Ernesto, CUU and DCOPThis is what I think at the end of July: we are at a very crucial crossroads for Copper Fox Metals this summer and it is sad to feel that management at the firm might actually ruin this event for us. The press release published this Tuesday about Sombrero Butte was on track with the proposed expenses detailed in the last budgeting of the Spring private placement. Today, Global Vanadium announced a preliminary agreement to buy the Stoney Lake gold mine project in Newfoundland from a former subsidiary of CUU, District Copper, previously known as Carmax (CUU still owns 25 % of DCOP). This deal is good for DCOP because it has passed to Global Vanadium all cash costs required to explore the property so long as GLV wishes to continue its exploration. It is probably a good deal for CUU in that CUU has a better chance of realizing significant value in DCOP if the gold play actually works. The deal stops the need for further dilution in DCOP and CUU can sit back and see what happens on this good gold prospect with rising gold prices without any further loss of interest.
However, for the past 18 years, CUU has relied on a sugardaddy or a majority shareholder to finance its growth and development. The billionnaire investor Ernesto has always been able to provide much needed cash flow to CUU at key moments to allow exploration and acquisition projects at a reasonable cost to shareholders. It can honestly be said that Ernesto was not too greedy prior to 2020 and he also exercised a tight control over the board of directors with regards to warrants and options, etc. Compared to numerous other venture firms, CUU has not granted its senior leadership many freebies in the past decade and that was good governance so far (you can compare this to REVO/CUV if you want the opposite situation!).
Suddenly, this year alone, Ernesto has shown a darker side of his personality that totally changes the game: he forced the private placement in February/March to be re-priced to his advantage and, last week, he cancelled the accelerated warrants which would have provided CUU with highly strategic cash reserves (an extra 2.5 million dollars) to take the initiative over TECK about Schaft Creek or to develop some Arizona properties which CUU owns at 100 %. Thus, there are rules of governance in the Canadian stock market about firm directors and their fiducial responsibilities to shareholders. This time, CUU's management crossed the line in no small way.
As a result, it appears that some large insider shareholders are now considering legal action with the Securities Commission against CUU if the waiver is not invalidated soon. I totally agree with this move because it is time for CUU to act and add value to its stock! Enough waiting! Sadly, we might have to look at Ernesto today with different lenses and realize that he is impeding the growth of CUU simply to tap into more shares and more private placements in the Fall or next year. He does not seem to want a closing of the TECK/Schaft Creek issue soon either, a fact that is quite detrimental to the stock price. Maybe CUU is only a tax or money shelter for him, who knows.
Moreover, TECK must not feel any real pressure to pay for a new NI 43-101 report on Schaft Creek when it looks at how low the finances of CUU are without the additional warrants money! TECK might also want to drive down CUU into bankruptcy or private hands (Ernesto?) by delaying everything even further. One CSX senior broker confidently declared to me a few months ago that TECK could wait 20 more years on Schaft Creek, if they wanted...
Based on all the above items, I am unfortunately quite pessimistic about any good or great news release before the August AGM from what transpires at the moment from the firm. I hope that I am wrong on this but Ernesto can drag this problem over and over again. We need some decisive and beneficial moves from the firm soon because the warrants waiver was quite a cold shower on all of us when we expected a clean celebration instead...