Disappointed with the REI'm deeply disappointed about this week's Resource Estimate.
Most of us, myself included, believe that Copper Fox is proving up a huge mineral resource at and around Schaft Creek. On this board we hear many speculations about the existence of multiple deposits, red blobs, purple zones, deep anomalies, etc etc and it's been fantastic to follow our company's hard work to unfold all of the hidden treasures in the rocks around Mt LaCasse.
What I have been earnestly hoping for was an official, objective confirmation, from AMEC, reassuring investors that our hopes and dreams about the expansion of the Schaft Creek deposit, are valid and that the work is making measurable progress.
Specifically, some things I was looking for were:
1. In the company's news release of June 1, 2010, and in the MDA released on June 11, 2010, management announced that the 2007 and 2008 drill results led them to believe that "a higher-grade zone of copper-gold-molybdenum-silver mineralization previously referred to as the West Breccia has been extended over a distance of 2,500 metres (“m”) and is open to the north, south and at depth".
So, I was expecting that the revised RE would show some additional pounds and ounces to reflect the good results of the 2007 & 2008 drilling. Or, alternatively, management could cherry-pick the best of these new pounds and ounces, and give us a grade increase instead.
2. The company's news release of Nov 4, 2010 advised that:
Copper Fox has commenced the re-sampling of 40 historical diamond drill holes (completed between 1960 and 1985) to check the previously reported copper-gold-molybdenum-silver content. The samples from these holes were not systematically assayed for gold possibly due to the low value of gold at that time. The historical analytical results for these holes contain high grade copper mineralization which shows a positive correlation with gold content.
So, I was expecting that the re-sampling of all of those old drill holes would find gold that had previously gone undetected and therefor not included in the 2007 RE. So, I was expecting that the 2011 RE should particularly show an increase in the gold ounces, or alternatively, a substantial increase in the gold grade.
3. Various news releases over the fall & winter of 2010 advised us of stunning results from the 2010 drill program. The Titan24 survey suggested that the there was a new, large, deep "Root Zone" of mineralization, somewhat to the east of the Paramount zone. We all knew that further drilling would be necessary to prove the extent and depth of the new "Root Zone", but I expected that the 2010 drill results were so spectacular that the 2011 RE should show a increase in number of pounds and ounces because of the preliminary "Root Zone" exploration. Or, once again, if management chose to give us a grade boost, then it would be a substantial one.
So, what did we get?
First, let me say a few words about "copper equivalent" values.
Sorry, friends, but I'm not interested in hearing about "copper equivalent" statistics. Or not now, please. As I understand it, a "copper equivalent" value is just an accounting sleight of hand, such that, for every ounce of gold, we will pretend that it isn't there and pretend that instead of that ounce of gold we have a certain number of phantom-pounds of copper. For those who play this accounting game, then of course they can fiddle with the copper-gold conversion ratio to give us a range of possible numbers of phantom-pounds of copper, depending on what they're trying to achieve with the statistics.
Since 2007 the price of gold has increased more than the price of copper, so even if the number of real ounces of gold in the ground were to remain absolutely constant over 4 years, then of course today there will be more phantom-pounds of copper for each of those gold ounces. My complaint here is that these attractive "copper equivalent" numbers don't give us any new information about the geology of Schaft Creek or what new minerals have been found -- the "copper equivalent" stats simply tell us that the price of gold has risen a lot since 2007 -- which we didn't need AMEC to tell us, since we knew it already.
Down the road, whenever we finally get that BFS, then it might be useful to do some financial calculations on the basis of "copper equivalent" numbers, but right now, friends, I'm only interested to hear about real pounds and ounces and real grades, not phantom-pounds or "equivalent" grades.
So, let's return to the main topic of discussion. Let's compare the 2007 and 2011 numbers.
In the June 2007 RE, in the Executive Summary on page i, we were told that the Measured & Indicated Mineral Resources included 1,393,282,171 tons, with an average copper grade of 0.25%, and an average moly grade of 0.019% and an average gold grade of 0.18%.
In our new RE we are now told that the Measured & Indicated Mineral Resources is 1.01 billion tons, with an average copper grade of 0.27%, and an average moly grade of 0.017% and an average gold grade of 0.18%.
So.
After all of the 2007, 2008, & 2010 drilling, and after the re-sampling of those old drill holes, what did we get?
The total Mineral Resource has gone down by about 28%.
The average copper grade has improved from 0.25% to 0.27% -- an increase of about 8%.
The average moly grade has gone down, not up.
The average gold grade has remained exactly the same.
So, friends, I'm not ready to join those of you who have been breaking out the champagne to celebrate what a fantastic Resource Estimate this was.
To me, this RE is a bitter bitter disappointment.
What did we get for the 2007 & 2008 drilling? Zilch.
What did we get for the re-sampling of the gold in the old drill holes? Zilch.
What did we get for the 2010 drill program? Zilch.
What did we get for giving up 28% of the Mineral Resource? For giving up roughly 2 billion pounds of copper and apx 2 million ounces of gold? We achieved a miserable 8% increase in the average copper grade, and no increase whatsoever in the average gold grade.
Some of you are valiantly trying to make a silk purse of a sow's ear, but sorry, I don't buy the talk about how this new RE somehow "saves" us billions of dollars. Some forum members seem to be delighted with Table 3 and Table 4 of News Release, where the company suggests some favourable assumptions about processing costs, capex allowances, etc, but that wasn't what I was looking for during our long long wait for this RE. In any event, my understanding is that until the BFS tells us what the production costs will be, any cost numbers we see now are just assumptions, not findings, and I was looking for facts and findings about the minerals in the ground.
I wanted this new RE to do one thing, and one thing only, which was to reassure investors (especially, new institutional investors) that all of work that the company has been doing to extend the Schaft Creek mineral resource has led to independently measurable results. For those of you who got what you wanted this week, fine. But for me, what this RE tells me that AMEC is urinating on all of the mineral exploration work that our company has been doing since 2006. So I'm deeply disappointed in the results.