Interview with Paul West-Sells, President & CEO of Western Copper & Gold Corp. (NYSE, TSX: WRN). Our previous interview: https://youtu.be/Qc5-gJVBeKA Western Copper and Gold Corporation are focused on developing the Casino project, Canada’s premier copper-gold project.
In July 2020 Western Copper and Gold updated the resource estimate at the Casino deposit based on its 2019 drilling results. The updated estimate includes 14.5 million ounces of gold in the measured and indicated category and 6.6 million ounces of gold in the inferred category in addition to 7.6 billion pounds of copper in the measured and indicated category and 3.3 billion pounds of copper in the inferred category.
Matthew Gordon: Give us that 1-minute overview of the business for people new to the story and we'll pick it up from there.
Paul West-Sells: Western Copper and Gold is a very, very simple company. We've got 1 asset, which is the Casino Copper Gold project located up in the Yukon. This is a large Copper Gold Porphyry. Overall categories, we're talking 3.5Bnt of ore containing 22Moz of Gold and 11Bnlb of Copper. We've been developing it for about 14-years now. It's a good time to be in Copper. It's a good time to be in Gold.
Matthew Gordon: I think the narrative's starting to change. It feels like it's starting to change with this raise. $28.75M. That's a lot of money. Why did you do it and what does that tell you?
Paul West-Sells: It's a lot of money certainly for us. It's actually the largest equity raise that we've done, actually as Western Copper and Gold. So it certainly is a pretty big equity raise. If you look at the investors, this is public now, that came into that equity raising, they're Blue-Chip US funds, the Fidelities and Franklins of the world. Our message when we were raising the money was very simple. Copper is now going to go on a run, which we're hopefully in the first bit of. If you look at Copper and Copper Gold assets, and you look at ones - and I'll come back to the size because size is important - that are sizeable or in good jurisdiction or economic, there's a very, very small number of assets and we happen to have one. On one side, as you're pointing out, some people are intimidated by the size because it comes with a large capital cost number. On the other side, that size attracts a certain type of potential partner, potential acquisition as you pointed out. I mean, one of the jokes I tell people is that I have actually had a couple of meetings with BHP, they look at this and it's too small for them. They only hunt giants. Now, for some of the other Copper guys it's the right size but these little Copper assets, you're not going to get a lot of interest from any of the majors.
Matthew Gordon: What's been the thing that's changed people's opinion of the potential here? Have you given them more data? Is it a change of the narrative, the story that you're saying? Or is it just they've made money elsewhere and they've got to deploy it somehow?
Paul West-Sells: I think it's the last one. There are a couple of things that have changed. For me, it's interesting. When we were a $0.50 stock, people looked at us and they said, 'To get this thing through permitting, get all the engineering updated, that next step is going to cost them $20M or $30M.’ Our shareholders and we as a company were like, 'We don't want you to go out and dilute all of our shares by half to do that.' Then when our share price went up, really on the back of just the commodities going up, we have this opportunity where we can say, 'Hey, we can go out, reasonable dilution, raise enough money,' and that's the important thing with that amount of money that we have right now. That amount of money is enough money for us to get all of the engineering done that we need to get done all the way through permitting.
Matthew Gordon: I'm interested in the conversations with these big Fidelities of this world. What were they asking of you? Because they've got a lot of choice out there. There are lots of ways they can spend their money. Why the sudden change in belief in your ability to deliver?
Paul West-Sells: The first thing is, is there a whole lot of choice? You do this, how many Copper companies come up that have multi-billion tonne deposits, good jurisdiction, all those things that I just mentioned. There are many 3 or 4. That's it. So that's point 1. I think the biggest thing is they wanted to come into Copper. The other part, the X factor here, is also that there have been a bunch of changes at board level. We brought on Mike Vitton, he's a big money guy out of New York. He had those connections certainly but I think he also is an M&A guy, he's a businessman, he can create value just by looking at business opportunities, not just buy us out or bring in a partner, those are things we've been looking at for a number of years, but other business combinations that make sense. I can tell you this because I've been doing this for the past 6-months, since Mike's been here. That's been a key focus of the company - what can we do to create value within the company as well just by being good businessmen?
