Strategic Manipulation The current frenzy of debate about Copper Fox Metals (CUU) is missing the key point of the story: CUU is being strategically manipulated, either by TECK or by someone else (a person or a group). That is my opinion.
Angry shareholders and bashers seem to quickly forget that the CEO of CUU, Elmer Stewart, fought for almost two years to get permission by TECK to release last week’s long-awaited Schaft Creek Joint Venture preliminary economic assessment report, originally due before the end of December 2019. What does that tell you about TECK? If the mining giant did not care about CUU, as numerous comments have repeatedly said on various boards, TECK would not have tried so hard to delay this key document. For sure, it shows that TECK does care immensely and does not want the Schaft Creek mine to be in the public spotlight with its true value.
Moreover, the report contains a blatant flaw or mystery that seems to confirm this theory. If you read the section about key changes since 2013, the following statement was made:
“LOM average operating cost per tonne processed reduced from US$13.25/t to US$8.66/t”
So, where is this incredible saving added? This is huge: the new assessment announced 4.59 US dollars less per tonne in operating cost but nowhere in the report can this amount be added to the new value of the mine. Can some 1.03 billion tonnes of copper over a 21-year lifespan costing 4.59 US dollars less per tonne not increase the value of the mine by at least a billion dollars or two? No, this reduction just disappeared in the calculations! Really? Either the report is flawed or intentionally misleading…
Thus, if you believe that TECK does not want to attract potential buyers on Schaft Creek, this toned-down economic assessment report with its long delay and low-key numbers makes sense. About six years ago, a Canadian Securities Exchange (CSE) broker told me in person that TECK was going to wear down CUU and could wait 20 years before committing to the Schaft Creek mine. In 2015, I laughed at him and refused to believe his words. Today, he is the one laughing at me. TECK can try to hold off as long as it wants on Schaft Creek just to force CUU to fold or to be bought as a whole at a real cheap price, like the ridiculous share value today on the Toronto Stock Exchange (Venture market).
What is really frustrating is also the fact that the market never takes into account the four other mines owned 100 % by CUU. They need to be acknowledged: Elmer did a fantastic job of diversifying the company with Arizona and Canadian mine purchases bringing new and attractive potential in, and creating future value to the company outside the TECK joint venture. The other mines (Van Dyke, Sombrero Butte, Mineral Mountain and Eaglehead) consist of exploration and development properties, some with substantial drilling work already completed on them. Sadly, the current CUU stock price and board discussions only focus on the Schaft Creek project but the rest is as valuable, if not more, than Schaft Creek itself. One day, the market will realise the full value of these great acquisitions.
In addition, it should not be forgotten that last week’s financials showed a healthy sum of 3,781,225 dollars in the bank as of July 2021. How many junior mining firms sit comfortably on almost four million dollars in reserve for future exploration and development projects? The current stock price is definitely a joke when viewed from this angle.
For all the above reasons, it is time for Elmer to act independently from TECK and move on. I have said it before: CUU needs to announce an exit plan for Schaft Creek to free its other mine projects and have the stock price rise to its true potential. CUU must put Schaft Creek up for grabs now and/or divide the firm in two because nothing will move under the current circumstances. There is such a strong manipulation of the stock price, quite evident in the last few trading days, that this is the only alternative to reward long-term and retail shareholders with their due.
This finally brings the issue of the CUU majority shareholder into play. What does Ernesto want? Can he be behind this strategic manipulation of CUU, since only he can decide to allow the sale of Schaft Creek or the splitting of the company? Is there an advantage for him, either financially or fiscally, to delay the growth of the share price? Nobody knows but it is high time for a decision! CUU is controlled by Ernesto and a sale/split cannot take place without his approval. Unfortunately, nothing out of this discussion was even remotely mentioned at the last annual general meeting, but that is still the big elephant in the room…
As long as CUU delays taking charge of its own destiny with a publicly-announced exit plan, strategic manipulation of the firm and of its share value will continue indefinitely.