Copper Fox’s primary and most advanced asset is its 25% carried interest in the Schaft Creek Joint Venture (SCJV) with Teck Resources Limited (Teck). Schaft Creek is one of the largest undeveloped porphyry copper-gold-molybdenum-silver deposits in North America, located in northwestern British Columbia.
The stated resources for the Schaft Creek project are considered to be the minimum for the project for the following reasons, i) the limits of the mineralized envelope in the Schaft Creek deposit has not been defined, ii) the Discovery Zone (porphyry style mineralization) located approximately 2 kilometers to the north of the Schaft Creek deposit has not been drilled out and iii) a number of exploration targets in the vicinvity of the Schaft Creek deposit have not been drill tested. The resource categories estimated for the Schaft Creek deposit are set out below:
|Resource Category||Tonnes (Mt)||Cu (%)||Mo (%)||Au(g/t)||Ag (g/t)||Cu (lb)||Mo (lb)||Au (ozs)||Ag (ozs)|
(Mt)= million tonnes, (%) =percent, (g/t) =grams per tonne, (lb)=pounds, (ozs)=ounces. Technical Report “Feasibility Study on the Schaft Creek Project, BC, Canada”, dated January 23, 2013, prepared by Tetra Tech, A. Farah, P. Eng.; et al as Qualified Persons; at 0.15% CuEq cutoff. Reserves reported at $6.60/tonne net smelter return (NSR) cutoff.
The SCJV was formed in 2013 to further explore and/or develop the Schaft Creek project. Since 2013, the SCJV has completed verification and technical studies all directed at advancing the technical understanding and surfacing the value of the project.
Schaft Creek Feasibility Study:
On January 23, 2013, Copper Fox filed a NI 43-101 Technical Report entitled “Feasibility Study on the Schaft Creek Project, BC Canada” prepared by Tetra Tech with A. Farah, P.Eng. et al. as Qualified Persons. The Feasibility Study proposed a 130,000 tonne per day (“TPD”) truck and shovel/flotation/open pit mine. The Feasibility Study indicated that the NPV and the IRR for the Schaft Creek project were most sensitive to fluctuations in the Foreign Exchange (“FOREX”) between the Canadian and United States dollar and the price of copper. The Feasibility Study used a FOREX of $1.00 US = $0.97 CAD and a copper price of US $3.25/lb.
The 2013 feasibility study was based on Proven and Probable Reserves of 940.8 million tonnes grading 0.27% copper, 0.19 g/t gold, 0.018% molybdenum and 1.72 g/t silver; containing 5.6 billion pounds of copper, 5.7 million ounces of gold, 363.5 million pounds of molybdenum and 51.7 million ounces of silver and annual production of 105,000 tonnes of copper, 201,000 ounces gold, 1.2 million ounces silver and 10.2 million pounds of molybdenum.
The Feasibility Study included a resource estimate that showed the Schaft Creek deposit hosts a Measured and Indicated Resource of 1.2 billion tonnes, grading 0.26% copper, 0.017% molybdenum, 0.19 g/t gold and 1.69 g/t silver as well as a 597.2 million tonne Inferred Resource grading 0.22% copper, 0.016% molybdenum, 0.17 g/t gold and 1.65 g/t silver. The above stated Proven and Probable Reserves for the Schaft Creek project are included within the stated Measured and Indicated Resources. Mineral Resources that are not Mineral Reserves do not have demonstrated economic viability.
Readers are cautioned that the Schaft Creek Joint Venture has completed several additional studies since 2013 and is undertaking an in-depth investigation of the Schaft Creek project in 2019. The results of the in-depth study may differ materially from the 2013 Feasibility Study. The information, assumptions and projections used in the 2013 Feasibility Study have changed since the date of the Feasibility Study. There is no assurance that the economic analysis, reserves and conclusions set out in the 2013 Technical Report will be realized.
Schaft Creek Joint Venture:
In July 2013, Copper Fox and Teck created the SCJV to further explore and develop the Schaft Creek project. The SCJV holds two main assets: i) the Schaft Creek copper-gold-molybdenum-silver project located in northwestern British Columbia and ii) an 85.41% equity interest in Liard Copper Mines (“Liard”). Liard holds a 30% Net Proceeds Interest in the Schaft Creek project subject to certain terms and conditions. Teck is the operator of the SCJV.
Under the SCJV agreement, Teck is required to make three cash milestone payments to the Company: (i) $20 million upon entering into the agreement (received), (ii) $20 million upon a production decision approving mine construction, and (iii) $20 million upon completion of construction mine facilities.
The SCJV agreement provides that Teck and the Company are each responsible for their pro-rata share of project costs in accordance with their interests, except that Teck is solely responsible for the first $60 million in pre-production costs (Teck has funded approximately $21 million as of April 2019). If pre-production costs exceed $60 million, the Company’s pro rata share of such costs will be set off against the two remaining cash milestone payments (totaling $40 million) payable by Teck to the Company. If pre-production costs exhaust the two cash milestone payments, Teck will further assist the Company by providing loans, as necessary, without dilution to the Company’s 25% joint venture interest.
