RE: Roulston Seems Unworried
Copper Fox Metals
(CUU-TSXV)
Copper Fox recently announced an updated resource estimate, confirming Schaft Creek as one of the largest copper-gold-molybdenum 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 world-class 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