Western Copper & Gold Corp 6-K, filed Nov 4, 2022
Western Copper & Gold Corp (WRN)
About this 6-K
Western Copper & Gold Corp filed this 6-K on November 4, 2022.
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 6-K
REPORT OF FOREIGN PRIVATE ISSUER PURSUANT TO RULE 13a-16 OR 15d-16
UNDER THE SECURITIES EXCHANGE ACT OF 1934
For the month of November 2022
Commission File Number: 001-35075
WESTERN COPPER AND GOLD CORPORATION
(Translation of registrant's name into English)
15th Floor – 1040 West Georgia Street,
Vancouver, BC V6E 4H1
(Address of principal executive offices)
Indicate by check mark whether the registrant files or will file annual reports under cover Form 20-F or Form 40-F.
[ ] Form 20-F [ x ] Form 40-F
Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(1): [ ]
Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(7): [ ]
DOCUMENTS INCORPORATED BY REFERENCE
Exhibits 99.1 and 99.2 to this Report on Form 6-K are hereby incorporated by reference as Exhibits to the Registration Statement on Form F-10 of Western Copper and Gold Corp. (File No. 333-241689).
SUBMITTED HEREWITH
Exhibits
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
| Western Copper and Gold Corporation | ||
| (Registrant) | ||
| Date: November 3, 2022 | By: | /s/ Paul West-Sells |
| Paul West-Sells | ||
| Title: | Chief Executive Officer | |
Western Copper and Gold Corporation
(An exploration stage company)
Condensed Interim Consolidated Financial Statements
For the three and nine months ended September 30, 2022
(Expressed in Canadian dollars)
|
Western Copper and Gold Corporation |
| (Expressed in Canadian dollars) |
CONDENSED INTERIM CONSOLIDATED BALANCE SHEETS
| September 30, 2022 | December 31, 2021 | ||||||
| Note | $ | $ | |||||
| ASSETS | |||||||
| Cash and cash equivalents | 4,998,165 | 30,688,210 | |||||
| Short-term investments | 3 | 24,224,444 | 16,073,639 | ||||
| Marketable securities | 4 | 500,100 | 1,104,400 | ||||
| Other assets | 999,489 | 860,529 | |||||
| CURRENT ASSETS | 30,722,198 | 48,726,778 | |||||
| Right-of-use assets | 697,753 | 413,047 | |||||
| Exploration and evaluation assets | 5 | 84,785,069 | 66,348,061 | ||||
| ASSETS | 116,205,020 | 115,487,886 | |||||
| LIABILITIES | |||||||
| Accounts payable and accrued liabilities | 5,142,719 | 2,228,673 | |||||
| Current portion of lease obligation | 245,273 | 171,167 | |||||
| Flow-through premium liability | 6 | - | 759,525 | ||||
| CURRENT LIABILITIES | 5,387,992 | 3,159,365 | |||||
| Lease obligations | 224,672 | 262,151 | |||||
| LIABILITIES | 5,612,664 | 3,421,516 | |||||
| SHAREHOLDERS' EQUITY | |||||||
| Share capital | 7 | 183,542,846 | 183,190,992 | ||||
| Contributed surplus | 37,253,697 | 35,472,638 | |||||
| Deficit | (110,204,187 | ) | (106,597,260 | ) | |||
| SHAREHOLDERS' EQUITY | 110,592,356 | 112,066,370 | |||||
| LIABILITIES AND SHAREHOLDERS' EQUITY | 116,205,020 | 115,487,886 |
Approved by the Board of Directors
/s/ Ken Williamson Director /s/ Klaus Zeitler Director
|
Western Copper and Gold Corporation |
| (Expressed in Canadian dollars) |
CONDENSED INTERIM CONSOLIDATED STATEMENTS OF LOSS AND COMPREHENSIVE LOSS
| Three Months Ended September 30, |
Nine Months Ended September 30, |
|||||||||||
| 2022 | 2021 | 2022 | 2021 | |||||||||
| $ | $ | $ | $ | |||||||||
| Depreciation | 38,723 | 38,723 | 116,169 | 64,538 | ||||||||
| Filing and regulatory fees | 5,857 | 14,701 | 262,748 | 266,684 | ||||||||
| Office and administration | 174,986 | 93,584 | 469,096 | 328,246 | ||||||||
| Professional fees | 67,392 | 136,659 | 220,380 | 320,250 | ||||||||
| Share-based payments (note 9, 10) | 309,770 | 600,187 | 1,260,375 | 1,006,604 | ||||||||
| Shareholder communication and travel | 205,366 | 226,213 | 618,739 | 587,255 | ||||||||
| Wages and benefits (note 10) | 329,136 | 320,172 | 1,207,423 | 1,174,404 | ||||||||
| CORPORATE EXPENSES | 1,131,230 | 1,430,239 | 4,154,930 | 3,747,981 | ||||||||
| Foreign exchange loss | 7,637 | 6,589 | 10,246 | 2,147 | ||||||||
| Interest income | (219,227 | ) | (68,594 | ) | (403,024 | ) | (153,095 | ) | ||||
| Flow-through premium recovery (note 6) | (252,194 | ) | (698,491 | ) | (759,525 | ) | (699,899 | ) | ||||
| Unrealized loss on marketable securities (note 4) | 39,180 | 240,120 | 604,300 | 285,920 | ||||||||
| LOSS AND COMPREHENSIVE LOSS | 706,626 | 909,863 | 3,606,927 | 3,183,054 | ||||||||
| Basic and diluted loss per share | 0.00 | 0.01 | 0.02 | 0.02 | ||||||||
| Weighted average number of common shares outstanding | 151,581,030 | 150,316,560 | 151,509,188 | 141,853,645 | ||||||||
|
Western Copper and Gold Corporation |
| (Expressed in Canadian dollars) |
CONDENSED INTERIM CONSOLIDATED STATEMENTS OF CASH FLOWS
| For the nine months ended September 30, | 2022 | 2021 | |||||
| $ | $ | ||||||
| Cash flows provided by (used in) | Note | ||||||
| OPERATING ACTIVITIES | |||||||
| Loss and comprehensive loss | (3,606,927 | ) | (3,183,054 | ) | |||
| ITEMS NOT AFFECTING CASH | |||||||
| Depreciation | 116,169 | 64,538 | |||||
| Finance costs | 28,349 | 16,531 | |||||
| Flow-through premium recovery | (759,525 | ) | (699,899 | ) | |||
| Unrealized loss on marketable securities | 604,300 | 285,920 | |||||
| Share-based payments | 1,260,375 | 1,006,604 | |||||
| 1,249,668 | 673,694 | ||||||
| Change in non-cash working capital items | 43,005 | (396,214 | ) | ||||
| OPERATING ACTIVITIES | (2,314,254 | ) | (2,905,574 | ) | |||
| FINANCING ACTIVITIES | |||||||
| Private placement proceeds | 7b | - | 33,634,423 | ||||
| Private placement issuance costs | 7b | - | (1,560,618 | ) | |||
| Exercise of stock options | 9a | 133,165 | 1,348,500 | ||||
| Lease payments | (147,751 | ) | (67,881 | ) | |||
| FINANCING ACTIVITIES | (14,586 | ) | 33,354,424 | ||||
| INVESTING ACTIVITIES | |||||||
| Purchase of short-term investments | (8,000,000 | ) | (16,000,000 | ) | |||
| Mineral property expenditures | (15,094,688 | ) | (7,349,137 | ) | |||
| Right of use asset | (266,517 | ) | - | ||||
| INVESTING ACTIVITIES | (23,361,205 | ) | (23,349,137 | ) | |||
| CHANGE IN CASH AND CASH EQUIVALENTS | (25,690,045 | ) | 7,099,713 | ||||
| Cash and cash equivalents - Beginning | 30,688,210 | 28,647,190 | |||||
| CASH AND CASH EQUIVALENTS - ENDING | 4,998,165 | 35,746,903 |
|
Western Copper and Gold Corporation |
| (Expressed in Canadian dollars) |
CONDENSED INTERIM CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
| Number of Shares |
Share Capital |
Contributed Surplus |
Deficit | Shareholders' Equity |
|||||||||||
| $ | $ | $ | $ | ||||||||||||
| DECEMBER 31, 2020 | 135,597,635 | 150,897,421 | 34,617,746 | (102,888,373 | ) | 82,626,794 | |||||||||
| Private Placement (note 7b) | |||||||||||||||
| Gross proceeds | 11,808,490 | 25,624,423 | - | - | 25,624,423 | ||||||||||
| Issuance costs | - | (865,829 | ) | - | - | (865,829 | ) | ||||||||
| Private Placement (note 7b) | |||||||||||||||
| Gross proceeds | 2,670,000 | 8,010,000 | - | - | 8,010,000 | ||||||||||
| Flow-through premium (note 6) | - | (1,655,400 | ) | - | - | (1,655,400 | ) | ||||||||
| Issuance costs | - | (694,788 | ) | - | - | (694,788 | ) | ||||||||
| Exercise of stock options | 1,350,000 | 1,875,165 | (526,665 | ) | - | 1,348,500 | |||||||||
| Share-based payments | - | - | 1,112,139 | - | 1,112,139 | ||||||||||
| Loss and comprehensive loss | - | - | - | (3,183,054 | ) | (3,183,054 | ) | ||||||||
| SEPTEMBER 30, 2021 | 151,426,125 | 183,190,992 | 35,203,220 | (106,071,427 | ) | 112,322,785 | |||||||||
| Share-based payments | - | - | 269,418 | - | 269,418 | ||||||||||
| Loss and comprehensive loss | - | - | - | (525,833 | ) | (525,833 | ) | ||||||||
| DECEMBER 31, 2021 | 151,426,125 | 183,190,992 | 35,472,638 | (106,597,260 | ) | 112,066,370 | |||||||||
| Exercise of stock options | 91,666 | 178,909 | (45,744 | ) | - | 133,165 | |||||||||
| Exercise of restricted share units | 79,698 | 172,945 | (172,945 | ) | - | - | |||||||||
| Share-based payments | - | - | 1,999,748 | - | 1,999,748 | ||||||||||
| Loss and comprehensive loss | - | - | - | (3,606,927 | ) | (3,606,927 | ) | ||||||||
| SEPTEMBER 30, 2022 | 151,597,489 | 183,542,846 | 37,253,697 | (110,204,187 | ) | 110,592,356 |
|
Western Copper and Gold Corporation |
| (Expressed in Canadian dollars) |
1. NATURE OF OPERATIONS
Western Copper and Gold Corporation (together with its subsidiaries, "Western" or the "Company") is an exploration stage company that is directly engaged in exploration and development of the Casino mineral property located in Yukon, Canada (the "Casino Project").
