After-Tax NPV8 US$842.1 million (C$1.1billion); IRR 12.9%
Pre-Tax NPV8 US$1.4 billion (C$1.8 billion); IRR 15.2%
Projected After-Tax Payback 4.8 years
Metal Price Assumptions: Cu: US$3.25/lb, Au: US$1,500/oz, Mo: US$10.00/lb, Ag: US$20.00/oz
Copper Fox Metals Inc. (TSX-V: CUU) (OTCQX: CPFXF) is pleased to announce the results of a Preliminary Economic Assessment for the Schaft Creek copper-molybdenum-gold-silver porphyry deposit located in Tahltan Territory in northwestern British Columbia. The Schaft Creek Project covers 55,779.56 ha of mineral concessions, located approximately 60 kilometers south of Telegraph Creek near existing transportation and energy infrastructure. The effective date of the PEA is September 10, 2021, a technical report relating to the PEA will be filed on SEDAR within 45 days of this news release. The 2021 PEA will supersede all previous studies and incorporates the Updated Mineral Resource Estimate announced on March 22, 2021.
The Schaft Creek Project is managed through the Schaft Creek Joint Venture formed in 2013 between Teck Resources Limited (75%) and Copper Fox (25%) with Teck being the Operator. The PEA was prepared by Tetra Tech Canada Inc. as the general contractor on behalf of Copper Fox in accordance with NI 43-101 standards (May 9, 2016), and CIM Definition Standards (May 19, 2014) with guidance from CIM Best Practice Guidelines (November 29, 2019). The results of the PEA are presented on a 100% project basis and in US$ unless stated otherwise.
The results of the PEA are preliminary in nature. The PEA includes a combination of indicated and inferred mineral resources which are considered too speculative geologically to have the economic considerations applied that would enable them to be categorized as mineral reserves. There is no certainty that the PEA forecasts will be realized or that any of the resources will ever be upgraded to reserves. Mineral resources that are not mineral reserves do not have demonstrated economic viability.
Elmer B. Stewart, President and CEO of Copper Fox, stated: “We are very pleased with the results of the PEA and the recommended program work of C$23 million that could be considered by the Operator to advance the Schaft Creek Project to the Pre-Feasibility Study stage of study and evaluation. The significantly higher investment returns, resulting in part from project enhancements developed over the past 2 years, and remaining resources in the deposit on completion of the first 21 years of mining, provides a compelling view of the Schaft Creek Project’s financial potential. The smaller project “footprint” and ability to access hydroelectric power from the existing provincial power grid is expected to reduce capital costs, as well as lower CO2 emissions and the impact on the environment when compared to other large copper development opportunities. The Schaft Creek Project is a copper-molybdenum-gold-silver conventional truck-and-shovel development opportunity with scale, optionality and is in a Tier 1 mining jurisdiction. In the first 5 years of full operation, the Schaft Creek Project has the potential to produce, on average, 398 million copper equivalent pounds (181Kt) per year.”
Key Changes from Previous Technical Study in 2013
Summary of PEA Economic Model
The PEA, Pre-Tax and After-Tax project economic analysis (reflecting constant 2021 US dollars) of the Schaft Creek Project is based on payable metal and was prepared on a 100% basis using revenues and costs projected into the future on an annual basis and then discounted using mid year discounting at a rate of 8% per annum to yield the NPV and IRR. Net Smelter Return, Capital, Operating and Sustaining Costs, Closure Costs, Net Proceeds Interests payments, BC Mineral Tax, and Federal and Provincial income taxes are included in the financial analysis. Metal prices are based on Long Term consensus metal prices (Energy and Metals Consensus Forecast, inflation adjusted pricing dated June 2021). Notes to accompany the tables are included at the end of this news release.
The Operational Summary for the PEA, is set out below:
|Category||Unit||Total (1)||Annual Average (2)|
2 to 6
|First 10 years||LOM||Years
2 to 6
|First 10 years||LOM|
|Total Material Moved||Mt||546.3||1,236.4||2,073.6||109.3||123.6||98.7|
|Total Material Processed||Mt||243.0||469.0||1,030.2||48.6||46.9||49.1|
|Head grade – copper||%||0.288||0.281||0.265||0.288||0.281||0.265|
|Head grade – gold||g/t||0.203||0.187||0.157||0.203||0.187||0.157|
|Head grade – silver||%||1.225||1.202||1.229||1.225||1.202||1.229|
|Head grade – molybdenum||g/t||0.014||0.015||0.017||0.014||0.015||0.017|
|Copper equivalent (3)||Mlbs||1,990.5||3,694.3||7,497.8||398.1||369.4||357.0|
|Revenue (net of TCRC)||$USM||5,867.4||10,867.4||21,959.1||1,173.5||1,086.7||1045.7|
|Site Operating costs||$USM||(2,092.5)||(4,337.8)||(8,921.5)||(418.5)||(433.8)||(424.8)|
|Concentrate transportation costs||$USM||(181.4)||(342.1)||(709.4)||(36.3)||(34.2)||(33.8)|
|NPI & Other Offisite Costs||$USM||(45.3)||(200.4)||(593.1)||(9.1)||(20.0)||(28.2)|
|Free Cash Flow (including Initial Capex)||$USM||747.4||2,578||7,376||124.6||257.8||351.2|
|Free Cash Flow (excluding Initial Capex) (1)||$USM||3,167||5,231||9,964||633.4||523.1||474.5|
|Cash Costs (4)|
|Before by-product credits||$US/lb.Cu||(2.17)||(2.40)||(2.56)||(2.17)||(2.40)||(2.56)|
|After by-product credits||$US/lb.Cu||(0.46)||(0.77)||(1.00)||(0.46)||(0.77)||(1.00)|
|All-in sustaining costs||$US/lb.Cu||(0.72)||(1.00)||(1.18)||(0.72)||(1.00)||(1.18)|
|Initial Capital (direct, indirect, contingency)||$USM||(2,653.2)|
|Closure costs||$USM||included in sustaining capex|
|Net Present Value (8%)||$USM||1,383.5|
|Internal Rate of Return||%||15.2|
|Payback Pre-Tax (5)||years||4.4|
|Net Present Value (8%)||$USM||842.1|
|Internal Rate of Return||%||12.9|
|Payback Post-Tax (5)||years||4.8|
Revenue split by commodity is copper (66.6%), gold (22.7%), molybdenum (9.3%) and silver (1.3%).
