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. Copper Fox is currently trading at a significant discount to the combined NPV's estimated for the Schaft Creek and Van Dyke projects. The decline in commodity prices over the last five years combined with other market factors has affected the perception of the values established for advanced stage projects. With the onset of a new commodity/investment cycle, the market valuation for copper producing companies have increased significantly over the past year. The implied value in many of the exploration and development companies are normally recognized later in the commodity cycle. Two of Copper Fox's assets are classified as advanced stage projects and supported by National Instrument 43-101 Technical Reports. The Technical Reports outlined resources in the measured, indicated and inferred categories for the Schaft Creek and Van Dyke projects. At Schaft Creek, a significant portion of the measured and indicated resources were upgraded to proven and probable reserves as a result of a 2013 Feasibility Study.
The Technical Reports on the Schaft Creek and Van Dyke 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 information, assumptions and projections of the 2013 Technical Report on the Schaft Creek project has changed, some significantly over the past five years. The conclusions and economic analysis presented in the 2013 Technical Report may not be achieved.
In addition to the NPV for the Schaft Creek and Van Dyke projects, Copper Fox has two large porphyry copper exploration projects in Arizona and owns 45% of the shares of Carmax Mining Corp., which holds title 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 metal prices as well as the foreign exchange rates ("FOREX") are industry consensus forecast to a future point in time. The metal prices, FOREX data assumptions used can change over time which in turn can materially impact the conclusions and economic forecast of a Technical Report. For example, the FOREX used in the Schaft Creek Feasibility Study was $1 US: $C 0.97 whereas the current FOREX is $1 US: $C = 0.78; a significant positive difference in terms of Canadian dollars. Forecasted long term metal prices are also subject to change. By way of example, the base case analysis in the 2013 Schaft Creek Feasibility Study used a copper price of US$3.25/lb and the 2015 Van Dyke PEA used a copper price of US$3.00/lb. Currently the spot copper price quoted on the London Metal Exchange ("LME") was in the order of US$2.77/lb and the long term price of copper is quoted to be US$3.30/lb. When the Schaft Creek Joint Venture selected the metal pricing for the re-modeling work in April 2017, the long term copper price was US$3.00/lb and the long term FOREX was $1 US: $C 0.83. As the above example demonstrates, changes in the FOREX and long term metal prices can have a significant impact on the base case economic analysis (in Canadian terms) which also impacts the per share net asset value.
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 nine 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 2018?
A. Yes we do. Copper Fox operates three of the four mineral projects in which it has a working interest. 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 45% of the shares of Carmax. Our 2018 capital requirement is estimated to be in the order of approximately C$300,000 in addition to General and Administrative expenses required to maintain the company. In 2018, Copper Fox will be involved in additional work at Schaft Creek, low cost meaningful exploration programs on the Sombrero Butte and Mineral Mountain projects as well as indirect exposure to the exploration activities completed on Carmax's Eaglehead project. Copper Fox will continue to seek partners to fund completion of the pre-feasibility study on the Van Dyke project.
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. The province of BC and teh state of Arizona are proven copper districts that are geopolitically stable, 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 project related environmental issues, these are manageable and not of concern. Both BC and Arizona have well defined rules and regulations to ensure sustainable development while protecting environmental values, preventing pollution 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 15 years. 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. 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. Social engagement and involvement forms the basis of Copper Fox's social and community relationship policies.
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.
Our strategy is value driven, based on the acquisition of projects that have the potential to host large, low cost copper deposits that would be of interest to copper producing companies. Our project portfolio as well as the equity interest in the Eaglehead project fits this strategy. The Schaft Creek deposit is one of the largest undeveloped porphyry deposits in North America. The stated resources for this project are minimum because the deposit is open in three directions and four other large areas of porphyry style mineralization have been located within the Schaft Creek project. Drilling on two of these zones intersected long intervals of copper-molybdenum-gold-silver mineralization that are not included in the stated resource for the Schaft Creek project.
At Van Dyke, the geological and resource modeling completed suggests that there is strong potential to substantially increase the size of the oxide copper deposit. The exploration potential of the project is demonstrated by; a second zone of oxide copper mineralization is exposed in outcrop approximately two kms southwest of the Van Dyke deposit and the potential for deep porphyry style mineralization southeast of the Van Dyke deposit below the Gila Conglomerate based on regional scale mapping and alteration patterns.