The Company is incorporated in British Columbia, Canada. Its head office is located at 1200 - 1166 Alberni Street, Vancouver, British Columbia.
The financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. The Company's ability to continue as a going concern is substantially dependent on its ability to raise funds necessary to acquire assets, perform exploration and development activities, and conduct its corporate affairs primarily through the issuance of its common shares. The Company will need to raise additional funds to complete the development of the Casino Project
2. BASIS OF PRESENTATION
a. Statement of compliance
These condensed interim consolidated financial statements have been prepared in accordance with International Financial Reporting Standards as issued by the International Accounting Standards Board ("IFRS"), applicable to the preparation of interim financial statements, including International Accounting Standard 34 - Interim Financial Reporting. The condensed interim consolidated financial statements should be read in conjunction with the Company's annual consolidated financial statements for the year ended December 31, 2021, which have been prepared in accordance with IFRS
These financial statements were approved for issue by the Company's board of directors on November 3, 2022.
b. Accounting estimates and judgments
The preparation of financial statements in conformity with IFRS requires management to exercise judgement in the process of applying its accounting policies and to make estimates that affect the reported amounts of assets and liabilities and disclosures of contingent assets and contingent liabilities at the date of the financial statements and the reported amounts of income and expenses during the period. Actual results could differ from those estimates. Differences may be material.
Judgment is required in assessing whether certain factors would be considered an indicator of impairment for the exploration and evaluation assets. We consider both internal and external information to determine whether there is an indicator of impairment present and accordingly, whether impairment testing is required. Where an impairment test is required, calculating the estimated recoverable amount of the cash generating units for non-current asset impairment tests requires management to make estimates and assumptions with respect to estimated recoverable reserves or resources, estimated future commodity prices, expected future operating and capital costs, and discount rates. Changes in any of the assumptions or estimates used in determining the recoverable amount could impact the impairment analysis. Management did not identify any impairment indicators during the three and nine month periods ended September 30, 2022.
|
Western Copper and Gold Corporation |
| (Expressed in Canadian dollars) |
3. SHORT-TERM INVESTMENTS
As at September 30, 2022, the Company had $24,000,000 (December 31, 2021 - $16,000,000) invested in Canadian dollar denominated guaranteed investment certificates plus accrued interest of $224,444 (December 31, 2021 - $73,639).
4. MARKETABLE SECURITIES
As at September 30, 2022, the Company held marketable securities with an aggregate fair value of $500,100 (December 31, 2021 - $1,104,400), consisting of 2.5 million common shares of Northisle Copper and Gold Inc. with a fair value of $487,500 (December 31, 2021 - $1,075,000) and 168,000 common shares of Granite Creek Copper Ltd. with a fair value of $12,600 (December 31, 2021 - $29,400).
5. EXPLORATION AND EVALUATION ASSETS
a. Casino (100% - Yukon, Canada)
The Casino Project is a copper-gold porphyry deposit located in Yukon, Canada.
The Casino Property is subject to the following royalty:
• 2.75% NSR on the claims comprising the Casino project in favour of Osisko Gold Royalties Ltd. ("Osisko Gold") pursuant to the Royalty Assignment and Assumption Agreement dated July 31, 2017 when 8248567 Canada Limited assigned to Osisko Gold all of its rights, title and interest in the 2.75% NSR.
b. Exploration and evaluation expenditures
| Total | |||
| $ | |||
| DECEMBER 31, 2020 | 53,748,013 | ||
| Claims maintenance | 22,270 | ||
| Engineering | 3,180,020 | ||
| Exploration and camp support | 7,648,920 | ||
| Permitting | 1,326,058 | ||
| Salary and wages | 281,452 | ||
| Share-based payments | 141,328 | ||
| DECEMBER 31, 2021 | 66,348,061 | ||
| Claims maintenance | 26,038 | ||
| Engineering | 3,344,636 | ||
| Exploration and camp support | 8,173,126 | ||
| Permitting | 5,316,223 | ||
| Salary and wages | 837,612 | ||
| Share-based payments | 739,373 | ||
| SEPTEMBER 30, 2022 | 84,785,069 |
|
Western Copper and Gold Corporation |
| (Expressed in Canadian dollars) |
6. FLOW THROUGH PREMIUM LIABILITY
In connection with the flow-through share offering the Company completed on July 29, 2021, the Company recorded a flow-through premium liability during the year ended December 31, 2021. The flow-through premium is recognized in the statement of loss based on the amount of qualifying flow-through expenditures incurred by the Company.
As at September 30, 2022, the Company had incurred $8,010,000 of qualifying flow through expenditures as required by the July 29, 2021 offering and recognized a flow-through premium recovery of $252,194 and $759,525 for the three and nine months ended September 30, 2022, respectively (nine months ended September 30, 2021 - $699,899).
7. SHARE CAPITAL
a. Authorized share capital
The Company is authorized to issue an unlimited number of common shares without par value and an unlimited number of preferred shares without par value.
b. Financing
On July 29, 2021, Western completed a brokered private placement of flow-through common shares (the "FT Shares"). The Company issued a total of 2,670,000 FT Shares at a price of $3.00 per FT Share for aggregate gross proceeds of $8,010,000. Issuance costs related to the private placement totaled $694,788. A flow through premium liability of $1,655,400 was recognized. Refer note 6.
On May 31, 2021, Rio Tinto Canada Inc. ("Rio Tinto") completed a strategic investment in Western by way of a private placement of the Company's common shares. The Company sold 11,808,490 common shares at a price of $2.17 per common share for gross proceeds of $25,624,423. The Company incurred $865,829 in costs associated with the private placement.
8. WARRANTS
A summary of the Company's warrants outstanding, including changes for the periods then ended, is presented below:
| Number of warrants |
Weighted average exercise price |
|||||
| $ | ||||||
| DECEMBER 31, 2020 | 1,500,000 | 0.85 | ||||
| - | - | |||||
| DECEMBER 31, 2021 and SEPTEMBER 30, 2022 | 1,500,000 | 0.85 |
|
Western Copper and Gold Corporation |
| (Expressed in Canadian dollars) |
Warrants outstanding are as follows:
| Warrant outstanding, by exercise price |
Number of warrants |
Weighted average exercise price | Average remaining contractual life | ||||||
| $ | years | ||||||||
| $0.85 | 1,500,000 | 0.85 | 2.42 | ||||||
| SEPTEMBER 30, 2022 | 1,500,000 | 0.85 | 2.42 |
9. EQUITY INCENTIVE PLANS
The Company has three equity incentive plans consisting of a stock option plan (the "Option Plan"), a restricted share unit plan (the "RSU Plan") and a deferred share unit plan (the "DSU Plan") (collectively the "Equity Incentive Plans"). Pursuant to the Company's annual general meeting held on June 17, 2021, it was approved that the maximum aggregate number of common shares issuable under the Equity Incentive Plans cannot exceed 10% of number of common shares issued and outstanding.
a. Stock Options and Share-based payments
Stock Options
Under the Option Plan, the exercise price of the stock options must be greater than, or equal to, the market value of the Company's common shares on the last trading day immediately preceding the date of grant. Stock options vest over a two year period from the date of grant unless otherwise determined by the directors. The maximum stock option term is 10 years. At September 30, 2022, the Company could issue an additional 2,366,354 stock options under the terms of the stock option plan.
A summary of the Company's stock options outstanding and the changes for the periods then ended, is presented below:
| Number of stock options |
Weighted average exercise price |
|||||
| $ | ||||||
| DECEMBER 31, 2020 | 7,075,000 | 1.19 | ||||
| Granted | 310,000 | 2.10 | ||||
| Exercised | (1,350,000 | ) | 1.00 | |||
| DECEMBER 31, 2021 | 6,035,000 | 1.28 | ||||
| Granted | 2,181,000 | 2.03 | ||||
| Exercised | (91,666 | ) | 1.45 | |||
| SEPTEMBER 30, 2022 | 8,124,334 | 1.48 |
During the three and nine months ended September 30, 2022, the Company recognized an expense of $182,675 and $569,353 respectively, in the statement of loss and comprehensive loss (three and nine months ended September 30, 2021 - $161,826 and $568,243). During the three and nine months ended September 30, 2022, $194,679 and $553,287 was capitalized, respectively, (three and nine months ended September 30, 2021 - $24,543 and $105,535) in the exploration and evaluation assets in relation to stock options.
|
Western Copper and Gold Corporation |
| (Expressed in Canadian dollars) |
Stock options outstanding are as follows:
| Stock options outstanding, by exercise price |
Number of Stock options |
Weighted average exercise price | Average remaining contractual life | ||||||
| $ | years | ||||||||
| $0.75 - $0.90 | 1,900,000 | 0.87 | 1.68 | ||||||
| $1.11 - $1.20 | 1,775,000 | 1.19 | 0.65 | ||||||
| $1.41 - $1.66 | 1,958,334 | 1.63 | 2.85 | ||||||
| $1.85 - $1.95 | 1,100,000 | 1.94 | 4.27 | ||||||
| $2.10 - $2.22 | 1,391,000 | 2.19 | 4.29 | ||||||
| SEPTEMBER 30, 2022 | 8,124,334 | 1.48 | 2.54 |
Average share price for options exercised during the nine months ended September 30, 2022, was $2.66 (nine months ended September 30, 2021 - $2.06). Of the total stock options outstanding, 5,636,665 were vested and exercisable at September 30, 2022. The weighted average exercise price of vested stock options is $1.25 and the average remaining contractual life is 1.77 years.
