monitoring completed by the State of Michigan in
1999 and earlier is also available.
Upon completion of the final closing of the acquisition of the mineral and surface rights from CRC, the
Company will assume all environmental liabilities related to the Consent Decree and on-going
environmental obligations.
Qualified Persons
Louis-Pierre Gignac, P. Eng., of GMSI, an independent qualified person, as defined under NI 43-101,
has read and approved the technical portions of this news release. The following qualified persons are
responsible for the preparation of their relevant portions of the technical report to be prepared in
accordance with NI 43-101.