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Gold/Mining/Energy : Western Copper Holdings Ltd. T.WTC -- Ignore unavailable to you. Want to Upgrade?

To: Stew who wrote (307)	6/4/1998 10:54:00 AM
From: Famularo	Read Replies (1) \| Respond to of 401

WESTERN COPPER HOLDINGS (WTC : TSE : $6.35 : Issued 12.6M; 14.0M f.d.) The Teck/Western Copper joint venture has announced that the San Nicolas zinc-copper-silver-gold deposit, located in Zacatecas State of central Mexico, could be an open-pit mine. The positive statement comes after several months of exploration and engineering work. Canaccord has provided regular analysis of the discovery, including a major report on April 2, 1998. San Nicolas is a massive sulphide body with zones of high-grade zinc and copper. Teck's resource estimate for the deposit is 85Mt. Of significant value in these results is that Teck will consider San Nicolas as an open pit mine with 45 degree walls and a waste to ore stripping ratio of 7.8:1. The mining scenario lowers the operating cost possibly to less than $10/t. The joint-venture will need to pre-strip about 100M t of waste at a mining cost of approximately US$0.70/t. Teck may be interested in buying the depleting Real de Angeles mine, located only 15 km from San Nicolas. Real de Angeles has a flotation plant capable of processing 18,500 tpd. Such an acquisition would accelerate the project, save on the capital expenditure, and provide a used pit for a disposal site for the tails. We noted in a previous comment that the value from silver and gold may be less than expected if the metals occur within the useless pyrite mineral. Teck has completed preliminary metallurgical work and found that the precious metal recoveries achieved to date are less than 20% for silver and gold. Furthermore the copper recovery in the high-grade zinc and mixed zones is estimated to be in the 60%-63% range. However, these estimates are based on experiments involving a very small sample size. Teck will undoubtedly conduct further metallurgical tests to optimize the metal recovery. We have revised our models to consider the new results. Using industry average costs and optimum mining rates we estimate that the project imparts a $6.00-7.00/share base-case NAV to Western Copper (refer to April 2 report for more information on assumptions and error). We note that WTC currently owns 45% of the project, however, it can be diluted to 22.5% with a payment of 5% of the project's discounted NPV at feasibility. The Teck engineering report gives Western Copper a foundation of value. The Company has considerable upside potential with the further step-outs and optimization at San Nicolas, positive exploration results at Penasquito, ongoing exploration and defined targets with the RTZ joint venture, and new prospects in central Mexico. We rate the stock a BUY and maintain our target price of $12.75. Canaccord Research Glenn Brown, Ph.D., Richard Gray.