Share-based payments
During the nine months ended September 30, 2022, the Company granted 2,181,000 (2021 - 310,000) stock options to employees, directors and consultants at an average exercise price of $2.03 per option. The fair value of each option granted is estimated on the date of grant using the Black-Scholes option pricing model. The weighted average assumptions and resulting fair values for the grant are as follows:
|
Inputs and assumptions |
Nine Months Ended September |
Year Ended |
|
|
|
|
|
Exercise price |
$2.03 |
$2.10 |
|
Market price |
$2.03 |
$2.10 |
|
Expected option term (years) |
3.0 |
3.0 |
|
Expected stock price volatility |
58.6% |
62.1% |
|
Average risk-free interest rate |
1.46% |
0.59% |
|
Expected forfeiture rate |
- |
- |
|
Expected dividend yield |
- |
- |
|
|
|
|
|
FAIR VALUE PER OPTION GRANTED |
$0.82 |
$0.84 |
|
Western Copper and Gold Corporation |
| (Expressed in Canadian dollars) |
b. Restricted Share Units
The Company granted RSUs in accordance with the RSU plan approved at the June 17, 2021 shareholders meeting. These RSUs vest in three equal tranches: Tranche one - on completion of 12 months from grant date, Tranche two - on completion of eighteen months from the grant date and Tranche three - on completion of twenty-four months from grant date. These RSUs are classified as equity-settled as these awards will be settled by issuing the shares and are valued at the market price of the Company shares on the date of grant. As at September 30, 2022, the Company could issue an additional 1,746,590 RSUs under the RSU Plan. A summary of the Company's RSUs outstanding and the changes for the periods then ended, is presented below:
| Number of shares issued or issuable on vesting | |||
| DECEMBER 31, 2020 | - | ||
| RSUs Granted | 239,100 | ||
| DECEMBER 31, 2021 | 239,100 | ||
| RSUs Granted | 359,723 | ||
| RSUs Converted to common shares | (79,699 | ) | |
| SEPTEMBER 30, 2022 | 519,124 |
In relation to RSUs, the Company recognized an expense of $127,095 and $400,382 during the three and nine months ended September 30, 2022, respectively (three and nine months ended September 30, 2021 - $75,971) in the statements of loss and comprehensive loss. During the three and nine months ended September 30, 2022 $64,764 and $186,086 was capitalized, respectively (three and nine months ended September 30, 2021 - Nil) in the exploration and evaluation assets.
|
Western Copper and Gold Corporation |
| (Expressed in Canadian dollars) |
c. Deferred Share Units
Only directors of the Company are eligible for DSUs and each DSU vests immediately and is redeemed upon a director ceasing to be a director of the Company. DSUs are classified as equity-settled as these awards will be settled by issuing the shares and are valued at the market price of the Company shares on the date of grant. As at September 30, 2022, the Company could issue an additional 1,640,111 DSUs under the DSU Plan.
| Number of shares issuable |
|||
| DECEMBER 31, 2020 | - | ||
| DSUs Granted | 167,000 | ||
| DECEMBER 31, 2021 | 167,000 | ||
| DSUs Granted | 138,400 | ||
| SEPTEMBER 30, 2022 | 305,400 |
In relation to DSUs, the Company recognized an expense of $nil and $290,640 during the three and nine months ended September 30, 2022, respectively (three and nine months ended September 30, 2021 - $362,390) in the statements of loss and comprehensive loss.
10. KEY MANAGEMENT COMPENSATION
The Company's related parties include its directors and officers, who are the key management of the Company. The remuneration of key management was as follows:
| Three Months Ended September 30, |
Nine Months Ended September 30, |
|||||||||||
| 2022 | 2021 | 2022 | 2021 | |||||||||
| $ | $ | $ | $ | |||||||||
| Salaries and director fees | 509,881 | 228,294 | 1,507,620 | 963,760 | ||||||||
| Share-based payments | 521,641 | 550,590 | 1,812,353 | 931,520 | ||||||||
| KEY MANAGEMENT COMPENSATION | 1,031,522 | 778,884 | 3,319,973 | 1,895,280 | ||||||||
Share-based payments represent the fair value on grant date of stock options, RSUs and DSUs previously granted to directors and officers that was recognized in the statement of loss and comprehensive loss during the years presented above.
11. SEGMENTED INFORMATION
The Company's operations are in one segment: the acquisition, exploration, and future development of mineral resource properties. All interest income is earned in Canada and all assets are held in Canada.
|
Western Copper and Gold Corporation |
| (Expressed in Canadian dollars) |
12. CAPITAL MANAGEMENT
The Company considers capital to be equity attributable to common shareholders, composed of share capital, contributed surplus, and deficit. It is the Company's objective to safeguard its ability to continue as a going concern so that it can continue to explore and develop mineral resource properties.
The Company monitors its cash position on a regular basis to determine whether sufficient funds are available to meet its short-term and long-term corporate objectives, and makes adjustments to its plans for changes in economic conditions, capital markets and the risk characteristics of the underlying assets.
To maintain its objectives, the Company may attempt to issue new shares, seek debt financing, acquire or dispose of assets or change the timing of its planned exploration and development projects. There is no assurance that these initiatives will be successful.
There was no change in the Company's approach to capital management during the period. Western has no debt and does not pay dividends. The Company is not subject to any externally imposed capital restrictions.
13. FINANCIAL INSTRUMENT RISK
The Board of Directors has overall responsibility for the establishment and oversight of the Company's risk management framework. The Company has exposure to liquidity, credit, and market risk from the use of financial instruments. Financial instruments consist of cash and cash equivalents, short-term investments, marketable securities, certain other assets, and accounts payable and accrued liabilities.
a. Liquidity risk
Liquidity risk is the risk that the Company will be unable to meet its financial obligations as they come due. The Company uses cash forecasts to ensure that there is sufficient cash on hand to meet short-term business requirements. Cash is invested in highly liquid investments which are available to discharge obligations when they come due. The Company does not maintain a line of credit.
b. Credit risk
Financial instruments that potentially subject the Company to credit risk consist primarily of cash and cash equivalents and short-term investments. These financial instruments are at risk to the extent that the institutions issuing or holding them cannot redeem amounts when they are due or requested. To limit its credit risk, the Company uses a restrictive investment policy. Cash and cash equivalents and short-term investments are in Canadian chartered banks. The carrying amount of financial assets recorded in the financial statements represents Western's maximum exposure to credit risk.
c. Market risk
The Company is exposed to market risk because of the fluctuating values of its publicly traded marketable securities. The Company has no control over these fluctuations and does not hedge its investments. Marketable securities are adjusted to fair value at each balance sheet date. A 10% fluctuation in value of its publicly traded marketable securities rate would have a minimal impact on the Company's loss and comprehensive loss.
|
Western Copper and Gold Corporation |
| (Expressed in Canadian dollars) |
As at September 30, 2022, the carrying amounts of cash and cash equivalents, short-term investments, certain other assets, and accounts payable and accrued liabilities are considered to be reasonable approximations of their fair values due to the short-term nature of these instruments. The fair value of the marketable securities is determined by reference to published price quotations in an active market (classified as level 1 in the fair value hierarchy).
| WESTERN COPPER AND GOLD CORPORATION | MANAGEMENT DISCUSSION AND ANALYSIS |
| Three and nine months ended September 30, 2022 | |
| (Expressed in Canadian dollars, unless otherwise indicated) |
MANAGEMENT'S DISCUSSION AND ANALYSIS
FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2022
The following management discussion and analysis of Western Copper and Gold Corporation (together with its subsidiaries, "Western" or the "Company") is dated November 3, 2022, and provides an analysis of the Company's results of operations for the three and nine months ended September 30, 2022.
This discussion is intended to provide investors with a reasonable basis for assessing the financial performance of the Company as well as certain forward looking statements relating to its potential future performance. The information should be read in conjunction with Western's condensed interim consolidated financial statements for the three and nine months ended September 30, 2022, and Western's audited consolidated financial statements for the year ended December 31, 2021, and the notes thereto, which have been prepared in accordance with International Financial Reporting Standards as issued by the International Accounting Standards Board ("IFRS"). The Company's accounting policies are described in note 3 to the audited consolidated financial statements for the year ended December 31, 2021. All of the financial information presented herein is expressed in Canadian dollars, unless otherwise indicated.
Western is listed on the Toronto Stock Exchange ("TSX") and the NYSE American under the symbol WRN. Additional information relating to the Company, including the Company's Annual Information Form for the year ended December 31, 2021, ("AIF"), is filed with Canadian regulators on SEDAR at www.sedar.com. This information, along with Western's annual report on Form 40-F, filed with the United States Securities and Exchange Commission (the "SEC"), is also available at edgar.sec.gov/edgar.shtml.
The operations of the Company are speculative due to the high-risk nature of the mining industry. Western faces risks that are generally applicable to its industry and others that are specific to its operations. Certain key risks affecting the Company's current and future operations are discussed in its AIF and Form 40-F. This list is not exhaustive. Additional risks not currently known to the Company, or that the Company currently deems immaterial, may also impair the Company's operations. Such risk factors could materially affect the value of the Company's assets and future operating results, and could cause actual results to differ materially from those described in the forward looking statements contained in this management discussion and analysis. Reference is made to the discussion of forward-looking statements at the end of this document.
DESCRIPTION OF BUSINESS
Western Copper and Gold Corporation and its wholly-owned subsidiary, Casino Mining Corp. ("Casino Mining"), are focused on advancing the Casino project ("Casino", "Project" or "Casino Project") towards production. The Casino Project is located in Yukon, Canada and hosts one of the largest undeveloped copper-gold deposits in Canada.
CORPORATE DEVELOPMENT
Strategic Investment by Rio Tinto Canada
On May 31, 2021, Rio Tinto Canada Inc. ("Rio Tinto") purchased 11,808,490 common shares of the Company at a price of $2.17 per common for gross proceeds of $25,624,423. The strategic investment results in Rio Tinto owning approximately 8% of the Company.
In connection with the strategic investment by Rio Tinto, the Company and Rio Tinto entered into an investor rights agreement, whereby, Rio Tinto will have certain rights, including the right to appoint:
| WESTERN COPPER AND GOLD CORPORATION | MANAGEMENT DISCUSSION AND ANALYSIS |
| Three and nine months ended September 30, 2022 | |
| (Expressed in Canadian dollars, unless otherwise indicated) |
- one member to a Casino Project Technical Committee until the earlier of: (a) Rio's ownership falling below 5.0%; and (b) November 28, 2022.
- one non-voting observer to attend all meetings of the board of directors of the Company until the earlier of (a) Rio's ownership falling below 5.0%; and (b) November 28, 2022.
- one director of the Company, if Rio Tinto's ownership increases to at least 12.5% before November 28, 2022.
- up to three secondees to the Casino Project until the earlier of: (a) Rio's ownership falling below 5.0%; and (b) November 28, 2022.
- Rio also maintains the one-time right to extend the above noted dates until November 28, 2023.
Rio Tinto will have a right to:
- Participate in future equity issuances to maintain its ownership in Western Copper until the earlier of: (a) Rio's ownership falling below 5.0%; and (b) May 28, 2023.
- A one-time "demand registration right" until the earlier of: (a) Rio's ownership falling below 8.0%; and (b) May 28, 2023.
- "Piggy-back registration rights" until the earlier of: (a) Rio's ownership falling below 8.0%; and (b) May 28, 2023.
- Rio also maintains the one-time right to extend the above dates until May 28, 2024.
Financing
On July 29, 2021, the Company completed a brokered private placement of flow-through common shares (the "FT Shares"). The Company issued a total of 2,670,000 FT Shares at a price of $3.00 per FT Share for aggregate gross proceeds of $8,010,000. In connection with the private placement, the agents were paid a cash fee equal to 6% of the aggregate gross proceeds from the sale of the FT Shares.