The NI 43-101 Technical Report completed by Copper Fox in 2017 concluded that the Eaglehead project is at the early to intermediate stage of exploration and hosts a porphyry copper-molybdenum-gold-silver system of significance. An exploration program estimated to cost $4.95 million is recommended to more fully evaluate the porphyry potential of the project. The exploration target at Eaglehead is a prospective, mineralized corridor (0.5-1.5 km in width and in excess of 8 km long) characterized by; a 10 km long, semi-continuous copper soil geochemical anomaly, a 6 km long, open-ended chargeability-high anomaly within which five zones of copper-molybdenum-gold-silver mineralization occur.
The Sombrero Butte and Mineral Mountain copper projects are located within the Arizona porphyry copper belt either in proximity to or on structural trends that hosts other large copper deposits. These projects have the potential to host large porphyry copper deposits based on a combination of; size, grade and extent of surface mineralized zones, mineralized hydrothermal breccia, large scale porphyry style alteration patterns, chargeability anomalies and most importantly Laramide age intrusive rocks. Two drill targets have been identified on the Sombrero Butte project. A large "leach cap" (1,100m by 900m) typical of porphyry copper deposits in arid climates has been identified within a much larger area of mineralized potassic and phyllic altered Quartz Monzonite/Granodiorite at Mineral Mountain. Leach caps are the current surface expression of a leached porphyry style minerealization due to natural weathering processes in an arid climate. The large number of the samples from within the leached area contain greater than 1% copper primarily due to the presence of chalcocite which suggests 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. Teck, like all other copper producing companies, require an ongoing supply of metals to sustain its business. Schaft Creek is a large, advanced copper-molybdenum-gold-silver project located in the mining friendly jurisdiction of northwest British Columbia, Canada. Projects like Schaft Creek provide the potential for optionality, expansion potential and improved economics in a rising commodity cycle. Since formation of the SCJV in 2013, Teck, the project operator has funded approximately $20 million on field programs and desktop studies despite the severe downturn in commodity prices between 2012 and 2016.
The Schaft Creek project has advanced considerably over the past year.
The project is included in Teck's Project Satellite initiative and the status of the 2013 Feasibility Study demonstrate the advanced nature of the project. The 2018 work program has the objective of evaluating a number of scenarios to identify value enhancing opportunities for the Schaft Creek project. This work needs to be completed in order to determine the next steps for the Schaft Creek project. The 2013 Schaft Creek Feasibility Study demonstrated many positive features including a low estimated C1 cost (net of other metal credits) for copper, political stability, economical available electrical power, social license, available seaport and low risk environmental impact.
Q. Why did Copper Fox Complete the PEA on the Van Dyke Copper Deposit?
A. The PEA was completed to address a number of questions related to the project such as; does the project warrant further investment, what is the potential size of the deposit, can the copper be recovered using standard industry methodologies. The PEA demonstrated that with further work; the project could have the potential to become a significant copper project with considerable value. The PEA demonstrated on a conservative basis a very attractive post-tax net present value and internal rate of return and an number of economic enhancements that could have a significant positive impact on the project economics. Based on the conclusions of the PE further investment is warranted to advance the project to the preliminary feasibility stage.
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 continue to increase due to the forecasted supply deficits. Electrification of the car industry, environmental initiatives and strong economic growth in a number of the western and emerging countries will significantly increase demand on the current supply chain.
On the supply side, lower levels of discoveries, reduced exploration expenditures, the limited number of large, advanced stage projects in the pipeline, global copper production peaking in late 2019 and the forecast that over 200 currently producing copper mines will reach the end of their productive life before 2035 are the long term factors facing the supply side of the copper industry. Near term impacts include supply disruption/destruction, operational difficulties, declining head grades as well as social and geopolitical issues.
On the demand side, the compounded annualized growth in copper consumption averaged 3.4% for the period 1900-2016 not including the additional copper consumption related to the "green revolution". If the long term growth in copper consumption remains at 3.4%, additional mine production would have to increase by approximately 780,000 tonnes of copper metal in 2018 to meet demand. Simply put, if the projects were available, the lead time from permitting and construction is too long to meet the forecast annual growth in copper demand.
Our thesis is that there is only one direction for the long term price of copper, and that's up!