Copper Fox Metals Inc. (CUU:TSX.V) assembled a team of mining professionals to help prepare an execution plan for its Van Dyke in situ recovery (ISR) copper project in Arizona, potentially leading to a prefeasibility study (PFS), reported HoldCo Markets in a June 23 research note. Details of the execution plan are expected in the coming weeks.
"The execution plan will play a pivotal role in setting the future direction for Van Dyke, the company's flagship asset," HoldCo wrote.
135% Upside Possible
"Given the recent successes seen from other Arizona ISR or heap-leach projects, such as Florence, Cactus and Gunnison, we feel that the time is right to concentrate on advancing the Van Dyke ISR project," HoldCo wrote. "This view is shared [by] management."
"As the flagship project further gets derisked under the execution plan, we maintain our CA$0.60 per share price objective," wrote HoldCo. At the time of the investment firm's report, Copper Fox's share price was about CA$0.255 per share. The difference between these prices implies potential upside of 135%.
HoldCo pointed out that Copper Fox, over the past several years, has assembled five portfolio projects encompassing billions of copper pounds in resources, yet the company remains relatively unknown. As such, it has low liquidity.
Copper Fox has 575.1 million basic shares outstanding. Its market cap is CA$143.8 million (CA$143.8M).
Phased Development Approach
As part of Copper Fox's phased approach to a PFS decision on Van Dyke, the execution plan will outline the scope, timing and estimated costs of the various programs and studies needed for this level of a study, reported HoldCo Markets. Once compiled, the company's board will analyze the results and decide whether or not to advance to a PFS.
Of Copper Fox's two most advanced projects, it makes the most sense to proceed with Van Dyke given the explorer-developer owns it outright and has minority (25%) joint ownership of Schaft Creek with Teck Resources Ltd. (TECK:TSX; TECK:NYSE) (75%).
Members of the Team
For the team that will devise the execution plan, Copper Fox chose five contractors, including Stantec, a global leader in mining engineering and design. These companies bring knowledgeable and expertise to the project; most have in-the-field experience from their involvement with two other advanced-stage Arizona ISR projects.
A preliminary geometallurgical model will also be prepared for Van Dyke so management may better understand how the copper mineralization is distributed and how variable it us. The model also will identify geometallurgical domains and identify areas for future drilling.
Two Sets of Project Forecasts
HoldCo reviewed the 2020 update of the 2015 preliminary economic assessment (PEA) of Van Dyke and presented its own project estimates. The 2020 used a long-term copper price of CA$3.15 per pound and an increased life of mine (LOM) of 17 years. It outlined an operation producing a total of 1,100,000,000 pounds (1.1 Blb) of copper. Economics were a CA$644.7M after-tax net present value discounted at 8% (NPV8%) and a 43% after-tax internal rate of return (IRR).
"Despite a low long-term estimated copper price, the resulting economics from the 2020 PEA are largely in line with some of the more advanced ISR projects in Arizona, particularly Taseko's Florence project," noted HoldCo.
HoldCo Markets, for its project estimates, used a CA$4.50/lb copper price, a $1.58/lb copper cash cost, CA$335M of initial capex and a 16-year LOM. Forecasted production 1.05 Blb of copper, average production of 66,000,000 pounds (66 Mlb) of copper per year with peak production near 85 Mlb per year. These parameters yield a CA$747.2M after-tax NPV8% and a 34.6% after-tax IRR.
Work Done Post Update
HoldCo reported that since the updated Van Dyke PEA, a geotechnical assessment of the planned decline was conducted. Hydrogeological monitoring, mineralogical and solubility studies and various other geotechnical and hydrogeological studies were started.
Results of a geotechnical study of the proposed decline concluded revealed that the current coverage of drilling data will support a PFS. It showed that the geotechnical parameters of the Gila Conglomerate are consistent and are consistent with the expected ranges of the Gila Conglomerate in other parts of Arizona's Globe-Miami Mining District. Lastly, it concluded that a roadheader could be used to excavate the spiral decline, according to a preliminary assessment of the Gila Conglomerate's rock quality.
What to Watch For
Upcoming catalysts for Copper Fox are a decision on whether or not to advance Van Dyke to a PFS.
If the outcome is a green light, the company likely will plan another drill program and carry it out after completion of the PFS. The Van Dyke deposit has significant resource expansion potential. It remains open to the southwest, where there is a 1.5-kilometer-long exploration target.
"We believe that the risk remains on the upside for further resource expansion," wrote HoldCo.
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