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Western Copper and Gold Initiation Report

Western Copper and Gold (WRN.TO, MCap C$232.36M, Share price: C$1.40)

The company is a Yukon-focused copper explorer with a couple of powerful backers - Rio Tinto (9.7% stake) and Mitsubishi Materials (5% stake). The company's flagship Casino project has 10.7 million pounds of copper and 21.1 million ounces of gold in resources, which is massive by any standard.

The Yukon government is a strong supporter of the project. They have invested in upgrading a port facility in Alaska, so WRN will be able to ship out copper concentrate once it enters production. While most mining jurisdictions are adopting a NIMBY mentality (not in my backyard), Yukon is focusing on being more mining friendly. Contrast this with neighboring Alaska, which seems hell bent on preventing Northern Dynasty Minerals' (NAK, NDM.TO) Pebble copper-gold project from becoming a mine.

What's it worth? A big copper-gold deposit is a sleeper asset; it'll only be worth something when there's a bidding war among major miners looking to add ounces to their resource base. Which is why the strong backing WRN enjoys is a plus. It also means the company will never be forced to raise money at distressed prices, preserving the share structure.

My recommendation is reliant on two catalysts: (1) a copper price north of $4/lb, (2) capital flowing back into the exploration sector as the Fed loosens liquidity.

This will take time, which is why a good entry is so important. I expect to double my money in a year's time, and I expect to deploy my cash into several such exploration plays so as to generate a decent 1-year return on the whole basket. Size accordingly. I will be recommending more exploration plays as opportunities arise.

I bought a lot of exploration plays during tax loss season in November and December but didn't recommend them. Now that this is a closed group, and as I continue working towards making this a paid product, I'll be sharing more small cap ideas.

Good Trading!

Kashyap Sriram

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