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Van Dyke

Desert Fox Van Dyke Co., a wholly owned subsidiary of Copper Fox Metals Inc., owns a 100% working interest in the Van Dyke project located in the Globe-Miami District in Arizona. The project consists of 531.5 hectares (1,312.8 acres) of mineral rights and 5.75 hectares (14.02 acres) of surface rights and is subject to a 2.5% gross royalty on revenue. Arizona is a favorable mining jurisdictions with respect to tax, regulation, infrastructure and labour.

The Globe-Miami District is located at the eastern end of the Jemez Zone, a northeast structural trend that hosts copper deposits in the Casa Grande, Florence, Ray, and Superior/Resolution Districts. The Globe-Miami District hosts the Pinto Valley, Carlota, Miami-East and Miami-Inspiration copper mines as well as the mined out Copper Cities and Old Dominion copper deposits.

In November 2015, Copper Fox announced the results of a NI-43-101 Technical Report entitled "Preliminary Economic Assessment Technical Report for the Van Dyke Copper Project" dated November 18, 2015 prepared under the direction of Moose Mountain Technical Services, Mr. Jim Gray, P.Eng., et al as Qualified Persons. The results of the Preliminary Economic Assessment ("PEA") were announced in a news release dated November 25, 2015.

The PEA is an independent assessment of the historical and current results from the Van Dyke project and provided recommendations for further work.

The Van Dyke property was first explored and developed in the early 1900s when a shaft was sunk to a depth of 1,692 feet. The underground mining operations are reported to have produced 11.8 million pounds of copper between 1929 and 1945 from copper oxide mineralization with a reported grade of 5.0% copper.

Historical Results - Van Dyke Project:
Between 1968 and 1982 Occidental Minerals obtained the permits to conduct two in situ-leaching ("ISL") tests. The first test consisted of two wells spaced 75 feet apart. The second, more extensive test, consisted of five wells and was conducted for a period of approximately two years, the conclusions of which are summarized below:
  • Maximum injection rates were 450 gallon per minute ("gpm") (at 95% of design capacity) and 275 gpm on a continuous basis,
  • Maximum loading of pregnant solution for a one month period was 3.4 gram per litre ("gpl") copper from a portion of the deposit that assayed less than 0.5% copper,
  • Total copper recovery should be 58.8% extraction from total available copper after 36 months leaching per gallery, clean up leaching should bring the total to 75% extraction,
  • Demonstrated hydraulic connection for a distance of up to 249 feet (76m),
  • The fluid flow followed the principal stress axis and fracture pattern of the rock,
  • Recovered leachate is clean of impurities and acid consumption per pound of copper was less than predicted,
  • Porosity and permeability of the formation is suitable for full scale production,
  • No apparent reason why full scale production cannot be accomplished, and
  • Over 100,000 pounds of copper was produced during the test in pregnant solutions.
The information on the historical metallurgical testwork on the Van Dyke deposit was taken from a report prepared for Occidental titled "Summary of In-Situ Leach Testing on the Van Dyke Copper Deposit Through 1981' by C.R. Caviness dated June 1986.

Between 1988 and 1989 Kocide Chemicals permitted the Van Dyke project and is reported to have recovered 4 million pounds of copper utilizing an in-situ leaching mining method. The last APP permit application for the Van Dyke project was withdrawn by Arimetco in July 1999 due to technical deficiencies experienced by Arimetco at Van Dyke and other operating sites in Arizona.

2014 Exploration:
In 2014, Copper Fox completed a diamond drilling program on the Van Dyke oxide copper deposit, re-assayed 560 of the original pulps from the drilling completed by Occidental in the 1970's and conducted in-situ pressure leach tests on whole drill core samples. The results of the drilling and the re-assaying compared favorably with the original assay results reported by Occidental.

2014 Diamond Drilling:
A six hole (3,211.7m) verification diamond drilling program on the Van Dyke oxide copper deposit was completed in June 2014. Analytical results (using a 0.05% copper cut-off) for total copper and soluble copper content of the six holes are listed below. The cut-off grade used is in line with the cut-off grade used on other similar more advanced oxide copper deposits in Arizona.