By way of example, assuming the existing 75% interest held by Teck and the 25% interest held by the Company remain unchanged, pre-production expenditures on the Schaft Creek Project would have to exceed a cumulative total of $220 million in order to eliminate the two cash milestone payments payable to the Company through set-off, after which Teck would be obligated to fund the Company’s pro-rata share of additional pre-production costs by way of loan to the Company (at prime plus 2%).
The definitive Joint Venture Agreement between Copper Fox and Teck dated July 15, 2013, is available under Copper Fox’s profile on SEDAR at www.sedar.com.
In 2013, the Schaft Creek Joint Venture conducted a program ($8.2 million) consisting of diamond drilling and collecting additional geotechnical information for pit slope stability studies. The drilling extended the mineralization to the east in the Paramount zone and intersected higher grade mineralized interval in several of the 2012 resource blocks classified as Inferred.
In 2014, the SCJV ($2.5 million program) commenced work to support a conceptual 12-year initial mine plan for the Liard zone, including a review of the Life of Mine (LOM) pit slope design set out in the 2013 Feasibility Study. Surface mapping and core re-logging to collect additional samples for geotechnical and geometallurgical purposes were completed. Surface exploration located the LaCasse zone, an area of copper and gold mineralization that measures 1,300m long by 800m wide north of the Discovery zone with value from outcrop samples up to 1.56% copper and 1.3 g/t gold over an area that measures 1,300m long by 800m wide and a new exploration target south of the Schaft Creek deposit.
In 2015, the SCJV ($4.8 million program) completed diamond drilling, infill sampling and re-logging of diamond drill cores, geometallurgical, lithogeochemistry and acid rock drainage investigations and a study of the surficial geology of the proposed tailing impoundment area in the Skeeter Valley. The drilling on the LaCasse zone (2,634m in five holes) intersected narrow intervals of low-grade copper mineralization; interpreted to be the up-dip extension to the mineralization intersected in the Discovery zone located in 2012.
The geometallurgical work (100 samples) to identify potential metallurgical changes in the mineralization across the Schaft Creek deposit indicated (based on 50th percentile of hardness) that throughput for the mill design used in the 2013 Feasibility Study could range from 118 to 153 kt/d, while maintaining a 150-micron flotation feed size.
The geotechnical, comminution and electrical studies completed in 2015 found similar results to those presented in the 2013 Feasibility Study. Mapping of the proposed tailings impoundment area yielded positive results and eliminated the concern related to the existence of a large slope sagging feature in the proposed tailing storage facility reported in the 2013 feasibility study.
At the end of 2015, approximately 43,000m of the drill core from the Schaft Creek deposit had been re-logged; the information from which would be used to upgrade the geological and structural model for the Schaft Creek deposit as well as the alteration and geo-metallurgical modelling. Surface mapping, geochemical and geophysical surveys located several new exploration targets both north and south of the Schaft Creek deposit.
In 2016, the SCJV ($0.7 million) used the 2013 drilling and the re-logging information to update the resource model for the Schaft Creek deposit with emphasis on getting a better understanding of the precious metals content of the deposit. Other activities in 2016 included voluntarily withdrawal from the Environmental Assessment (“EA”) process and the queue for the Northern Transmission Line (“NTL”) for the Schaft Creek project. The SCJV was and still believes keeping the EA active and remaining on the NTL queue would not be significantly beneficial to the project as there are no technical or procedural disadvantages to leaving these processes. Re-entering the EA process or returning to the NTL queue later is not foreseen by the SCJV to be problematic.
In 2017, the SCJV ($0.9 million program) completed resource remodeling of the Schaft Creek deposit, desktop engineering and trade-off studies, collection of environmental baseline data,applied for a multi-year area based permit and social activities with the Tahltan Nation. The resource remodelling confirmed that there were no material changes in the Measured and Indicated resource categories used in the 2013 Feasibility Study and the 2017 work. Changes to the Inferred resource category were primarily due to Whittle pit constraints, classification of material and legacy issue related to historical precious metal analysis.
The positive outcome of the 2017 work program was the basis for the 2018 sizing and infrastructure alternatives study that investigated four sizing scenarios targeting potential capital, operating and sustaining cost reductions, a higher-grade initial starter pit and identify other infrastructure and access opportunities to improve project economics. The 2018 work indicated that the 133 ktpa scenario should be selected for more in-depth study in 2019. The receipt of the Multi-Year Area Based Permit for the Schaft Creek project allows the SCJV to complete future field activities and includes approval for up to 50 diamond drill holes, none of which are planned at this stage. The 2018 program was budgeted at $0.8 million.
In 2019, the SCJV ($2.1 million program) has assembled a project team dedicated to the Schaft Creek project and is working toward completion of the in-depth conceptual study to confirm the technical-engineering and economics of the identified engineering improvement options and the associated 133ktpa mine plan design to lower capital and operating costs, infrastructure and further define access options for the Schaft Creek project. In addition to the planned field studies (geotechnical and environmental), a review of the site characteristics of potential revisions to key infrastructure elements, e.g., tailing storage, conveyance systems, ore and waste transport options, and mill location are to be completed. A review of permitting and environmental requirements for the newly identified engineering improvements, collection of baseline environmental data together with continued engagement with the Tahltan Nation is planned in 2019.