Management Changes
On January 13, 2022, the Company announced the appointment of Ken Engquist as Chief Operating Officer, effective January 15, 2022.
CASINO PROJECT UPDATE
Feasibility Study
On June 28, 2022, the Company released the results of its Feasibility Study (the "Study") on its wholly-owned Casino copper-gold-molybdenum deposit. The Study considered the Project being constructed as an open pit mine, with a concentrator processing 120,000 tonnes per day (t/d) to recover copper, gold, molybdenum and silver, as well as a 25,000 t/d oxide heap leach facility to recover gold, silver and copper.
The Study supersedes all previous studies and incorporates an updated mineral resource and mineral reserve with an effective date of April 29, 2022. The Study examines the development of the Casino Project, which comprises the processing of 1.43 billion tonnes of Mineral Reserve for both the mill and heap leach, with deposition of mill tailings and mine waste in the Tailings Management Facility ("TMF") consistent with the design concepts considered during the Best Available Tailings Technology ("BATT") Study as a base case development.
Unless otherwise indicated, all references to "$" are to Canadian dollars and references to "US$" are to United States dollars.
| WESTERN COPPER AND GOLD CORPORATION | MANAGEMENT DISCUSSION AND ANALYSIS |
| Three and nine months ended September 30, 2022 | |
| (Expressed in Canadian dollars, unless otherwise indicated) |
FINANCIAL RESULTS
The Study indicates that the potential economic returns from the Project justify its further development and securing of the required permits and licenses for operation.
The financial results of the Study were developed under commodity prices that were based on analyst projections of long-term metal prices and a CAN$:US$ exchange rate of 0.80 ("Base Case" prices).
The following table summarizes the financial results:
|
|
Base Case |
|
Copper (US$/lb) |
3.60 |
|
Gold (US$/oz) |
1,700 |
|
Molybdenum (US$/lb) |
14.00 |
|
Silver (US$/oz) |
22.00 |
|
Exchange Rate (C$:US$) |
0.80 |
|
|
|
|
NPV pre-tax (5% discount, $millions) |
5,768 |
|
NPV pre-tax (8% discount, $millions) |
3,473 |
|
IRR pre-tax (100% equity) |
21.2 |
|
|
|
|
NPV after-tax (5% discount, $millions) |
4,059 |
|
NPV after-tax (8% discount, $millions) |
2,334 |
|
IRR after-tax (100% equity) |
18.1 |
|
|
|
|
LOM pre-tax free cash flow ($millions) |
13,713 |
|
LOM after-tax free cash flow ($millions) |
10,019 |
|
|
|
|
Payback period (years) |
3.3 |
|
Net Smelter Return ($/t milled) |
29.08 |
|
|
|
|
Copper Cash Cost (net of by-product credits) ($/lb) |
(1.00) |
|
Copper Cash Cost (co-product basis) ($/lb) |
1.92 |
|
Gold Cash Cost (co-product basis) ($/oz) |
908.53 |
| WESTERN COPPER AND GOLD CORPORATION | MANAGEMENT DISCUSSION AND ANALYSIS |
| Three and nine months ended September 30, 2022 | |
| (Expressed in Canadian dollars, unless otherwise indicated) |
The financial results of the Study are significantly influenced by copper and gold prices, as is shown in the tables below:
|
Copper Price (US$/lb)* |
$3.00 |
$3.50 |
$3.60 |
$4.00 |
$4.50 |
$5.00 |
|
NPV pre-tax (8%) ($M) |
2,547 |
3,318 |
3,473 |
4,090 |
4,862 |
5,634 |
|
NPV after-tax (8%) ($M) |
1,655 |
2,221 |
2,334 |
2,786 |
3,351 |
3,917 |
|
IRR pre-tax |
18.2% |
20.7% |
21.2% |
23.0% |
25.3% |
27.4% |
|
IRR after-tax |
15.5% |
17.7% |
18.1% |
19.7% |
21.6% |
23.5% |
|
Payback (years) |
3.8 |
3.4 |
3.3 |
3.0 |
2.8 |
2.6 |
|
Gold Price (US$/oz)* |
$1,300 |
$1,500 |
$1,700 |
$1,850 |
$2,050 |
$2,200 |
|
NPV pre-tax (8%) ($M) |
2,412 |
2,943 |
3,473 |
3,871 |
4,402 |
4,800 |
|
NPV after-tax (8%) ($M) |
1,551 |
1,944 |
2,334 |
2,627 |
3,017 |
3,310 |
|
IRR pre-tax |
17.5% |
19.4% |
21.2% |
22.5% |
24.2% |
25.5% |
|
IRR after-tax |
14.9% |
16.5% |
18.1% |
19.2% |
20.7% |
21.8% |
|
Payback (years) |
4.0 |
3.6 |
3.3 |
3.1 |
2.9 |
2.8 |
*All other metal prices except those noted are the same as the Base Case.
Higher grade material is fed to the concentrator during the first four years of the concentrator operation. This factor, combined with the concurrent heap leach facility operation, results in higher yearly cash flows and other metrics during this period and contributes significantly to the Project's financial performance.
|
|
Years 1-4 |
Life of Mine |
|
Average Annual Pre-tax Cash Flow ($millions) |
1,033 |
662 |
|
Average Annual After-tax Cash Flow ($millions) |
951 |
517 |
|
Average Net Smelter Return (NSR) ($/t ore milled) |
43.15 |
29.08 |
|
% of Revenue - Copper |
48.5 |
46.8 |
|
% of Revenue - Gold |
38.8 |
36.0 |
|
% of Revenue - Silver |
2.1 |
2.4 |
|
% of Revenue - Molybdenum |
10.6 |
14.8 |
CAPITAL COSTS
Total initial capital investment in the Project is estimated to be $3.62 billion, which represents the total direct and indirect cost for the complete development of the Project, including associated infrastructure and power plant. The following table shows how the initial capital is distributed between the various components.
|
Cost Item |
Total ($M) |
|
Process Plant and Infrastructure |
|
|
Project Directs including freight |
2,116 |
|
Project Indirects |
431 |
|
Contingency |
369 |
|
Subtotal |
2,916 |
|
Mining |
|
|
Mine Equipment |
433 |
|
Mine Preproduction |
228 |
|
Subtotal |
661 |
|
Owner's Costs |
41 |
|
Total Initial Capital Costs |
3,618 |
|
Sustaining Capital |
751 |
|
Total Life of Mine Capital Costs |
4,369 |
| WESTERN COPPER AND GOLD CORPORATION | MANAGEMENT DISCUSSION AND ANALYSIS |
| Three and nine months ended September 30, 2022 | |
| (Expressed in Canadian dollars, unless otherwise indicated) |
OPERATING COSTS
Operating costs for the milling operation were calculated per tonne of material processed through the mill over the life of mine:
|
|
LOM |
|
|
($/tonne) |
|
Milling |
$6.42 |
|
General & Administrative |
$0.46 |
|
Total |
$6.88 |
Heap leach operating costs were calculated per tonne of material processed through the heap leach over the life of the heap leach.
|
|
LOM |
|
|
($/tonne) |
|
Heap Leach Operation |
$1.93 |
|
ADR/SART |
$4.80 |
|
Total |
$6.73 |
Mining costs were calculated to average $2.30 per tonne of material moved and $3.65 per tonne of mineralized material.
|
|
($/tonne) |
|
Cost per tonne material (material moved) |
$2.30 |
|
Cost per tonne mill feed (mill + heap leach material) |
$3.65 |
|
Cost per tonne mill feed |
$4.28 |
The combined mining and milling costs are $11.16 per tonne material milled for the life of mine, which compares favorably to the life-of-mine net smelter return of $29.08 per tonne at Base Case metal prices.
| WESTERN COPPER AND GOLD CORPORATION | MANAGEMENT DISCUSSION AND ANALYSIS |
| Three and nine months ended September 30, 2022 | |
| (Expressed in Canadian dollars, unless otherwise indicated) |
DEVELOPMENT PLAN
The Study evaluates the development of the Casino deposit as a conventional open pit mine, concentrator complex, and heap leach operation. The initial production will focus on the deposit's oxide cap as a heap leach operation to recover gold and silver in doré form. The main sulphide deposit will be processed using a conventional concentrator to produce copper-gold-silver and molybdenum concentrates. Key metrics of the processing plant are shown below:
|
|
Years 1-4 |
Life of Mine |
|
Strip ratio |
0.26 |
0.43 |
|
Nominal Throughput |
|
|
|
Mill (t/d) |
120,000 |
120,000 |
|
Heap (t/d) |
25,000 |
25,000 |
|
Average Annual Metal Production |
|
|
|
Copper (Mlbs) |
241 |
163 |
|
Gold (kozs) |
333 |
211 |
|
Silver (kozs) |
1,596 |
1,277 |
|
Molybdenum (Mlbs) |
15.5 |
15.1 |
|
Average Annual Mill Feed Grade |
|
|
|
Copper (%) |
0.300 |
0.189 |
|
Gold (g/t) |
0.352 |
0.217 |
|
Silver (g/t) |
2.054 |
1.659 |
|
Molybdenum (%) |
0.025 |
0.021 |
|
Average Annual Heap Leach Grade* |
|
|
|
Gold (g/t) |
0.366 |
0.265 |
|
Silver (g/t) |
2.356 |
1.95 |
|
Copper (%t) |
0.042 |
0.036 |
|
Recovery (Mill) |
|
|
|
Copper (%) |
83.9 |
86.5 |
|
Gold (%) |
67.7 |
67.1 |
|
Silver (%) |
55.6 |
53.1 |
|
Molybdenum (%) |
64.1 |
71.2 |
|
Recovery (Heap) |
|
|
|
Gold (%) |
80.0 |
80.0 |
|
Copper (%) |
18.0 |
18.0 |
|
Silver (%) |
26.0 |
26.0 |
|
Annual Concentrate Production |
|
|
|
Cu (dry kt) |
390 |
264 |
|
Mo (dry kt) |
13 |
12 |
|
Average Concentrate Grade |
|
|
|
Copper Concentrate |
|
|
|
Cu (%) |
28.0 |
28.0 |
|
Au (g/t) |
26.5 |
24.9 |
|
Ag (g/t) |
127.2 |
150.7 |
|
Molybdenum Concentrate |
|
|
|
Mo (%) |
56.0 |
56.0 |
*Heap leach first four years grades taken from the start of the heap leach.
| WESTERN COPPER AND GOLD CORPORATION | MANAGEMENT DISCUSSION AND ANALYSIS |
| Three and nine months ended September 30, 2022 | |
| (Expressed in Canadian dollars, unless otherwise indicated) |
MINERAL RESERVES
The Mineral Reserve estimate is based on an updated open pit mine plan and mine production schedule using commodity prices of US$3.25 per pound copper, US$1,550 per ounce gold, US$12.00 per pound molybdenum and US$22.00 per ounce silver.
