Frequently Asked Questions (FAQs)
Q. Does the current Copper Fox stock price accurately represent the net asset value of the company?
A. No it does not. Commodity prices have only recently turned to the upside in what has been a down trend for approximately five years. As commodity prices decline, market valuations for resource companies generally follow this trend. This combined with other market forces and macro issues tend to distort the values assigned to advanced stage projects. Copper Fox currently has four mineral properties of merit on which two have had National Instrument 43-101 Technical Reports completed. On the two properties; the Technical Reports outlined resources in the measured, indicated and inferred categories. Included in the two projects is the Schaft Creek project which contains measured, indicated and inferred resources. A significant portion of the measured and indicated resources at Schaft Creek was upgraded to proven and probable reserves as a result of a 2013 Technical Report entitled "Feasibility Study on the Schaft Creek Project dated January 23, 2013 prepared for Copper Fox by Tetra Tech, A. Farah P. Eng. et al as Qualified persons.
The Technical Reports on the Van Dyke and Schaft Creek projects confirm that these projects have positive net present value ("NPV") and internal rate of return ("IRR") on both a pre-tax and post-tax basis. The Reader is cautioned that the Schaft Creek Joint Venture is in the process of updating the resource model for the Schaft Creek deposit that includes all information collected at Schaft Creek over the past four years. The information, assumptions and projections of the 2013 Technical Report on the Schaft Creek project has changed, some significantly over the past four years. The conclusions and economic analysis presented in the 2013 Technical Report may not be achieved.
In addition to the four mineral properties, Copper Fox owns 65% of the shares of Carmax Mining Corp., which holds title (subject to determination of a legal dispute) to the Eaglehead copper project located in northern British Columbia.
Q. Do the NPVs and associated per share values in the Technical Reports reflect current copper and gold price and foreign exchange scenarios which would have been used as input parameters?
A. No they don't. The lead time to develop either the Van Dyke or Schaft Creek project range from 3.0 to 5.0 years into the future. The metal prices as well as the foreign exchange rates ("FOREX") used in the Technical Reports are industry consensus forecast to that future point of time. The information, assumptions and projections used in technical reports can change significantly from the date of the Technical Report which can change the conclusions and economic analysis in the Technical Reports. For example, the FOREX used in the Schaft Creek Feasibility Studywas $1 US: $C 0.97 whereas the current FOREX is $1 US: $C = 0.74; a significant positive difference in terms of Canadian dollars. Metal prices are also subject to change. By way of example, the base case analysis in the Schaft Creek Feasibility Study used a copper price of US$3.25/lb and a gold price of $US1,445/oz. . Currently the spot copper and gold prices quoted on the London Metal Exchange ("LME") was in the order of US$2.55/lb and $US1,255/oz. The Schaft Creek Joint Venture is using long term copper and gold prices of $US3.00/lb and $US1200.00/ozs and a FOREX of 0.83 in the current resource remodeling work being completed on the Schaft Creek project. As one can see, the metal prices used in the Feasibility Study can change significantly in terms of the Canadian dollar with time and the applicable FOREX.
Q. What keeps your largest shareholder interested in the company and what is his long term objective?
A. Our largest shareholder, an insider and director, Mr. Ernesto Echavarria, holds approximately 55% of the company's common shares and has been a shareholder since 2009. Over the last six years, Mr. Echavarria has continued to accumulate shares in Copper Fox by participating in all the equity financings since he first became involved in Copper Fox. He fully understands the merits of investing in copper and gold for the longer term and the compelling logic of the Copper Fox story. Of course, Mr. Echavarria's reasons underlying his investment is being further reinforced by knowing just how limited the number of quality assets there are in the copper space, not to mention other factors such as, foreign exchange, metal cycles, market volatility and geopolitically risks as seen in other jurisdictions throughout the world are subject to. Mr. Echavarria has continuously supported Copper Fox in its growth and in seeing the market value of the company more in line with its net asset value.
