Here's Roulston's take on the CUU selloff:
copperfoxmetals.com
Copper Fox recently announced an updated resource estimate,
confirming Schaft Creek as one of the largest copper-goldmolybdenum
deposits in the world. Copper Fox has a 93% interest
in the property, located just northeast of NovaGold’s Galore
Creek deposit in British Columbia.
Schaft Creek was discovered in the 1950’s and has been worked
on by three large mining companies since that time. Drilling
confirmed the presence of a large deposit, but for a period after
1973 government policy was unfavorable toward mining, leading
to a wholesale exit from the province.
As the industry regained confidence in the provincial government,
the metal prices slumped, further delaying the return of
exploration and development activity. Copper Fox optioned the
property from Teck Cominco in 2001, at the bottom of the price
cycle. The deal provides an opportunity for the major to earn
back into the project. A back-in would be positive for Copper
Fox in that it would confirm that Schaft Creek is indeed a worldclass
deposit. If the major backs in, they would then provide the
bulk of funding through to production.
Since Copper Fox acquired its interest, the project has appreciated
in value in several ways. Firstly, the prices of gold, copper
and molybdenum rose by multiples from their 2001 levels, adding
enormous value to what was then a marginal deposit. Secondly,
NovaGold’s plans to build roads and infrastructure in the
area for their nearby Galore Creek project will provide a
significant benefit to the Schaft Creek project.
Work by Copper Fox over the past few years has also added
considerable value to the project. The company has improved
the geological understanding, leading to the discovery of zones
with higher grades and extending the limits of the deposit. They
have carried out metallurgical work that enhances the recovery
levels estimated decades ago. They have also conducted other
engineering and environmental work and achieved an understanding
with the local First Nations.
Copper Fox announced its updated resource estimate on May 9.
Using a cut-off of 0.2% copper (similar to Galore Creek), the
deposit has 1.06 billion tonnes of measured and indicated resource
averaging 0.31% copper, 0.23g/t gold, 0.02% molybdenum
and 1.63g/t silver. Those figures imply a contained metal
content of 6.6 billion pounds of copper, 455 million pounds of
molybdenum, 7.8 million ounces of gold and 55 million ounces
of silver.
The fall-off in the share price after the announcement of the resource
suggests that some investors don’t fully understand the
figures. As is typical at this stage, the figures are based on an
overall average grade of the entire deposit as presently outlined.
Within the overall deposit, there are zones with substantially
more favorable grades. To put this in perspective, at the planned
mining rate, the total deposit is adequate for more than 40 years
of production. Subject to the actual geometry of the deposit,
mining of material at the average grade might not occur until
after year 20.
The company will now begin to more carefully evaluate the deposit,
with the intent of identifying zones with more favorable
grade. The next round of evaluation will involve a more detailed
examination of the deposit that will be carried forward into a
mining plan. To that end, the company plans a 15,000 meter drill
program for this summer.
Other work in support of a pre-feasibility study will include further
engineering studies, environmental assessments, geotechnical
work for minesite design, further metallurgical testing and
conclusion of socio-economic agreements.
We have already enjoyed a five-fold gain in the share price since
we began following the company in Resource Opportunities in
February 2006. There is still considerable upside potential as the
company advances toward a pre-feasibility study over the course
of this year. An updated scoping study expected in the coming
weeks should provide greater insight into the economic outlook
for the project.
Few investors yet recognize that the Schaft Creek deposit is very
large and has excellent prospects of continuing to advance toward
development. Subscribers may recall similar skepticism
over many of the projects that we have covered that evolved into
investment successes.
Price May 10, 2007: C$1.25
Shares Outstanding: 70 million
Shares Fully Diluted: 81 million
Market Cap:C$ C$87.5 million
Contact: Investor Relations
403- 264-2820
www.copperfoxmetals.com |
