Good day to all,
Here we are 15 years since Ernesto Echavarria took over Copper Fox Metals in July 2009 (Compensation Committee) and saved the firm from bankruptcy. Back then, only the Schaft Creek project belonged to CUU (25 %) and we all dreamed of being rich in a few years with him…
What happened since then? Below are some of my thoughts:
ERNESTO’S BEHAVIOUR
Nobody knows what Ernesto wants. For sure, he believes in the firm because he always committed to financing CUU every year or so, ever since he took over. As the majority shareholder of the company, we can honestly state that this is his baby and he controls it as he wishes. He keeps CUU afloat and he deserves our respect for that, although at the cost of a huge dilution since he came onboard. In short, Ernesto is a shrewd businessman and he never gave CUU any freebies; everything was strictly business with him and he profited from his “generosity” at each private placement with million more cheap shares in his pockets. Yet, he never sold a single share either on the open market; this needs to be acknowledged as well.
However, it is clear that he only cares about himself and not the shareholders. If the goal of a publicly-traded company is to maximise the value of the stock for the benefit of the shareholders, Ernesto completely failed in this endeavour: the price of CUU went down from about $ 2.70 in 2011 to 30 cents at the moment. Not a true success at all if you only consider share price movement.
That said, by retaining Elmer Stewart at the helm of CUU since July 2009, the company grew to acquiring four other mining projects at 100 % ownership with immense potential and value for all shareholders (3 in Arizona, 2 in British Columbia). I wrote it before and I will repeat it again: all CUU shareholders owe so much to Elmer for changing CUU into a multiple-mine asset-based firm instead of a sole-project firm. On paper, CUU is so much richer today than in 2009, and that is what keeps bringing more buyers of shares into the fray every day, even after an abysmal decade of failed realised gains. To be fair, if you bought shares in the Spring of 2020 at 8 or 10 cents, and better with warrants at 9 cents, your investment looks quite good now too.
So, what is the plan, Ernesto? What is next with Copper Fox Metals?
FAILED OPPORTUNITIES
At one recent annual general meeting, Ernesto clearly and personally declared that he was more than willing to sell Schaft Creek at the right price. This is a known fact in management circles but when will this happen? I often wrote on this discussion board that it is my sincere belief that TECK wants to stay put and wear out CUU. I think that they have no interest at all in giving CUU what it deserves and might have a not-so secret plan to wait for CUU to fold, and then buy us out at a discounted price. Just go back and analyse all the delays TECK created with Schaft Creek, the missed deadlines for exploration and drilling reports, the nonchalant attitude towards Elmer’s requests, etc. TECK just does not care about CUU and why would they! We are one tiny mouse next to an elephant…
Nevertheless, we could also add that Ernesto does not care either! In the past decade, numerous private initiatives have been offered mostly for free to the board of directors at CUU in order to break this stalemate. Some were good, others were brilliant, most were very timely and none was accepted. Ernesto rejected them all and they were never made public. The idea of splitting the firm in two components was brought forward years ago at a time when it could have skyrocketed the share price just on speculation alone. Nothing moved. Management did issue a press release last year stating that a strategic review of the company’s structure was also considered. No results yet. Time and time again, CUU missed the boat with international copper price growth or with a favourable global mining environment by not acting on a trend or a suitable context to maximise shareholder value with key moves. Ernesto does not care: he has his own plan.
So, what to expect in 2025?
THE CONUNDRUM
Sadly, all of us long-term shareholders and true believers in CUU are facing a confusing and difficult problem or question. We don’t know what will happen next year again. It is the same old, same old situation that we have been facing for the last 15 years!
The market makers and other powerful investors ignore CUU because of Ernesto controlling the firm so strongly. There is no long-term plan for them to gauge, no incentive to move the stock price at will or to increase it exponentially. And, to add to our frustration, the Venture exchange only reacts to Schaft Creek news when linked to the stock price and that is completely wrong: other projects like Mineral Mountain could be worth more than ten times what the British Columbia mine is valued at nowadays. In short, the true value of CUU should be in the dollar range ($ 1 to $ 2) just based on its current American copper supply, in my humble opinion.
What really bothers me at the moment is to hear again and again from various circles and insiders that CUU needs more time (years!) to properly assess the true value of all our new mining projects before any consideration of a sale could take place. For some, it is too soon to put Arizona mines up for sale until CUU really knows how much copper there is down there. Enough! We received the same feedback a decade ago about Schaft Creek and the 25 % project is still not up for sale, despite so many reports and drilling programs! Just split the firm and let CUU keep Arizona while Ernesto sails into the sunset with the BC mine(s). I am afraid that Elmer put us in a vicious circle where there will never be enough data yet to sell the new mines, and that more and more decade-long exploration programs will need to be funded before any major move comes with the structure of CUU. I despise this thought because if you remember well, management promised us the moon with the Schaft Creek NI 43-101 report and, guess what? It did nothing to increase the share price considerably while its (partial) results became a cold watershed for many of us.
The last point I would like to discuss is the future. Elmer and Lynn are no spring chickens anymore. There will soon be a change of leadership at the top. I felt a few years ago that Ernesto would want to reward them with a great pension fund in the form of a dollarland share price so all of us, them and loyal shareholders, could finally cash in and exit after a grand sale or so. I don’t know anymore. By bringing a younger Mexican accountant on the board of directors last March, Ernesto might have sent us the signal of more waiting, more patience and a new turnover of leaders to enter, yet again, the unknown…
The reality is that Ernesto cannot just sell Copper Fox Metals for cash. As a foreigner invested in a Canadian firm, he would be slaughtered by corporate taxes and fees, etc. He might instead want a swap for shares with TECK or another mining giant. Despite this, if he parked his money in a Canadian company to leave it there for posterity and as a safe haven, he might not even want to sell any CUU assets in the near or medium-term future! We could very well have to wait another 3 or 5 years to get some serious movement on the strategic front. That is the conundrum: we don’t know how much longer he is willing to wait. It could be shocking to discover his actual schedule and master plan…
What I learned so far is that Ernesto is a foreign billionaire investor who does not need more money with Copper Fox Metals. He never sold a single share since and he kept putting more funds into the company as every year went by. I used to think that this was a great behaviour for all shareholders. Honestly, I don’t know about that anymore.
Merry Christmas to all,