Q. Do you have the necessary capital resources to continue in 2017?
A. Yes we do. Of the four mineral projects in which Copper Fox has a working interest , three are operated by Copper Fox. The Schaft Creek project is 100% funded by Teck Resources Limited ("Teck"). Copper Fox's exposure to the Eaglehead project operated by Carmax Mining Corp in by way of its ownership of 65% of the shares of Carmax. . Work completed on the Van Dyke, Sombrero Butte and Mineral Mountain projects are funded by Copper Fox. Our 2017 capital budget requirement for Van Dyke, Sombrero Butte and Mineral Mountain is estimated to be in the order of approximately $C600,000. In addition General and Administrative expenses are also required to maintain the company. . Our strategy for 2017 is to complete the permitting process for the recommended eight hole pilot scale in-situ leach test on the Van Dyke project and complete low cost meaningful work on the Sombrero Butte and Mineral Mountain projects. Copper Fox will continue to seek partners to fund completion of the pre-feasibility study on the Van Dyke project and additional exploration on the Sombrero Butte and Mineral Mountain projects.
Q. Your projects are located in the province of British Columbia ("BC") in Canada and in the state of Arizona in the USA. Are these geopolitically stable areas and are there any environmental issues of concern?
A. Both the province of BC and the state of Arizona are geopolitically stable areas that are pro-mining and derive a considerable amount of funding from the mining industry through taxes, etc. Both jurisdictions have rigorous environmental and permitting processes which are well defined, manageable and achievable. Regarding specific environmental issues, there are none of concern. Both BC and Arizona have well defined rules and regulations that are in place to ensure sustainable development of either the province or state resources while protecting environmental values, preventing pollution, promoting and restoring environmental quality and restoration of the site to its natural state. Copper Fox works with the appropriate environmental authorities to ensure that these laws are adhered to.
Q. Aside from environmental issues, don't you have to deal with aboriginal issues in both BC and Arizona?
A. In BC, Copper Fox has developed a strong relationship with the Tahltan First Nation over the past 13 years since Copper Fox first became involved in the Schaft Creek project. We engage the Tahltan First Nation and discuss issues such as work plans, wildlife and environmental assessments, employment opportunities and participation in community and social affairs. Because of its share ownership in Carmax, Copper Fox has introduced this relationship to Carmax as they continue exploration of their Eaglehead project located within the traditional territory of the Tahltan First Nation. In Arizona we have made a considerable effort to engage the people living around the Van Dyke project as well as the local community leaders. This social engagement and involvement forms the basis of Copper Fox's social and community relationship policies. As the Sombrero Butte and Mineral Mountain projects are only in the early stage of exploration, our relationships with the people in those areas are continuing to develop.
Q. How would you describe the exploration potential of your four properties beyond the billions of pounds of copper resources currently identified?
A. I would like to mention that in addition to the approximately 3.9 billion pounds of copper, Copper Fox also owns approximately 2.7 million ounces of gold, 165 million pounds of molybdenum and 24 million ounces of silver in all resource categories.
We believe that all four mineral projects as well as the Eaglehead project have excellent potential to locate additional resources. At Schaft Creek; the mineralization in the deposit is open in three directions and the project has excellent exploration potential to locate new zones of mineralization. The mineralization is characterized by a chargeability signature that extends for a distance of at least four kilometers ("kms") and possibly up to seven kms north of the Schaft Creek deposit, depending on the interpretation of the survey results. So far; four large areas of mineralization, the Discovery zone, the LaCasse zone, the ES zone and the GK zone, have been located within this chargeability signature north of the Schaft Creek project. Drilling on the Discovery zone in 2012 and the LaCasse zone in 2015 located broad intervals of mineralization and the current interpretation is that these two zones are part of the same mineralized system.
At Van Dyke, the modeling completed after the 2014 drilling program suggests that there is excellent potential to considerably increase the size of the deposit to the west and to the southwest. In addition to this, a second zone of oxide copper mineralization is exposed in outcrop approximately two kms southwest of the Van Dyke deposit which has not been explored.
Copper Fox is of the opinion that the Eaglehead project has many similarities to the Schaft Creek project. . The exploration target on the Eaglehead project consists of five zones of porphyry style copper mineralization hosted in a six km long chargeability signature of which a very small portion has been tested by drilling. To date 126 drill holes containing variable concentrations of copper-molybdenum-gold-silver mineralization has been completed over a four km strike length of the chargeability signature. Over the past three years Copper Fox has provided technical input to the exploration programs completed on the Eaglehead project. This work indicated widespread copper-molybdenum-gold-silver mineralization over a horizontal distance of at least 1,000m in the Pass zone and the continuity of the mineralization between the East-Bornite-Pass zones.
