Resource World Magazine

Mi n i n g Yellowhead Mining blazing a trail for a new generation of junior miners by David Forest The exploration push of the last several years has resulted in different types of discoveries. There are the sub-economic ore bodies: projects where mineralization is obviously too weak to make a go of mining. At the other end of the spectrum are the world-class discoveries: finds where the immense size and grade are immediately recognized by the mining world as precursor to a new, major mine. But there is also a third class of discoveries, becoming more and more common worldwide: those of considerable size, but with grade not quite in the zone acknowledged by industry as a "no-brainer." Yellowhead Mining Inc. [YMI-TSX] is blazing a trail for the development of this new breed of deposit and showing how a junior company can move forward a massive project and answer questions over grades of the sort that are quickly becoming the new normal for the mining business. Yellowhead has just such a project in the rolling mountains of southeastern British Columbia. Yellowhead's Harper Creek copper project lays some 150 km north of Kamloops, home to an immense mineral endowment of nearly 6 billion pounds of contained metal resource according to a February 2012 report. The tonnage of Harper Creek competes with anything else the world has to offer. The grade, however, is not eye-popping – at least not by traditional industry yardsticks – at 0.29% copper, with traces of gold and silver. But neither is the grade skinny. Numerous mines around the world process copper ore at similar grades, or even lower. Teck's Andacallo Project in Chile, for example, features a global resource grade of 0.29% copper. In fact, in many of South America's copper-producing districts, similar grades are becoming the norm. Faced with a deposit like Harper Creek, many juniors would twist in the wind 32 www.resourceworld.com Yellowhead recently purchased this rail-loading facility 25 kilometres from the Harper Creek Project. Photo courtesy of Yellowhead Mining waiting for a larger partner to jump in and do the heavy lifting required to move the project toward mining – but not Yellowhead. Management has hoisted Harper Creek's massive copper resource onto its shoulders and is running it toward the goal line at a frenetic pace. Case in point: the company completed an initial Preliminary Economic Assessment on the project in March 2011, just five green months after going public. Less than a year later, in February 2012, Yellowhead turned out an updated resource for the project, ramping up tonnage by over 50%. Two weeks later, management released a full feasibility study for Harper Creek, showing a robust $750 million net present value and 20% internal rate of return for a 70,000 tonne-per-day operation. Not bad for less than 18 month's work. By completing these studies themselves, the company has also been able to tackle the issue of grade through mine optimization plans. During the first three years of operations, as envisioned by the feasibility study, production will focus on higher-grade, near-surface zones of mineralization within the host volcanic units allowing for copper head-grades that are approximately 15% higher than the global resource grade during this economics-critical period of mining. As Ron Handford, Yellowhead's Vice-President of Corporate Development puts it, "Cut-off grade is determined by project economics, at the level which produces the best IRR." The feasibility study also highlights some attractive aspects of Harper Creek's location, which might not be immediately apparent, for one, affordable electric power in British Columbia. Harper Creek's total electricity draw will cost an estimated $0.69 per tonne of ore milled – very competitive by global standards, and a big part of the reason a number of BC, bulk tonnage operations such as Thompson Creek Metals' Mount Milligan Project and the Copper Mountain Mine got the go-ahead. On the back of such input cost savings, Harper Creek's total life-of-mine operating costs are pegged at just $6.88 february 2013

• Cover