All of the mineralization comprised in the Mineral Reserve estimate with respect to the Casino Project is contained on mineral titles controlled by Western Copper and Gold. The following table presents the Mineral Reserve that is the basis for this Study.
|
|
Tonnes |
NSR |
Cu |
Au |
Mo |
Ag |
CuEq |
Cu |
Au |
Mo |
Ag |
|
Mill Ore Reserve: |
(Mt) |
($/t) |
(%) |
(g/t) |
(%) |
(g/t) |
(%) |
(Mlbs) |
(Moz) |
(Mlbs) |
(Moz) |
|
Proven Mineral Reserve |
140.1 |
38.50 |
0.31 |
0.39 |
0.024 |
2.1 |
0.67 |
944 |
1.8 |
74.9 |
9.4 |
|
Probable Mineral Reserve |
1,076.9 |
23.68 |
0.17 |
0.19 |
0.021 |
1.6 |
0.36 |
4,135 |
6.7 |
497.1 |
55.5 |
|
Proven/Probable Reserve |
1,217.1 |
25.38 |
0.19 |
0.22 |
0.021 |
1.7 |
0.40 |
5,079 |
8.5 |
571.9 |
64.9 |
|
|
Tonnes |
NSR |
Au |
Cu |
Mo |
Ag |
AuEq |
Au |
Cu |
Mo |
Ag |
|
Heap Leach Reserve: |
(Mt) |
($/t) |
(g/t) |
(%) |
(%) |
(g/t) |
(g/t) |
(Moz) |
(Mlbs) |
(Mlbs) |
(Moz) |
|
Proven Mineral Reserve |
42.9 |
22.52 |
0.45 |
0.055 |
N/A |
2.7 |
0.47 |
0.62 |
51.8 |
N/A |
3.7 |
|
Probable Mineral Reserve |
166.8 |
11.14 |
0.22 |
0.031 |
N/A |
1.8 |
0.23 |
1.17 |
113.5 |
N/A |
9.4 |
|
Proven/Probable Reserve |
209.6 |
13.47 |
0.26 |
0.036 |
N/A |
1.9 |
0.28 |
1.78 |
165.3 |
N/A |
13.1 |
Notes:
1. The Mineral Reserve estimate has an effective date of June 13, 2022 and was prepared using the CIM Definition Standards (10 May 2014).
2. Columns may not sum exactly due to rounding.
3. Mineral Reserves are based on commodity prices of US$3.25/lb Cu, US$1550/oz Au, US$12.00/lb Mo, and US$22.00/oz Ag.
4. Mineral Reserves amenable to milling are based on NSR cutoffs that vary by time period to balance mine and plant production capacities. They range from a low of $6.11/t to a high of $25.00/t.
5. NSR value for supergene (SOX and SUS) mill material is NSR (C$/t) = $73.63 x recoverable copper (%) + $40.41 x gold (g/t) + $142.11 x moly (%) + 0.464 x silver (g/t), based on recoveries of 69% gold, 52.3% molybdenum and 60% silver. Recoverable copper = 0.94 x (total copper - soluble copper).
6. NSR value for hypogene (HYP) mill material is NSR (C$/t) = $67.88 x copper (%) + $38.66 x gold (g/t) + $213.78 x moly (%) + $0.386 x silver (g/t), based on recoveries of 92.2% copper, 66% gold, 78.6% molybdenum and 50% silver.
7. Mineral Reserves amenable to heap leaching are based on an NSR cutoff of $6.61/t.
8. NSR value for leach material is NSR (C$/t) = $14.05 x copper (%) + $47.44 x gold (g/t) + $0.210 x silver (g/t), based on recoveries of 18% copper, 80% gold and 26% silver.
9. AuEq and CuEq values are based on prices of US$ 3.25/lb Cu, US$ 1550/oz Au, US$ 12.00/lb Mo, and US$ 22.00/oz Ag, and account for all metal recoveries and smelting/refining charges.
10. The NSR calculations also account for smelter/refinery treatment charges and payables.
On August 9, 2022, the Company filed a technical report titled "Casino Project, Form NI 43-101F1 Technical Report Feasibility, Yukon, Canada" with an effective date of June 13, 2022 (the "Report"). The Report summarizes the results of the Feasibility Study on the Casino copper-gold project, which results were first reported by the Company in a news release dated June 28, 2022.
2021 Exploration and Drilling Program
On March 24, 2022, the Company announced assay results from its 2021 diamond drilling program. The program, developed with input from Rio Tinto, comprised a total of 6,074.97 metres in 22 holes.
Drilling in the deposit core area confirmed its importance to the overall resource at Casino as shown by long intercepts of grades higher than the average resource grades in the Leached Cap ("CAP"), Supergene ("SUP"), and Hypogene ("HYP") zones. Hole DDH21-13 returned a 300.23 m (length of hole) interval grading 0.70% CuEq1, including a 21.00 m sub-interval grading 1.50% CuEq1 within the HYP zone. Hole DDH21-20 returned a 248.41 m (length of hole) interval grading 0.58% CuEq1, including a 21.00 m sub-interval grading 1.10% CuEq1 in the SUP zone.
| WESTERN COPPER AND GOLD CORPORATION | MANAGEMENT DISCUSSION AND ANALYSIS |
| Three and nine months ended September 30, 2022 | |
| (Expressed in Canadian dollars, unless otherwise indicated) |
Drilling northeast of the deposit core returned values at or exceeding resource-grade levels. Hole DDH21-17 returned a 300.23 m (length of hole) interval grading 0.57% CuEq1, including a 15.00 m sub-interval grading 1.09% CuEq1 in SUP mineralization.
Review of lithological and mineralogical settings for holes DDH21-07, 21-08 and 21-09 indicate these holes were collared along or proximal to the NW - SE trending Casino Fault. A high-grade intercept grading 2.53% CuEq1 across 65.80 m in DDH21-09 (see News Release dated November 29, 2022) is hosted by brecciated rock that consistently hosts higher-grade mineralization in the Casino Deposit. Although grades from most exploration holes drilled outside of the current deposit area were lower than average resource grades, hole DDH21-14, collared east of the deposit, returned a 54.35 m interval grading 0.78% CuEq1, with the majority of contained value derived from anomalous gold and silver content. (Refer to News Release dated March 24, 2022, for more information).
1CuEq Metal Prices: US$2.75/lb copper, US$1,500/oz gold, US$11/lb molybdenum, US$18/oz silver with no adjustment for metallurgical recovery.
Permitting
On October 31, 2022, Casino was informed by the Executive Committee of the Yukon Environmental and Socio-Economic Assessment Board (“YESAB”) that it is necessary to revise the Environmental and Socio-Economic Statement Guidelines (the “Guidelines”), which were issued June 20, 2016 following the Casino Copper-Gold Project’s (the “Project”) referral to a Panel of the Board (the “Panel Review”).
The need to revise the Guidelines is the result of discussions between the Company and YESAB on how to address changes in assessment methods, environmental best practices, and enhancements to the Project that have occurred since the issuance of the original Guidelines in 2016. The revision process will commence immediately and is not expected to have a material impact on overall permitting timelines.
On December 16, 2021, the Company submitted to the YESAB Executive Committee an updated schedule for submission of an Environmental and Socio-economic Effects Statement (“ESE Statement”) on its Casino Project. In the schedule, the Company indicates it expects to submit the ESE Statement in the latter part of 2023.
The ESE Statement submission is an important next step in the Panel Review process. Since 2016, when the Casino project was referred to Panel Review by the YESAB's Executive Committee, Casino has continued to advance the Project by engaging with potentially affected First Nations, completing a variety of Traditional Knowledge and environmental studies, conducting a number of drill campaigns, and finalizing a PEA on the Project. On February 24, 2022, the Company announced leading Canadian environmental consultancy firm, Hemmera, will lead preparation of the ESE Statement for the Casino Project.
Infrastructure
In 2017, the Federal and Yukon Governments announced commitments to fund the upgrade for a portion of the existing access road to standards required for the Casino Project, as well as to fund a section of the additional 126 km of new access road to the Casino site.
The first project agreement on the Freegold Road was reached in April 2019 on the initial segment of the Freegold Road - the Carmacks Bypass. On February 24, 2022, the Company announced the Yukon Government had commenced construction of the Carmacks Bypass Project, required for Casino's construction and operation, following award of the contract in November 2021. The Carmacks Bypass will allow industrial vehicles to circumvent the Village of Carmacks; reducing heavy traffic and increasing community safety, while improving access to the Casino Project site located approximately 200 km from the community.
| WESTERN COPPER AND GOLD CORPORATION | MANAGEMENT DISCUSSION AND ANALYSIS |
| Three and nine months ended September 30, 2022 | |
| (Expressed in Canadian dollars, unless otherwise indicated) |
Exploration and evaluation expenditures
Capitalized expenditures for the periods presented were as follows:
| For the nine months ended September 30, | 2022 | 2021 | ||||
| $ | $ | |||||
| Claims maintenance | 26,038 | 22,270 | ||||
| Engineering | 3,344,636 | 1,765,852 | ||||
| Exploration and camp support | 8,173,126 | 6,908,699 | ||||
| Permitting | 5,316,223 | 532,995 | ||||
| Salary and wages | 837,612 | 139,605 | ||||
| Share-based payments | 739,373 | 105,535 | ||||
| TOTAL | 18,437,008 | 9,474,956 |
During the nine months ended September 30, 2022, the Company's activity focused on working toward the completion of its feasibility study. Concurrently the Company began initial permitting and environmental activities associated with its planned submission of the ESE Statement. The Company also executed a drilling and exploration program.
During the nine months ended September, 2021, the Company was focused on the completion of its PEA, and its drilling and exploration program.
Royalty payments
The Casino Property is subject to the following royalty:
• 2.75% NSR on the claims comprising the Casino project in favour of Osisko Gold Royalties Ltd. ("Osisko Gold") pursuant to the Royalty Assignment and Assumption Agreement dated July 31, 2017 when 8248567 Canada assigned to Osisko Gold all of its rights, title and interest in the 2.75% NSR.