DDH Zone Azimuth Dip From  To  Interval  Total Total Soluble  Total/Soluble 
ID       (m) (m) (m) Copper (%) Copper (%) Copper (%)
VD14-01 Oxide 0 90 246.9 368.4 121.5 0.36 0.27 75.0
VD14-02 Oxide 0 90 375.2 591.6 216.4 0.44 0.39 88.0
    Including   375.2 399.6 24.4 1.39 1.28 92.4
VD14-03 Oxide 0 90 301.1 434.6 133.5 0.62 0.48 78.2
    Including   384.7 400.4 15.7 1.34 1.14 85.1
VD14-04 Oxide 0 90 452.4 596.6 144.2 0.38 0.33 86.8
VD14-05 Oxide 0 90 401.4 450.6 49.2 0.56 0.52 92.9
VD14-06 Oxide 0 90 249.1 383.8 134.7 0.33 0.24 72.7
    Including   268.0 277.4 9.4 2.09 1.94 92.8
Note: The core intervals listed in the above tables do not represent true widths.

Re-Assay Program:
In 2014, 560 samples from the drilling completed by Occidental were re-assayed. This work shows a strong positive correlation between the historical and current assays for the same sample intervals for both total copper and soluble copper. A comparison of the historical and 2014 assays is shown below:

Van Dyke From To Interval  Total Copper  Soluble Copper 
Drillhole ID (m) (m) (m) 2014 Pulp Original 2014 Pulp Original
OXY-6 376.12 460.25 84.13 0.444 0.456 0.418 0.390
and  463.30 583.69 120.39 0.670 0.706 0.556 0.546
OXY-8 313.94 404.77 90.83 0.533 0.563 0.334 0.222
and  406.30 439.22 32.92 0.861 0.883 0.704 0.544
OXY-15 402.64 455.07 52.43 0.503 0.537 0.458 0.489
OXY-17B 324.61 396.85 72.24 0.662 0.699 0.482 0.427
VD-73-6 359.97 497.13 137.16 0.341 0.367 0.299 0.278
OXY-27 527.40 620.70 93.30 0.408 0.407 0.329 0.308
Note: The core intervals listed in the above tables do not represent true widths.

In-Situ Leach ("ISL") Results:
In-Situ Copper Leaching Simulation tests were completed by SGS E&S Engineering Solutions Inc. ("SGS") located in Tucson, Arizona. The tests were completed on eight samples selected from five of the six 2014 diamond drill holes. These samples were subjected to leaching under a nominal pressure of 120 pounds per square inch ("psi") to maintain carbonates in solution over 120 days of a locked cycle type of leaching regime to simulate the underground hydraulic pressure in the ISL process. A mineralogical examination on the test samples showed that chrysocolla and malachite are the primary copper bearing minerals. Native copper, azurite and chalcocite are present in minor concentrations.

Highlights of the In-Situ Pressure Leach Tests are:
  • Calculated total copper grades ranged from 0.35% to 2.03% and averaged 0.76%,
  • Approximately 89% of the copper contained in the samples reports as soluble copper, both acid soluble and cyanide soluble,
  • Gangue acid consumption ranged from 0.72 kg/kg copper to 23.69 kg/kg copper and averaged 7.72 kg/kg copper, and
  • Preliminary copper extractions based on a 120 leach period ranged from approximately 87% to 24% and averaged 63%.
The relative difference between the percentage copper extractions and the percentage of soluble copper (acid soluble copper and cyanide soluble copper) reported could be due to lack of solution diffusion, lack of ferric iron generation, mass transfer or solution channeling in the test vessels used to complete the tests. SGS recommended additional pressure leach test work.

Resource Estimates:
The maiden resource estimate for the Van Dyke project was prepared by Moose Mountain Technical Services ("MMTS"). The National Instrument ("NI") 43-101 Technical Report entitled "Technical Report and Resource Estimation for the Van Dyke Copper Project" dated January 30, 2015 was prepared by S. Bird, P. Eng., and R, Lane P. Geo as Qualified Persons was filed on SEDAR on February 2, 2015.

Preliminary Economic Assessment ("PEA"):
The PEA is the first current engineering technical study undertaken on the Van Dyke copper project and builds upon the previous resource estimate and metallurgical testwork completed by MMTS and SGS E&S Engineering Solutions Inc. The PEA suggests that Van Dyke is a technically sound, In-Situ Leach ("ISL") copper project with low cash costs, strong cash flows and an after-tax IRR of 27.9 %. All dollar amounts are rounded and stated in US currency.