Matthew Gordon: So, you took the language of JVs and M&A?
Paul West-Sells: Yes.
Matthew Gordon: He's giving you some optionality when you're having conversations with these funds as well. Are those the kinds of things that they like hearing?
Paul West-Sells: Yes. They invested $28M, right? That's the message, and that’s the message tomorrow. My elevator pitch right now is that we're doing 3 things. Advance at Casino, that's where most of that money is going. The second thing is a little bit of exploration here and there, keep the story going in terms of this land package that we bought, next to us. We did a bit of work on that last year and we'll talk a little bit about what we're going to do in the future on that. The third thing is to aggressively go out and see what opportunities are there.
Matthew Gordon: It's been in the hiatus this very tepid market, and it's been 14-years in the making, right? It's had various growth spurts during that phase but do you think people have got bored of the story and they needed this aggression to pay attention?
Paul West-Sells: Yeah, when you say are you being a bit more aggressive, are you being a bit- I just say, more than a bit. We went from being parked to putting the foot on the gas at full pace here. Yeah, I think that's it. We were stuck in this rut and it was share price related, it was broad market related, and it was a board that was like well, ‘We almost got bought out a couple of times, it'll happen, let's just be patient.’ Now, it's like let's make our own future. Let's make our own destiny. Now we have the money to do it as well.
Matthew Gordon: I think the other thing we want to note is, now you've got the money, you're in control of how you go about deploying it - to what end? What are you going to spend it on?
Paul West-Sells: More of the money is going to moving Casino forward. Casino is a great project. You fully unlock that value when you get it permitted. That's going to take probably 4 or 5-years. Permitting takes a while. When we paused the permitting, that was 4 or 5-years ago. If we hadn't paused - now, there were some monetary reasons why we did that - but if we hadn't paused it then, I'd be talking to you about this permitted project in the really hot Copper market, right? I think it's like, ‘Let's get that going. Let's update the engineering.’ Right now, we announced that we're going to do a PEA first, just a quick check on everything, get that out, get that in the market, and then into a Full Feasibility Study by the end of the year. That's where that money is going.
Matthew Gordon: That's an updated PEA, is it?
Paul West-Sells: Yeah, we had a Feasibility Study and we looked at, do we just update the Feasibility Study or do we want to do a quick check at the PEA level. We announced it at the end of the year. We should have the results in 4 or 5-months, very, very quickly. It's a quick check on that. And that all that will roll into an updated Feasibility Study at the end of the year. The old Feasibility Study was done in 2013. Pretty dated. It was a pretty different world back then. It's overdue for an update.
Matthew Gordon: The new look. Does that change the way that you go about tackling updating the PEA, or indeed the Feasibility Study? Do you get more data in there or are we expecting just confirmation of what you already have known, whether it be historic or recent times?
Paul West-Sells: Yeah, the biggest thing that's going to go into this updated Feasibility Study is the new resource, which we released last year. It's not about the size. It's got a lot bigger, that's fine. More importantly, we did quite a bit of infill drilling and we're dropping our strip ratio from probably 0.6 to less than 0.5. It has a massive impact on the economics. I can't overemphasise. People look at our project, ‘Ah it's big, it's low-grade.’ Look at that strip ratio. That's what makes these projects economic or not economic and that's what we have in spades.
Matthew Gordon: When you've got something of this scale, there's going to be a lot of this tweaking, this engineering, because when you've got a multi-cycle project, that's what mid-tiers are looking for and they can tweak the economics. These low-grade economics really start to stand out. What else are you going to be looking at? What else are you trying to tweak?
Paul West-Sells: That’s going to come in. We did a lot of work on tailings, it's boring stuff but let's be honest, to get every big project through that permitting hurdle- when I go into communities and talk to the First Nations, they want to talk about what’s happening with the tailings. We spent 18-months working with the First Nations in particular, and the government and the regulators on tailings and what to do with that. That's going to be rolled into this updated engineering. Those are the 2 big things. A little bit better metallurgy, we've got some metallurgy; slightly better recoveries are going to get rolled in. It's not 1 big change but there are a lot of certain small positive changes that are going to have a positive impact on the economics.
Matthew Gordon: I'm excited to see what the PEA comes up with. What was the timing on the Feasibility, if you do that?