SELECTED QUARTERLY FINANCIAL INFORMATION
The following quarterly information has been extracted from the Company's unaudited condensed interim consolidated financial statements.
| As at and for the quarter ended | 30-Sep-22 | 30-Jun-22 | 31-Mar-22 | 31-Dec-21 | ||||||||
| $ | $ | $ | $ | |||||||||
| Loss and comprehensive loss | 706,626 | 1,276,212 | 1,617,087 | 525,833 | ||||||||
| Loss per share - basic and diluted | 0.00 | $ | 0.01 | 0.01 | 0.00 | |||||||
| Cash and short-term investments | 29,222,609 | 38,634,795 | 43,259,683 | 46,761,849 | ||||||||
| Exploration and evaluation assets | 84,785,069 | 74,338,172 | 68,862,927 | 66,348,061 | ||||||||
| Total assets | 116,205,020 | 114,671,589 | 113,980,260 | 115,487,886 |
| As at and for the quarter ended | 30-Sep-21 | 30-Jun-21 | 31-Mar-21 | 31-Dec-20 | ||||||||
| $ | $ | $ | $ | |||||||||
| Loss and comprehensive loss | 909,863 | 1,176,295 | 1,096,896 | 407,894 | ||||||||
| Loss per share - basic and diluted | 0.01 | 0.01 | 0.01 | 0.00 | ||||||||
| Cash and short-term investments | 51,790,157 | 49,710,381 | 26,989,662 | 28,647,190 | ||||||||
| Exploration and evaluation assets | 63,222,969 | 56,785,349 | 54,467,749 | 53,748,013 | ||||||||
| Total assets | 116,499,708 | 108,157,055 | 82,667,429 | 83,810,068 |
| WESTERN COPPER AND GOLD CORPORATION | MANAGEMENT DISCUSSION AND ANALYSIS |
| Three and nine months ended September 30, 2022 | |
| (Expressed in Canadian dollars, unless otherwise indicated) |
Items that resulted in significant differences in the quarterly figures presented above are explained in the following narrative.
Loss and comprehensive loss
The scale and nature of the Company's corporate and administrative activity have remained relatively consistent over the periods presented above. Quarterly fluctuations in loss and comprehensive loss figures have mainly been driven by gains and losses related to marketable securities, flow-through premium recovery and variances in stock-based compensation expense.
During the three months ended September 30, 2022, share-based payments totaled $309,770 due to timing, valuation, and recognition differences relating to the underlying stock option grants as well the recognition and amortization related to RSUs which was partially offset by the $252,194 related to flow-through premium recovery.
During the three months ended June 30, 2022, share-based payments totaled $380,869 due to timing, valuation, and recognition differences relating to the underlying stock option grants as well the recognition and amortization related to RSUs. The Company also recognized an unrealized loss of $462,600 on marketable securities which was partially offset the flow-through premium recovery.
During the three months ended March 31, 2022, share-based payments totaled $569,736 due to timing, valuation, and recognition differences relating to the underlying stock option grants as well the recognition and amortization related to RSU's and DSUs. The Company also recognized higher costs associated with wages and benefits as it increased its head count and provided raises to certain employees.
During the three months ended June 30, 2021, the Company incurred higher filing and legal fees associated with its stock option plan renewal and restricted share unit and deferred share unit plans. Wages and benefits also increased as the Company recognized an expense for a $300,000 payment related to the retirement of the Company's former Executive Chairman.
The Company completed a significant financing during the three months ended December 31, 2020, and completed subsequent financings during the three months ended June 30, 2021 and September 30, 2021, which resulted in an overall increase in activity during all quarters of 2021 as the Company executed on its exploration and development strategy.
Exploration and evaluation assets
Expenditures incurred by the Company relating to its mineral properties are capitalized. As a result, the carrying value of exploration and evaluation assets generally increases from period to period.
During the three months ended September 30, 2022, exploration and evaluation assets increased as the Company incurred $8,173,126 in expenditures related to its drilling and exploration program. The Company also incurred on-going expenditures associated with on-going work on its ESE statement and completing its Feasibility Study which totaled $5,316,223 and $3,344,636 respectively.
During the three months ended June 30, 2022, exploration and evaluation assets increased as the Company incurred $2,022,528 in expenditures related to its drilling and exploration program. The Company also incurred on-going expenditures associated with on-going work on its ESE statement and Feasibility Study which totaled $1,681,215 and $1,249,707, respectively.
During the three months ended December 31, 2021, and the three months ended September 30, 2021, exploration and evaluation assets increased as the Company completed field work related to its 2021 exploration and drilling program as well as incurred engineering expenditures related to work on its Feasibility Study.
| WESTERN COPPER AND GOLD CORPORATION | MANAGEMENT DISCUSSION AND ANALYSIS |
| Three and nine months ended September 30, 2022 | |
| (Expressed in Canadian dollars, unless otherwise indicated) |
Cash, cash equivalents, and short-term investments
Cash is used to fund ongoing operations. Unless there is a significant financing transaction, total cash, cash equivalents and short-term investments are expected to decrease from one period to the next.
During the three months ended September 30, 2021, the Company completed a brokered private placement of flow through common shares for aggregate proceeds of $8.0M.
During the three months ended June 30, 2021, the Company received $25.6M as part of a strategic investment from Rio Tinto Canada.
During the three months ended December 31, 2020, the Company raised $28.7M through an equity offering which resulted in a significant increase to cash and cash equivalents.
RESULTS OF OPERATIONS
| Three Months Ended September 30, |
Nine Months Ended September 30, |
|||||||||||
| 2022 | 2021 | 2022 | 2021 | |||||||||
| $ | $ | $ | $ | |||||||||
| Depreciation | 38,723 | 38,723 | 116,169 | 64,538 | ||||||||
| Filing and regulatory fees | 5,857 | 14,701 | 262,748 | 266,684 | ||||||||
| Office and administration | 174,986 | 93,584 | 469,096 | 328,246 | ||||||||
| Professional fees | 67,392 | 136,659 | 220,380 | 320,250 | ||||||||
| Share-based payments | 309,770 | 600,187 | 1,260,375 | 1,006,604 | ||||||||
| Shareholder communication and travel | 205,366 | 226,213 | 618,739 | 587,255 | ||||||||
| Wages and benefits | 329,136 | 320,172 | 1,207,423 | 1,174,404 | ||||||||
| CORPORATE EXPENSES | 1,131,230 | 1,430,239 | 4,154,930 | 3,747,981 | ||||||||
| Foreign exchange loss | 7,637 | 6,589 | 10,246 | 2,147 | ||||||||
| Interest income | (219,227 | ) | (68,594 | ) | (403,024 | ) | (153,095 | ) | ||||
| Flow-through premium recovery | (252,194 | ) | (698,491 | ) | (759,525 | ) | (699,899 | ) | ||||
| Unrealized loss on marketable securities | 39,180 | 240,120 | 604,300 | 285,920 | ||||||||
| LOSS AND COMPREHENSIVE LOSS | 706,626 | 909,863 | 3,606,927 | 3,183,054 | ||||||||
| WESTERN COPPER AND GOLD CORPORATION | MANAGEMENT DISCUSSION AND ANALYSIS |
| Three and nine months ended September 30, 2022 | |
| (Expressed in Canadian dollars, unless otherwise indicated) |
THREE MONTHS ENDED SEPTEMBER 30, 2022
Western incurred a loss of $706,626 ($nil per common share) for the three months ended September 30, 2022, compared to a loss of $909,863 ($0.01 per common share) over the same period in 2021. The scale and nature of the Company's administrative activity have remained generally consistent throughout these periods, but a few items led to differences in the comparative figures, as follows:
Office and administration increased by $81,402 during the three months ended September 30, 2022, compared to the same period in 2021 due to an increase in corporate development activity.
Professional fees decreased by $69,267 during the three months ended September 30, 2022, compared to the same period in 2021 due to a decrease in legal activity.
Share-based payments decreased by $290,417 during the three months ended September 30, 2022, compared to the same period in 2021 due to timing, valuation, and recognition differences relating to the underlying stock option grants, restricted share unit grants and deferred share unit grants.
During the three months ended September 30, 2022, the Company recorded a flow-through premium recovery of $252,194 compared to a flow-through premium recovery of $698,491 during the three months ended September 30, 2021.
The Company recorded an unrealized loss on marketable securities of $39,180 during the three months ended September 30, 2022, compared to an unrealized loss of $240,120 during the same period in 2021 as a result of changes in the share price of the marketable securities held by Western at each period end date.
NINE MONTHS ENDED SEPTEMBER 30, 2022
Western incurred a loss of $3,606,927 ($0.02 per common share) for the nine months ended September 30, 2022, compared to a loss of $3,183,054 ($0.02 per common share) over the same period in 2021. The fluctuations in the Company's corporate costs during the nine months ended September 30, 2022 relate to variances in office and administration, professional fees, share-based payments, flow-through premium recovery and unrealized gains and losses on marketable securities. The reasons for these fluctuations are explained in the section above that discusses changes for the three months ended September 30, 2022.
| WESTERN COPPER AND GOLD CORPORATION | MANAGEMENT DISCUSSION AND ANALYSIS |
| Three and nine months ended September 30, 2022 | |
| (Expressed in Canadian dollars, unless otherwise indicated) |
LIQUIDITY AND CAPITAL RESOURCES
| For the nine months ended September 30, | 2022 | 2021 | ||||
| $ | $ | |||||
| CASH PROVIDED BY (USED IN) | ||||||
| Operating activities | (2,314,254 | ) | (2,905,574 | ) | ||
| Financing activities | (14,586 | ) | 33,354,424 | |||
| Investing activities | (23,361,205 | ) | (23,349,137 | ) | ||
| CHANGE IN CASH AND EQUIVALENTS | (25,690,045 | ) | 7,099,713 | |||
| Cash and cash equivalents - beginning | 30,688,210 | 28,647,190 | ||||
| CASH AND CASH EQUIVALENTS | 4,998,165 | 35,746,903 |
Cash and cash equivalents totaled $4,998,165 as at September 30, 2022 (December 31, 2021 - $30,668,210). Cash and short-term investments totaled $29,222,609 as at September 30, 2022 (December 31, 2021 – $46,761,849). Western’s net working capital as at September 30, 2022 totaled $25,334,206 (December 31, 2021 - $45,567,413).
Western is an exploration stage company. As at the date of this report, the Company has not earned any production revenue. It depends heavily on its working capital balance and its ability to raise funds through capital markets to finance its operations. Although the Company expects that the current working capital balance will be sufficient to fund anticipated operating activities in the next twelve months, it will require significant additional funding to complete the development and construction of the Casino mine.
The financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. The Company's ability to continue as a going concern is substantially dependent on its ability to raise funds necessary to acquire assets, perform exploration and development activities, and conduct its corporate affairs primarily through the issuance of its common shares. There is a risk that in the future the Company may not be able to raise the capital required to fund operations.
Operating activities
The significant components of operating activities are discussed in the Results of Operations section above.
Financing activities
During the nine months ended September 30, 2022, the Company received $133,165 from the exercise of stock options and expended $147,751 on lease payments.