The results of the PEA are preliminary in nature as they include an inferred mineral resource which is considered too speculative geologically to have the economic considerations applied that would enable them to be categorized as mineral reserves. There is no certainty that the PEA forecasts will be realized or that any of the resources will ever be upgraded to reserves. Mineral resources that are not mineral reserves do not have demonstrated economic viability.

The updated Inferred Resource used in the PEA has an effective date of November 16, 2015. The Base Case is stated at a 0.05% total copper ("TCu") cut-off and is considered appropriate for the extraction of copper by in-situ leaching, as determined by a literature review of similar properties in Arizona (HDI-Curis, 2013 and Excelsior, 2011). The updated Inferred Resource applies a potentially economic confining shape which considers only the modelled oxide to have value. The mixed oxide/sulphide copper mineralization within this confining shape is included in the updated resource estimate.

Inferred Mineral Resource Estimate within Potentially Economic Confining Shape (Sue Bird, P.Eng.)
Zone Cut-off - TCu(%) tonnes TCu (%) ASCu (%) ASCu/TCu Total Cu (Mlb) Oxide Cu (Mlb)
Oxide 0.05   113,143,000 0.434 0.284 0.676 1,083 704
Mixed 0.05     69,918,000 0.167 0.060 0.403 245 93
Total 0.05   183,061,000 0.332 0.198 0.598 1,328 797
Notes: All numbers are rounded following Best Practice Principles. The total copper and oxide copper expressed in millions of pounds ('Mlb'). The terms Oxide and ASCu represent acid soluble copper. Mineral resources that are not mineral reserves do not have demonstrated economic viability.

The resource estimate suggests that the copper mineralization on the Van Dyke property is open to the west and southwest. Only acid soluble copper ("ASCu") grades were used in estimating the pounds of oxide copper mineralization within the resource estimate.

Summary of Base Case Economic Results:
Results of the Preliminary Economic Assessment on the Van Dyke Project are shown below:
Van Dyke - Economic Summary Unit Base Case
Life of Mine (LOM) years 11
Copper Cathode Sold Million lbs 456.9
Copper Price $US/lb 3.00
Gross Revenue $ 1,370,000,000
Royalties $ 31,500,000
Operating Costs (includes LOM sustaining costs) $ 619,800,000
LOM Direct Operating Cost ($/pound recovered copper) $/lb copper 0.60
All In Sustaining Cost ($/pound recovered copper) $/lb copper 1.44
Initial Capital Costs (includes 30% Contingency) $ 204,400,000
Taxes $ 110,900,000
NPV & IRR (Base Case)
Discount Rate % 8%
Pre-Tax Net Free Cash Flow $ 453,100,000
Pre-Tax NPV $ 213,100,000
Pre-Tax IRR % 35.5%
Payback Years 2.3
Post-Tax Net Free Cash Flow $ 342,200,000
Post-Tax NPV $ 149,500,000
Post-Tax IRR % 27.9%
Payback years 2.9

Project Enhancements:
The PEA identified several aspects of the project that could have a positive impact on project economics and recommended completion of a pre-feasibility study at an estimated cost $US16.6 million. The main components of the pre-feasibility study are:
  • A 10,000m diamond drilling program to expand the size of the resource and upgrade the existing Inferred Resource has the potential of increasing mine life;
  • A five well ISL test program designed to further investigate overall metal recoveries, refine well field design, and determine the extent of rock stimulation required, if any, and
  • Opportunities to lower capital, sustaining and operating costs by reduction in the size of the underground development and further defining operating procedures.
In 2016, a review of the process to obtain the main permits related to the pilot leach test concluded that the costs could be reduced from the $1.0 million estimated in the PEA to US$425,000 and that a substantial portion of the historical data for the project could be used in the future permitting process.

A review of the metallurgical portion of the pre-feasibility study was also completed in early 2106 and concluded that this work was estimated to cost $US265,000 down from the from $US500,000 set out in the PEA. The next round of pressure leach testing is expected to yield higher copper recovery due to increasing the leach time from 120 to 210 days.

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