Paul West-Sells: Well, so the updated PEA is Q2. Updated Feasibility, we'll see. Everything that goes into the PEA will go into the Feasibility so I haven't released timing on that, end of the year.
Matthew Gordon: Conversations that you're having now are around the optionality of JVs or other acquisitions, which are complimentary to what you're got. Some of the conversations, which you'll have been having for a long time now with some of the big boys with big balance sheets who find you interesting, obviously, not BHP.
Paul West-Sells: Who knows? Maybe. I don't where they're going to find their future Copper production. Maybe they'll have to look smaller.
Matthew Gordon: What's the big ‘so what’ at the end of this? What should we be going away thinking about this new look company of yours?
Paul West-Sells: I think if you'd talked to me, probably not the last time but 2 times ago, I'd say, ‘We're looking for a partner.'
Matthew Gordon: You did, you said it.
Paul West-Sells: And I probably said that. Certainly, we still are. That board was like, 'We're done, we've been here for 14-years, get this thing sold, enough for now, Paul,’ whereas now it's like, 'Why don't we create a company? Why don't we maybe buy an asset?' We've got horsepower on the board now that could potentially do that. We go out and create a Copper company, right? Do we buy an asset and bring it in? Do we buy a Gold asset and bring it in? Not just a development asset, maybe an operating asset. You start to build a company that isn't just a single-asset company that has maybe some cash flow. Then we can start to talk about while that cash flow could potentially come in and begin to fund the first part of this. You begin to start that dialogue and we're not just sitting there saying, 'Please partner', with a sign up. We're creating our own destiny. Again, that's the big change now from let's call it a year ago to now, that we're going out and trying to locate those opportunities. There aren't just partnerships. We certainly are doing that. That's certainly a key thing we're looking at but again, controlling our own destiny, are there things we can bring into the company in addition to Casino to create value?
Matthew Gordon: It didn't feel like it at times last year because of the market, and the lethargy of the previous board structure. American bankers, love them or hate them, they make things happen. I happen to like them.
Paul West-Sells: Yes, they do. They're not about sitting and waiting. They certainly don't do that much.
Matthew Gordon: It sounds like PEA is the next big thing that we should be looking out for. Are you going to be blowing any more money on any more drilling? Do you need any more data?
Paul West-Sells: This year, the focus is really on the engineering. I looked at the drill results. There are always interesting things in the drill results but do we need to get bigger? No. I think that the idea is that when we're in permitting, we've always got lots of targets to look at. We've got a good deep target. We're not an exploration story right now, we never have been. But we did that last year. If we do anything this year, it'll be small.
Matthew Gordon: Do you feel that the events that you're focused on, the PEA, the potential Feasibility maybe at the end of the year or beginning of next, are what’s going to drive a little bit more excitement in the marketplace? And whatever these conversations that you may or may not be having with other parties?
Paul West-Sells: This updated PEA, people have been looking at this project for a while but the last time we actually had up-to-date economics was in 2013. Now, it's like, ‘Okay let's cement them in time right now.’ All of these little small things are all going to add up. The strip ratio was huge. Some better recoveries are huge. All of these things are going to be very, very key. Then it's this X factor. It's the new board, it's being aggressive as a company, and I can't reiterate enough, high copper prices drive those. Now, you have your top 10 Copper companies saying, 'What are we doing in terms of our next production? Where is it coming from?' They weren't asking those questions when Copper was at $2. They were saying, 'How do we stop bleeding cash?'. Copper is on a different cycle than Gold and we're half Copper, half Gold, but this asset sits more comfortably in a Copper company.
Matthew Gordon: At least you haven't told me you’re a Silver company. I've seen that too many times this year already.
Paul West-Sells: That was only Monday. That was only 1 day.
Matthew Gordon: Look, Paul, great to speak to you. I'm glad things are going well. I like the new look. Stay in touch.
Paul West-Sells: Alright, thanks a lot for the opportunity, Matt. I just want to remind your viewers, this is a big year for us. The PEA is coming out, we've just raised a big whack of money and the job is to put that to work. New board, new outlook, and an aggressive attitude in terms of moving forward. These are exciting times.
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