During the nine months ended September 30, 2021, the Company received $1,348,500 from the exercise of stock options and expended $67,881 on lease payments.
During the nine months ended September 30, 2021, the Company also completed private placements totaling gross proceeds of $33,634,423.
Investing activities
Investing activities include both mineral property expenditures, and purchases and redemptions of short-term investments. Investments with an original maturity of greater than three months are considered short-term investments for accounting purposes. Purchases and redemptions of short-term investments are mainly driven by cash requirements and available interest rates.
| WESTERN COPPER AND GOLD CORPORATION | MANAGEMENT DISCUSSION AND ANALYSIS |
| Three and nine months ended September 30, 2022 | |
| (Expressed in Canadian dollars, unless otherwise indicated) |
During the nine months ended September 30, 2022, the Company purchased $8,000,000 in short term investments, spent $15,094,688 on exploration and evaluation assets and spent $266,517 on leasehold improvements. During the nine months ended September 30, 2021, the Company purchased $16,000,000 in short term investments and spent $7,349,137 on exploration and evaluation expenditures. A summary of activities relating to the Casino Project is available under the Casino Project Update section at the beginning of this report.
OUTSTANDING SHARE DATA
As at the date of this report, the Company has 151,597,489 common shares outstanding. The Company also has 8,124,334 stock options outstanding with exercise prices ranging from $0.75 to $2.22 and 1,500,000 warrants with an exercise price of $0.85. In addition, there are 519,124 restricted share units and 305,400 deferred share units to be settled by way of common shares issued from treasury.
CONTRACTUAL OBLIGATIONS
The Company leases office space in Vancouver, British Columbia and Whitehorse, Yukon. The future minimum lease payments by calendar year are approximately as follows:
|
Year |
$ |
|
2022 |
61,018 |
|
2023 |
245,673 |
|
2024 |
180,415 |
|
2025 |
20,400 |
|
|
|
|
TOTAL |
507,506 |
The Company has no off-balance sheet arrangements and no long-term obligations other than those described throughout this document, or in the description of exploration and evaluation assets contained in the notes to the consolidated financial statements.
KEY MANAGEMENT COMPENSATION
The Company's related parties also include its directors and officers, who are the key management of the Company. The remuneration of directors and officers during the periods presented was follows:
| Three Months Ended September 30, |
Nine Months Ended September 30, |
|||||||||||
| 2022 | 2021 | 2022 | 2021 | |||||||||
| $ | $ | $ | $ | |||||||||
| Salaries and director fees | 509,881 | 228,294 | 1,507,620 | 963,760 | ||||||||
| Share-based payments | 521,641 | 550,590 | 1,812,353 | 931,520 | ||||||||
| KEY MANAGEMENT COMPENSATION | 1,031,522 | 778,884 | 3,319,973 | 1,895,280 | ||||||||
Share-based payments represent the fair value of stock options, RSUs and DSUs previously granted to directors and officers that was recognized during the years presented above.
| WESTERN COPPER AND GOLD CORPORATION | MANAGEMENT DISCUSSION AND ANALYSIS |
| Three and nine months ended September 30, 2022 | |
| (Expressed in Canadian dollars, unless otherwise indicated) |
SIGNIFICANT ACCOUNTING ESTIMATES
Use of estimates
The preparation of financial statements in conformity with IFRS requires to exercise judgement in the process of applying its accounting policies and to make estimates that affect the reported amounts of assets and liabilities and disclosures of contingent assets and contingent liabilities at the date of the financial statements and the reported amounts of income and expenses during the reporting period. Actual results could differ from those estimates. Differences may be material.
Exploration and evaluation assets
The carrying amount of the Company's exploration and evaluation assets represents costs net of write-downs and recoveries to date and does not necessarily reflect present or future values. Recovery of capitalized costs is dependent on successful development of economic mining operations or the disposition of the related mineral properties.
The Company's assets are reviewed for indication of impairment at each balance sheet date. If indication of impairment exists, the assets' recoverable amount is estimated. If the assets' carrying amount exceeds the recoverable amount, then an impairment loss is recognized in the statement of loss. The Company's review did not identify any indication of impairment.
Environmental site reclamation
As at September, 2022, the Company had not recognized an amount for environmental site reclamation, however, minimum standards for site reclamation have been established by various governmental agencies that affect certain operations of the Company. The determination of reclamation costs requires assumptions with respect to future expected costs and legislation in effect at that time. Changes in these assumptions could have a material effect on the amount required to be recognized as an environmental reclamation provision.
DISCLOSURE CONTROLS AND PROCEDURES
Management is responsible for designing, establishing, and maintaining a system of disclosure controls and procedures. Disclosure controls and procedures are designed to provide reasonable assurance that material information relating to the Company is made known to management, particularly during the period in which the annual filings are being prepared and that information required to be disclosed by the Company in its annual filings, interim filings or other reports filed or submitted by it under securities legislation is recorded, processed, summarized and reported within the time periods specified in securities legislation.
The Chief Executive Officer and the Chief Financial Officer evaluated the effectiveness of the Company's disclosure controls and procedures as of December 31, 2021. As a result of the material weakness identified during the assessment of internal control over financial reporting, as described below, management also concluded that its disclosure controls and procedures were not effective as at December 31, 2021.
MANAGEMENT'S REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING
Management is responsible for designing, establishing, and maintaining a system of internal control over financial reporting ("ICFR") to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with accounting principles generally accepted in Canada.
| WESTERN COPPER AND GOLD CORPORATION | MANAGEMENT DISCUSSION AND ANALYSIS |
| Three and nine months ended September 30, 2022 | |
| (Expressed in Canadian dollars, unless otherwise indicated) |
In making this assessment, the Company's management used the criteria established by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in its 2013 Internal Control-Integrated Framework.
The Chief Executive Officer and the Chief Financial Officer assessed the design and the operating effectiveness of the Company's internal control over financial reporting as of December 31, 2021.
Based on that assessment, management concluded that, as at December 31, 2021, the Company's internal control over financial reporting was not effective due to the existence of a material weakness. A material weakness existed in the design of internal control over financial reporting caused by a lack of adequate segregation of duties in the financial close process. The Chief Financial Officer is responsible for preparing, authorizing, and reviewing information that is key to the preparation of financial reports. He is also responsible for preparing and reviewing the resulting financial reports. This weakness has the potential to result in material misstatements in the Company's financial statements, and should also be considered a material weakness in its disclosure controls and procedures.
Management has concluded, and the audit committee has agreed that taking into account the present stage of Western's development, the Company does not have sufficient size and scale to warrant the hiring of additional staff to correct the weakness at this time.
FINANCIAL INSTRUMENT RISK
The Board of Directors has overall responsibility for the establishment and oversight of the Company's risk management framework. The Company has exposure to liquidity, credit, and market risk from the use of financial instruments. Financial instruments consist of cash and cash equivalents, short-term investments, marketable securities, certain other assets, and accounts payable and accrued liabilities.
Liquidity risk
Liquidity risk is the risk that the Company will be unable to meet its financial obligations as they come due. The Company uses cash forecasts to ensure that there is sufficient cash on hand to meet short-term business requirements. Cash is invested in highly liquid investments which are available to discharge obligations when they come due. The Company does not maintain a line of credit.
Credit risk
Financial instruments that potentially subject the Company to credit risk consist primarily of cash and cash equivalents. These financial instruments are at risk to the extent that the institutions issuing or holding them cannot redeem amounts when they are due or requested. To limit its credit risk, the Company uses a restrictive investment policy. It deposits cash and cash equivalents in Canadian chartered banks and purchases short-term investments that are guaranteed by Canadian governments or Canadian chartered banks. The carrying amount of financial assets recorded in the financial statements, net of any allowance for losses, represents Western's maximum exposure to credit risk.
Market risk
The Company is exposed to market risk because of the fluctuating values of its publicly traded marketable securities. The Company has no control over these fluctuations and does not hedge its investments. Marketable securities are adjusted to fair value at each balance sheet date.
| WESTERN COPPER AND GOLD CORPORATION | MANAGEMENT DISCUSSION AND ANALYSIS |
| Three and nine months ended September 30, 2022 | |
| (Expressed in Canadian dollars, unless otherwise indicated) |
FORWARD-LOOKING STATEMENTS
This management discussion and analysis ("MD&A") and certain information incorporated by reference in this MD&A contain certain forward-looking statements concerning Western's strategy, projects, plans or future financial or operating performance. All statements that are not statements of historical fact are "forward-looking statements" as that term is defined in the United States Private Securities Litigation Reform Act of 1995 and "forward looking information" as that term is defined in National Instrument 51-102 ("NI 51-102") of the Canadian Securities Administrators (collectively, "forward-looking statements"). Certain forward looking information may also be considered future-oriented financial information ("FOFI") as that term is defined in NI 51-102. The purpose of disclosing FOFI is to provide a general overview of management's expectations regarding the anticipated results of operations and capital expenditures and readers are cautioned that FOFI may not be appropriate for other purposes. Forward-looking statements are frequently, but not always, identified by words such as "expects", "anticipates", "believes", "intends", "estimates", "potential", "possible", "targets", "plans", "goals" and similar expressions, or statements that events, conditions or results "will", "may", "could", "should" or "would" occur or be achieved. Such forward-looking statements are set forth, among other places, under the heading "Casino Project Update" and elsewhere in the MD&A and may include, but are not limited to, statements regarding perceived merit of properties; mineral reserve and resource estimates; capital expenditures; feasibility study results (including projected economic returns, operating costs and capital costs in connection with the Casino Project); cash flow forecasts; exploration results at the Company's property; budgets; work programs; permitting or other timelines; the Company's engagement with local communities to manage the COVID-19 pandemic; estimated timing for construction of, and production from, any new projects; strategic plans, including without limitation Western's strategy and plans in respect of environmental and social governance issues; market price of precious and base metals; expectations regarding future price assumptions, financial performance and other outlook or guidance or other statements that are not statements of historical fact.
Forward-looking statements are necessarily based upon a number of estimates and assumptions, including material estimates and assumptions related to the factors set forth below that, while considered reasonable by the Company as at the date of this MD&A in light of management's experience and perception of current conditions and expected developments, are inherently subject to significant business, economic and competitive uncertainties and contingencies. The material assumptions used to develop the forward-looking statements herein include assumptions that (1) prevailing and projected market prices and foreign exchange rates, exploitation and exploration estimates will not change in a materially adverse manner, (2) requisite capital and financing will be available on acceptable terms, (3) equipment and personnel required for permitting, construction and operations will be available on a continual basis, (4) no unforeseen delays, unexpected geological or other effects, equipment failures, or permitting or other delays, and (5) general economic, market or business conditions will not change in a materially adverse manner and as more specifically disclosed throughout this document, and in the AIF and Form 40-F.
