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The Maturing Yukon: Northern Freegold And Western Copper And Gold

|Includes:Northern Freegold Resources Ltd. (NFRGF), WRN

No longer an early-stage gold play, the Yukon might have lost much of its excitement. But more advanced work continues to command interest, as shown by recent announcements from Northern Freegold Resources (OTCPK:NFRGF) and Western Copper and Gold (NYSEMKT:WRN).

Northern Freegold's January 9 resource update enhances a potential gold-silver-copper open pit at its Freegold Mountain Project. Based on 322 holes totalling over 50,000 metres on the Nucleus deposit, the estimate uses a cutoff of 0.25 grams per tonne gold-equivalent. The indicated category shows:

  • 71.9 million tonnes averaging 0.57 g/t gold, 0.85 g/t silver and 0.06% copper for 1.31 million gold ounces, 1.97 million silver ounces and 89 million copper pounds.

The inferred category shows:

  • 60.4 million tonnes averaging 0.41 g/t gold, 1.48 g/t silver and 0.04% copper for 801,235 gold ounces, 2.9 million silver ounces and 52 million copper pounds.

The resource begins at surface and is open to expansion laterally and at depth, the company stated.

Northern Freegold added that two-thirds of the indicated resource falls within "a significant zone of higher-grade mineralization" in the centre of the Nucleus deposit. Using a cutoff of 0.5 g/t gold-equivalent, this zone shows:

  • 25.9 million tonnes averaging 1.02 g/t gold, 1.11 g/t silver and 0.07% copper for 851,603 gold ounces, 924,040 silver ounces and 38 million copper pounds.

The nearby Revenue deposit has a January 2012 inferred resource. Using a 0.5 g/t gold-equivalent cutoff, the estimate shows:

  • 101 million tonnes averaging 0.34 g/t gold, 3.14 g/t silver, 0.13% copper and 0.04% molybdenum for 1.12 million gold ounces, 10.19 million silver ounces, 286.87 million copper pounds and 89.61 million molybdenum pounds (or 3.66 million gold-equivalent ounces).

A Q1 2013 PEA is expected for both Nucleus and Revenue, which are open in all directions, Northern Freegold president/CEO John Burges stated. "We believe these deposits form part of a much larger continuous district-scale gold-copper system as evidenced by an eight-kilometre-long geophysical anomaly and largely coincidental gold-and-copper soil anomalies."

The project has road access to Whitehorse, 200 kilometres southeast. Yukon's electrical grid reaches the town of Carmacks, 70 kilometres away.

Northern Freegold stock opened January 9 at $0.12, half a cent below the previous close, then ended the day at $0.145.

Northern Freegold's resource update follows closely on the January 7 feasibility announcement for Western Copper and Gold's TSX:WRN Casino copper-gold-molybdenum-silver property, 132 kilometres west.

The study projects an initial capex of $2.46 billion and an 8% discount rate for a pre-tax NPV of $2.82 billion ($1.83 billion after taxes) and a pre-tax IRR of 24% (20.1% after taxes). Payback is expected in three years. The open-pit mine would have a mill operating for 22 years and a heap-leach operation for 18 years. Together they would produce an annual average of 399,000 gold ounces, 245 million copper pounds, 15 million molybdenum pounds and 1.8 million silver ounces for the first four years.

Average annual pre-tax cash flow is forecast at $773 million for the first four years and $531 million over the mine's lifespan. After taxes, the average is forecast at $682 million for the first four years and $400 million for life.

Combined mining and milling costs are projected at $8.52 per tonne of ore. In December the company sold a 2.75% NSR to a numbered company for US$32 million.

Liquefied natural gas would power both on-site electricity generation and the mining fleet. "The technology to fuel mine haul trucks of the class required for Casino is still in development, but haul truck suppliers have publicly stated that they are targeting 2017 to make this technology commercially available, which is well before the date required for Casino," Western Copper and Gold stated. LNG "has a significant impact in lowering the unit cost for mine haulage," added the company.

The study also envisions building a 132-kilometre road through Northern Freegold's property to connect with the highway and provide year-round access to the deep-sea port of Skagway on the Alaska Panhandle.

Assuming success with permitting and funding, construction could begin in 2016, heap-leach production in 2017 and concentrator production in 2019.

On the day of the January 7 announcement, Western Copper and Gold shares opened at $1.40, eight cents above their previous close. The highest point since was $1.53 on January 9, before closing that day on $1.50.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

Stocks: NFRGF, WRN