The Sombrero Butte project is located within the Arizona porphyry copper belt close to several other large copper deposits. This project exhibits many parameters/characteristics suggestive of a porphyry system. The chargeability/resistivity signatures, alteration and mineralization in outcrop combined with the numerous mineralized breccia pipes suggest the presence of a porphyry system underlying the Sombrero Butte property. In 2015, a large (4,000m long by at least 600m wide) chargeability/resistivity signature was located toward the center of the property, south of the cluster of mineralized breccia pipes. The large chargeability signature is underlain by the Copper Creek granodiorite, the main host rock for the copper mineralization in the Copper Creek deposit located approximately 2 kilometers north of the Sombrero Butte property. Recent work has demonstrated that the breccia pipes contain distinct styles of mineralization being: copper-molybdenum-gold-silver, copper-silver and copper mineralization.
The Mineral Mountain project is located between the Florence and Resolution copper deposits in Arizona. The property is underlain by Laramide age Quartz Monzonite and granodiorite that intrudes older Pinal schist. The work completed by Copper Fox in late 2015 and 2016 has identified a large area (1,100m by 900m) of copper mineralization located within a larger area of potassic and phyllic altered Quartz Monzonite/Granodiorite. The majority of the samples from within the larger area of potassic and phyllic altered rocks are mineralized. The style of mineralization, geochemical signature, alteration and veining suggest a large porphyry copper environment. The presence of chalcocite indicates that supergene processes have been active and may suggest the possibility of a high grade "chalcocite blanket" at depth.
Q. Your premier project, Schaft Creek, is a Joint Venture with Teck whereby Teck holds 75% and is operator. Will they continue to aggressively invest in the Schaft Creek project given the current challenges facing large corporations such as Teck?
A. Only Teck can answer that question, however, Teck like all other copper producing companies have seen significant decreases in their operating cash flow which has resulted in either reduced or no capital investment in new projects. That being said, copper producers like Teck also require an ongoing supply of copper to sustain its copper business. This copper could come from the Schaft Creek project should the current work demonstrate the economic viability of the project.
The 2017 work program for the Schaft Creek project consists of completing a remodel of the 2012 resource estimate. The results of the 2013 drilling and the extensive re-logging program completed in 2013, 2014 and 2015 has been incorporated into a updated geological model for the Schaft Creek deposit which has been used to better constrain the resource block model for the Schaft Creek deposit. The remodeling allows the Schaft Creek Joint Venture the opportunity to update many of the input parameters that were used in the 2013 Feasibility Study. The information, assumptions and projections used in Technical Reports can change significantly over time which can changes the conclusions and economic analysis set out in a Technical Report. Over the past four years, Teck as Operator of the Schaft Creek Joint Venture has looked at the major components of the 2013 Feasibility Study and found no material differences from that set out in the Feasibility Study. The Schaft Creek project has many positive features including a low estimated cost (net of other metal credits) to produce a pound of copper and is in the politically stable province of BC.
Q. Why did Copper Fox Complete the PEA on the Van Dyke Copper Deposit?
Copper Fox wanted to know if the project warranted further investment. There is a rich history of mining in the Miami-Globe area and the Van Dyke deposit. The deposit was mined using underground mining and on two occasions the ISL method was used to extract the copper from the bedrock. In the 1970s Occidental Minerals completed a considerable amount of work on the Van Dyke deposit including several ISL tests, one of which lasted for almost two years. Occidental concluded that the project was technically sound and that ISL was a viable production method for the Van Dyke project. Kocide Chemicals also used the ISL method for a two year period to produce copper from the Van Dyke deposit in the late 1980's. The PEA demonstrated that further expenditures were warranted and that a number of economic enhancements were identified that could have a significant positive impact on the project economics.
Q. What is your long-term view on the price of copper?
A. We believe that within the next one -- two years, the price of copper will appreciate. The cut backs in copper production announced in 2015 and 2016 combined with low commodity prices, mine closures, supply disruption, lower head grade and the forecasted 2.0% increase in global demand for copper should be positive for future copper prices. The lack of investment in new projects is expected to have a positive effect on future copper prices. Many people believe that the copper supply will slip into a deficit position in 2017. China continues to be the major consumer of copper. Other aspects that puts a strain on the copper supply is the consumption of copper per capita in developing countries such as India and China is only about one tenth that of copper consumed in developed countries such as Canada and new uses for copper including electrical cars and environmental applications.
The copper head grade of operating mines continues to decline with copper ore now yielding 30% less than just 20 years ago. Yearly supply disruptions, low commodity prices and higher than projected yearly copper mine losses adds to our thesis as to why there is only one direction to the long term price of copper, and that's up!