Forward-looking statements are statements about the future and are inherently uncertain, and actual results, performance or achievements of Western and its subsidiaries may differ materially from any future results, performance or achievements expressed or implied by the forward-looking statements due to a variety of risks, uncertainties and other known or unknown factors. Such risks and other factors include, among others, risks involved in fluctuations in gold, copper and other commodity prices and currency exchange rates; the speculative nature of mineral exploration and development; uncertainties relating to interpretation of drill results and the geology, continuity and grade of mineral deposits; uncertainty of estimates of capital and operating costs, recovery rates, production estimates and estimated economic return; changes in project parameters as plans continue to be refined; risks associated with projects in the early stages of evaluation and for which additional engineering and other analysis is required; the benefits expected from recent transactions being realized; failure to comply with environmental and health and safety laws and regulations; risks related to cooperation of government agencies and First Nations in the exploration and development of the property and the issuance of required permits; risks related to the need to obtain additional financing to develop the property and uncertainty as to the availability and terms of future financing; the possibility of delay in exploration or development programs or in construction projects and uncertainty of meeting anticipated program milestones; increased costs, delays, suspensions and technical challenges associated with the construction of capital projects; operating or technical difficulties in connection with mining or development activities, including geotechnical challenges and disruptions in the maintenance or provision of required infrastructure and information technology systems; uncertainty as to timely availability of permits and other approvals; non-renewal of key licenses by governmental authorities; the impact of global liquidity and credit availability on the timing of cash flows and the values of assets and liabilities based on projected future cash flows; adverse changes in the Company's credit ratings; the impact of inflation; changes in national and local government legislation, taxation, controls or regulations and/or changes in the administration of laws, policies and practices, expropriation or nationalization of property and political or economic developments in Canada, the United States and other jurisdictions in which the Company or its affiliates do or may carry on business in the future; risks associated with illegal and artisanal mining; risks associated with new diseases, epidemics and pandemics, including the effects and potential effects of the global COVID-19 pandemic; the possibility that future exploration results will not be consistent with the Company's expectations; risks that exploration data may be incomplete and considerable additional work may be required to complete further evaluation, including but not limited to drilling, engineering and socioeconomic studies and investment; risk of loss due to acts of war, terrorism, sabotage and civil disturbances; litigation and legal and administrative proceedings; contests over title to properties, particularly title to undeveloped properties, or over access to water, power and other required infrastructure; business opportunities that may be presented to, or pursued by, the Company; the Company's ability to successfully integrate acquisitions or complete divestitures; employee relations including loss of key employees; increased costs and physical risks, including extreme weather events and resource shortages, related to climate change; and other risks and uncertainties disclosed in Western's AIF and Form 40-F, and other information released by Western and filed with the applicable regulatory agencies. Western also cautions that its 2020 guidance, projections, plans and strategy may be impacted by the unprecedented business and social disruption caused by the spread of COVID-19.
| WESTERN COPPER AND GOLD CORPORATION | MANAGEMENT DISCUSSION AND ANALYSIS |
| Three and nine months ended September 30, 2022 | |
| (Expressed in Canadian dollars, unless otherwise indicated) |
All of the forward-looking statements made in this MD&A are qualified by these cautionary statements. Specific reference is made to the most recent Form 40-F/Annual Information Form on file with the SEC and Canadian provincial securities regulatory authorities for a more detailed discussion of some of the factors underlying forward-looking statements and the risks that may affect the Company's ability to achieve the expectations set forth in the forward-looking statements contained in this MD&A.
Western's forward-looking statements are based on the beliefs, expectations and opinions of management on the date the statements are made, and Western does not assume, and expressly disclaims, any intention or obligation to update or revise any forward-looking statements whether as a result of new information, future events or otherwise, except as otherwise required by applicable securities legislation. For the reasons set forth above, investors should not place undue reliance on forward-looking statements. Readers are cautioned that forward-looking statements are not guarantees of future performance.
| WESTERN COPPER AND GOLD CORPORATION | MANAGEMENT DISCUSSION AND ANALYSIS |
| Three and nine months ended September 30, 2022 | |
| (Expressed in Canadian dollars, unless otherwise indicated) |
CAUTIONARY NOTE TO U.S. INVESTORS
The MD&A has been prepared in accordance with the requirements of the securities laws in effect in Canada as of the date of this MD&A, which differ in certain material respects from the disclosure requirements of United States securities laws. The terms "mineral reserve", "proven mineral reserve" and "probable mineral reserve" are Canadian mining terms as defined in accordance with Canadian National Instrument 43-101 Standards of Disclosure for Mineral Projects ("NI 43-101") and the Canadian Institute of Mining, Metallurgy and Petroleum (the "CIM") - CIM Definition Standards on Mineral Resources and Mineral Reserves, adopted by the CIM Council, as amended. NI 43-101 is a rule developed by the Canadian Securities Administrators that establishes standards for all public disclosure an issuer makes of scientific and technical information concerning mineral projects. The definitions of these terms and other mining terms, such as "inferred mineral resource," differ from the definitions of such terms, if any, for purposes of the disclosure requirements of the United States Securities and Exchange Commission (the "SEC").
Accordingly, information contained and incorporated by reference into this MD&A that describes the Company's mineral deposits may not be comparable to similar information made public by issuers subject to the SEC's reporting and disclosure requirements applicable to domestic United States issuers.
Form 52-109F2 - Certification of Interim Filings
I, Paul West-Sells, Chief Executive Officer of Western Copper and Gold Corporation, certify the following:
1. Review: I have reviewed the interim financial report and interim MD&A (together, the “interim filings”) of Western Copper and Gold Corporation (the “issuer”) for the interim period ended September 30, 2022.
2. No misrepresentations: Based on my knowledge, having exercised reasonable diligence, the interim filings do not contain any untrue statement of a material fact or omit to state a material fact required to be stated or that is necessary to make a statement not misleading in light of the circumstances under which it was made, with respect to the period covered by the interim filings.
3. Fair presentation: Based on my knowledge, having exercised reasonable diligence, the interim financial report together with the other financial information included in the interim filings fairly present in all material respects the financial condition, financial performance and cash flows of the issuer, as of the date of and for the periods presented in the interim filings.
4. Responsibility: The issuer's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (DC&P) and internal control over financial reporting (ICFR), as those terms are defined in National Instrument 52-109 Certification of Disclosure in Issuers' Annual and Interim Filings, for the issuer.
5. Design: Subject to the limitations, if any, described in paragraphs 5.2 and 5.3, the issuer's other certifying officer(s) and I have, as at the end of the period covered by the interim filings
(a) designed DC&P, or caused it to be designed under our supervision, to provide reasonable assurance that
(i) material information relating to the issuer is made known to us by others, particularly during the period in which the interim filings are being prepared; and
(ii) information required to be disclosed by the issuer in its annual filings, interim filings or other reports filed or submitted by it under securities legislation is recorded, processed, summarized and reported within the time periods specified in securities legislation; and
(b) designed ICFR, or caused it to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with the issuer's GAAP.
5.1 Control framework: The control framework the issuer's other certifying officer(s) and I used to design the issuer's ICFR is the Internal Control-Integrated Framework established by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in 2013.
5.2 ICFR - material weakness relating to design: The issuer has disclosed in its interim MD&A for each material weakness relating to design existing at the end of the interim period
(a) a description of the material weakness;
(b) the impact of the material weakness on the issuer's financial reporting and its ICFR; and
(c) the issuer's current plans, if any, or any actions already undertaken, for remediating the material weakness.
5.3 N/A
Form 52-109F2 - Certification of Interim Filings
6. Reporting changes in ICFR: The issuer has disclosed in its interim MD&A any change in the issuer’s ICFR that occurred during the period beginning on July 1, 2022 and ended on September 30, 2022 that has materially affected, or is reasonably likely to materially affect, the issuer’s ICFR.
Date: November 3, 2022
(signed) Paul West-Sells
Paul West-Sells
Chief Executive Officer
Form 52-109F2 - Certification of Interim Filings
I, Varun Prasad, Chief Financial Officer of Western Copper and Gold Corporation, certify the following:
1. Review: I have reviewed the interim financial report and interim MD&A (together, the "interim filings") of Western Copper and Gold Corporation (the "issuer") for the interim period ended September 30, 2022.
2. No misrepresentations: Based on my knowledge, having exercised reasonable diligence, the interim filings do not contain any untrue statement of a material fact or omit to state a material fact required to be stated or that is necessary to make a statement not misleading in light of the circumstances under which it was made, with respect to the period covered by the interim filings.
3. Fair presentation: Based on my knowledge, having exercised reasonable diligence, the interim financial report together with the other financial information included in the interim filings fairly present in all material respects the financial condition, financial performance and cash flows of the issuer, as of the date of and for the periods presented in the interim filings.
4. Responsibility: The issuer's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (DC&P) and internal control over financial reporting (ICFR), as those terms are defined in National Instrument 52-109 Certification of Disclosure in Issuers' Annual and Interim Filings, for the issuer.
5. Design: Subject to the limitations, if any, described in paragraphs 5.2 and 5.3, the issuer's other certifying officer(s) and I have, as at the end of the period covered by the interim filings
(a) designed DC&P, or caused it to be designed under our supervision, to provide reasonable assurance that
(i) material information relating to the issuer is made known to us by others, particularly during the period in which the interim filings are being prepared; and
(ii) information required to be disclosed by the issuer in its annual filings, interim filings or other reports filed or submitted by it under securities legislation is recorded, processed, summarized and reported within the time periods specified in securities legislation; and
(b) designed ICFR, or caused it to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with the issuer's GAAP.
5.1 Control framework: The control framework the issuer's other certifying officer(s) and I used to design the issuer's ICFR is the Internal Control-Integrated Framework established by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in 2013.
5.2 ICFR - material weakness relating to design: The issuer has disclosed in its interim MD&A for each material weakness relating to design existing at the end of the interim period
(a) a description of the material weakness;
(b) the impact of the material weakness on the issuer's financial reporting and its ICFR; and
(c) the issuer's current plans, if any, or any actions already undertaken, for remediating the material weakness.
5.3 N/A
Form 52-109F2 - Certification of Interim Filings
6. Reporting changes in ICFR: The issuer has disclosed in its interim MD&A any change in the issuer’s ICFR that occurred during the period beginning on July 1, 2022 and ended on September 30, 2022 that has materially affected, or is reasonably likely to materially affect, the issuer’s ICFR.
Date: November 3, 2022
(signed) Varun Prasad
Varun Prasad
Chief Financial Officer