Copper Fox's main asset is 100% working interest of Schaft Creek, one of the largest undeveloped copper-molybdenum-gold-silver porphyry deposits in Canada located in northwest British Columbia.
Copper Fox: Advancing North America's Largest Undeveloped Copper-Gold-Molybdenum-Silver Deposit
COPPER Fox Metals (TSX-V:CUU)(“Copper Fox”) primary focus is to develop the Schaft Creek Deposit in British Columbia, which is the largest undeveloped copper, gold, molybdenum and silver deposit in North America.
Copper Fox Metals’ Schaft Creek is subject to a “earn back” option held by Teck Resources (TSX: TCK.A, TCK.B, NYSE:TCK). Teck can earn up to a 75% interest in the project by paying up to 400% of expenditures incurred on the project, on completion of a feasibility study.
Copper Fox has already incurred $60 million of approved expenditures on the Schaft Creek project, and is now completing an updated resource estimate that is expected to be completed by the end of March 2011.
On receipt of the feasibility study Teck has 120 days to decide whether it exercises one of its “earn in options” at 20%, 40%, or 75%, or retains a 1% Net Smelter Return Royalty, or accepts shares in Copper Fox to a value of $1 million, and forfeits all of its interest. Assuming that Teck exercises its maximum 75% earn in option, it will arrange funding on the entire project, with Copper Fox repaying its share of funding from a 25% share of metals sales.
A NI 43-101 Compliant Pre-Feasibility Study was completed at Schaft in 2006 and estimated Measured Resources of 436.5 million tonnes grading 0.30% copper, 0.23 g/t gold, 0.02% molybdenum and 1.55 g/t silver, and Indicated Resources of 929.8 million tonnes grading 0.23% copper, 0.15 g/t gold, 0.02% molybdenum and 1.56 g/t silver. Additional Inferred Resources exist around some of the margins of the deposit of 186.3 million tonnes at 0.14% copper, 0.18% molybdenum, 0.09 g/t gold and 1.16 g/t silver.
The same study projected a recovery of 4.8 billion pounds of copper, 255 million pounds of molybdenum, 4.5 million ounces of gold and 32.5 million ounces of silver over 23 years. Recoveries would come in the form of a copper concentrate containing 33.8% copper with additional gold and silver credits, and a separate molybdenum concentrate grading 50%, which would be processed at off site refineries.
The initial capital cost of the project was assessed at $2.95 billion, plus ongoing capital costs of $797 million. The production rate was calculated at 100,000 tonnes per day, utilizing bulk mining techniques from a large open pit, delivering ore to a crush and floatation plant producing concentrates. Metallurgical studies indicated recovery rates for copper at 88%, molybdenum at 71%, gold at 82% and silver at 72%, to output 211 million pounds of copper, 11.3 million pounds of molybdenum, 199,000 ounces of gold, and 1.4 million ounces of silver per year.
Operating costs (includng transportation, refining and smelting of the concentrates) were calculated at US$12.49 per tonne, producing a concentrate with a Net Smelter Return (“NSR”) of $31.47 per tonne, providing an operating margin of $18.98 per tonne of ore processed through the plant. The study utilized 2008 metals pricing of US$3.12 per pound of copper, $33.00 per pound of molybdenum, US$692.90 per ounce of gold and $13.09 per ounce of silver, to produce a total pre-tax revenue flow of $25.56 billion and $11.73 billion in pre-tax cash flow.
This produced a pre-tax Internal Rate of Return of 18.6% and a Net Present Value (“NPV”) of US$4.79 billion at a 5% discount rate before tax, or $2.76 billion at a discount rate of 8%. The project maintains very robust margins, where the production cost of copper drops to -$0.32 per pound after application of molybdenum, gold and silver credits, and pays back capital in 4.7 years.
The current development program has focused on defining a rich core starter pit, reducing overall capital costs and optimizing economics, , and an increase in the process rate to 120,000 tonnes per day, along with completion of environmental studies. Revenue flows should also increase due to higher metals prices.
In early 2010 deep earth imaging surveys at Schaft Creek confirmed that the southern portion of the deposit is approximately 1,500 meters wide and 250 meters deep and has been well tested by diamond drilling across its width. The relatively undrilled northern portion has a different geophysical signature that is about 1,500 meters wide and is open at depth below 500 meters, and extends for approximately 800 meters to the east under Mount LaCasse.
In the second half of 2010 additional technical studies confirmed that the deposit extends to the north and south for a total strike length of 3,200 meters, and that the center of the deposit contains an anomaly that measures 1000 meters in length and 500 meters in width and is open at depth.
In mid 2010 diamond drilling commenced on a higher grade starter pit, measuring 600 meters in length by 200 meters in width. DDH CF398 immediately extended the vertical extent of copper mineralization from 225 meters to 450 meters and was still in copper and molybdenum mineralization at the end of the hole.
DDH CF399 cut mineralization from a very shallow depth of 9.14 meters over an interval of 508.1 meters at a copper equivalent grade of 0.67%, extending mineralization 175 meters to the east, and adding an extra 125 meters to the resource at depth.
DDH CF401 cut mineralization from a depth of 5.66m over an interval of 489.5 meters at a copper equivalent grade of 0.75%, extending mineralization a further 130 meters to the east and an additional 100 meters at depth.
CF399 also intersected 54.5 meters of copper equivalent ore grading 0.94% at a depth of 462.7 meters, and CF401 had even a higher grade of copper equivalent ore grading 1.17% over 83.8 meters at a depth of 345.4 meters. (why not update this to include DDH 403 and DDH 405 as well?
Based on deep earth imaging and current drilling, it looks extremely likely that the mineralized tonnage could grow substantially, and the current work program will have a very positive impact on the development of the feasibility study.
Teck projects copper demand will outpace supply, and in 2020 will require new mine production of 6.6 million tonnes per year. That will require the addition of 44 mines producing 150,000 tonnes of copper per annum. Teck carries a market capitalization of $30 billion, projects a cash balance of $9 billion in 2013, and is very bullish on copper and focused on development of new and large copper projects.
Under this bullish copper scenario Schaft Creek looks set to have a bright future.