"We don't see a need to even review how we're going to fund it for at least about 21 months, a year and three quarters [will review "on the ramp" commitments like QB2 in November 2016]. So a lot can happen in the meantime. [Major risk exists in that Nov 2016 time line.] So that kind of scenario is just not something that we need to stress test our balance sheet for. [No hard plans... we're really not even thinking about it now.] We probably will be on a schedule where Fort Hills will be just about finished before any major CapEx needs to be devoted to"... [projects that ARE on the ramp].
Copper Fox and Shaft Creek aren't on the ramp... but Teck, with no incentive to hurry, is now slowly re-doing Elmer's previously screwed up work that might eventually get Schaft Creek re-considered for moving back toward a position on the ramp. The window of opportunity that did exist to get a position on the ramp was lost... so, whatever the current slow pace in the ongoing work shows, success will mean being placed behind all the other things already on the ramp... and being fully subject to all the risks that exist in those things out there that are on the ramp ahead of them.
"In terms of when the decision is actually made to begin to move forward with the [QB2] execution phase of the project, we would actually see the ramp up in capital spending probably over about an 18-month period. So we would probably see, in that first year, a doubling or tripling of the capital expenditure levels of what we are seeing today as we begin to ramp back up on the engineering front and the procurement of the long-lead equipment. And following that, we would go back to the capital expenditure profiles that we had previously identified for the project over the remaining 48 months of the project". "I might just clarify just to -- you heard the words doubling and tripling, but that's from today's amount of about CAD90 million. So if you got to 2017, which is the last half a year of construction of Fort Hills, which is about CAD400 million, you might start QB2 at that stage with CAD200 million or CAD300 million and then in 2018 you would start getting into a larger amounts. So it looks like a pretty good sequence at the moment."
So, movement of Teck's projects now on the ramp for development after Fort Hills... starts with long lead capital expenditures in 2017 and 2018, followed by 4 years of major investment... taking you to 2022... perhaps allowing early stage long lead capital expenditures on the "next" project on the ramp beginning in 2020 or 2021... but, with obvious market and project risks inherent in the time lines. Odds are that by 2022 some other commodity will be more interesting and offer greater value.
The controlling factor is likely to be... the price of oil. If Fort Hills makes a lot of money you get one result... and if Fort Hills doesn't make a lot of money... you get something else... but, even in the best case... there's not a spot on the ramp that will be open for other new projects prior to 2020... and what Fort Hills will be doing for them then won't be apparent before then...
So, IF the ongoing re-accomplishment of the work Elmer screwed up does show its worth sustaining the project [which it might not] then... they might want to decide what to do about that in the 2018 to 2022 time frame... getting it a slot on the ramp, with success, as early as 2020 to 2024.... perhaps being developed in the long lead items as early as 2022... beginning major work in 2024... getting it put in production in 2028... or... not. Risk exists, of course, that Schaft Creek, even with complete success in the current work, might not be in line to be next, or might be displaced by better opportunities that arise in the interim, so you could easily add 4 to 6 years to the time lines... pushing the early stage yes/no decisions out to 2026 or beyond... obviously well beyond anyone's ability to predict market conditions, etc.
Meanwhile, the cash that they had that Elmer claimed would last until 2018... is already gone.
If they do get a couple million in a tax refund... pfffttt... more of the same... a delay of a year, maybe two... with salaries on the line... and then...
Elmer doesn't appear to have learned anything at all useful from the monumental screw up at Schaft Creek... but is doing more of the same with two other projects, now... while the focus of the efforts and the basic survivability of the company are apparently still fully dependent on the decisions made by a single investor... whose risk tolerance and interest (and decision making) clearly isn't all that well aligned with the interest of the average shareholder.
Shaft Creek... is basically wholly irrelevant in any proper analysis of Copper Fox's current potential... leaving investors to focus on the near term impact of the company having shot the wad on more recent projects, generating large requirements for additional $ to complete them, the requirement generating growing survival risks in the near term... which is all that is relevant, and all that rational investors or potential investors here should be focused on, now.
My own (admittedly cynical) analysis of the patterns apparent here suggests that they're fully intending to kill off Copper Fox, now... or, push it out of the way, as time (and the statute of limitations) allows, in order to bury and distract from the risks that were generated and realized by the legacy in the Shaft Creek screw ups. This well has been poisoned. So, baring major reversals in the market trends (a growing economy, booming copper demand, rising prices... a reversal in trends on the TSXV) they'll have to move on to another. Companies that fail... shrink, or evaporate... leases persist, expire, or transfer... properties always outlive the leases and the companies, perhaps re-emerging as interesting to someone else again a decade or a century later... while management trumps geology, and lives to trump geology again in the next round... with or without the benefit of a learning curve.
The legacy of risks that survive the promotion of the fiction of "negative copper costs" isn't just about risk for current shareholders... that risk also has to condition Teck's current and future planning... so the Copper Fox well not the only one poisoned by the risks Elmer generated... which requires a fallow field for a season or two.
Given Copper Fox has deliberately made itself into the largest (but not yet majority) shareholder in another company... they'll probably determine "soon" (based on timing driven by internal planning factors... or the market realities) that they need to reduce costs in the redundancies... which will make that company the surviving entity... and which will probably have them move to wrap everything into it. But, perhaps not Shaft Creek. Hopefully, that process (or whatever else occurs in generating a comparable result) will demonstrate a learning curve that has the effort made shedding the current management to bring in new management with a higher caliber of "skills" that extend beyond a knack for promotion.
Ultimately, the key issue here is still that the market in minerals... and minerals exploration stocks more... is on a trend that has it off the highs... if not yet nearing a nadir. There was a peak reached in 2014... based on decades of expansion of demand in China... which growth will continue, but will not continue at the pace it held over the prior 20 or 30 years. What happens next in the rest of the global economy, as a new market balance is reached, will determine prices and the future fate of mineral producers. The prior pace of Chinese growth, though, has anticipated and pre-filled a larger pipeline than will likely be needed in the near future... so, determining how the ongoing unwinding in exploration ends, and when it will turn... is a wide open question...
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