The PEA After-Tax Annual and Cumulative FCFs, EBITDA and Capital Cost Expenditure are shown below:
Schaft Creek Financial Summary Chart
The sensitivity and incremental percentage change (8% discount rate) of the EBITDA, Free Cash Flow and NPV based on incremental changes in metal prices, FOREX (CADUSD), Operating costs, and Initial Capital costs on after-tax basis are shown below:
Schaft Creek Sensitivities
Note: Green represents an increase in the input variable; grey represents a decrease. Base Case=The economic analysis in this news release.
Note: Images in this news release can be seen on the PDF version of the news release located on SEDAR and our website www.copperfoxmetals.com.
After-Tax Schaft Creek Project Economics
The After-tax NPV and IRR, after applicable Federal and Provincial tax are deducted, are US$842.1 million and 12.9%. Payback of initial capital is achieved in 4.8 years from commencement of operations. The BC Mineral Tax (Provincial Resource Tax) is deductible from Federal and Provincial taxes payable. Federal, Provincial and BC Mineral Tax payable based on the PEA financial model are outlined below:
|Estimated Taxes Payable|
|Tax Component||LOM Amount (C$M)|
|Corporate Tax (Federal)||1,432|
|Corporate Tax (Provincial)||1,145|
|BC Mineral Tax||1,198|
Capital Cost Estimates
The major items of the initial capital cost estimate (accuracy of +/- 30%), as of Q4 2020 which covers direct field costs, indirect costs associated with design, construction, and commissioning with no allowances for inflation or escalation, are outlined below. The estimates are consistent with a Class 5 estimate. Capital intensity (excluding contingency) is estimated to be approximately C$20,200 (US$15,500) per operating tonne and C$17,200 (US$13,200) per operating tonne of payable CuEq(3) production. (Note: CuEq is estimated using accepted metallurgical recovery for each metal and the metal price assumptions used in this PEA).
|Initial Capital Costs|
|Stockpile & Reclaim||54.3||41.8|
|Grinding, Flotation and Regrind||649.4||500.0|
|Tailing Management Facility (TMF)||178.2||137.2|
|Site Services and Site Utilities||38.3||29.5|
|Plant Mobile Fleet||8.8||6.8|
|Off-site Infrastructure and Facilities||106.8||82.2|
|Total Direct Costs||$1,683.2||$1,296.1|
|Total Indirect Costs||$1,001.3||$771.0|
|Total Direct and Indirect Costs||$2,684.5||$2,067.1|
|Contingency (@25.0%) + provisions||761.2||586.1|
|Total Initial Capital||$3,447.3||$2,653.2|
The main components of the LOM sustaining capital are set out below:
|LOM Sustaining Capital|
|Total Sustaining Capital||848.73|
The LOM site unit operating cash costs per tonne processed are set out below:
|LOM Processing Costs|
Note: Mining includes the cost of mining waste and processed material. The LOM average strip ratio is estimated to be 1:1.
PEA Project Description Update
Social and Environment
Copper Fox completed environmental baseline work on the Schaft Creek project between 2006 and 2013. Since 2013 additional environmental baseline work has been carried out by the Schaft Creek JV. Copper Fox is committed to working with its JV partner to develop and operate the Schaft Creek Project in a safe, ethically and socially responsible manner while maximizing benefits and economic opportunities for local First Nations and other communities, including employment, training, and using local service providers.
A review of the current Provincial and Federal environmental regulations indicates that the PEA project design should not present any issues pursuant to Provincial and Federal requirements in the Environmental Assessment process.
Reclamation plans for the TMF, open pit and waste rock are set out in the PEA. These plans will be considered and updated throughout design, construction, and operation of the Schaft Creek Project to help ensure that these objectives can be achieved.
Updated Mineral Resource Estimate
The Updated Mineral Resource Estimate for the Schaft Creek Project was announced on March 22, 2021. Approximately 80% of the mineral resources in the Schaft Creek deposit are classified as Measured and Indicated.
Mining of the Schaft Creek deposit is planned as a conventional truck-shovel open-pit mining operation. Total mine production is estimated to be 1.03 Bt of mill feed and 1.03 Bt of waste rock resulting in a LOM 1:1 strip ratio. Annual mined tonnes range from 46.9 to 165.0 Mt, averaging 98.7 Mt LOM. The 21-year mine plan utilizes approximately 60% of the mineral resource base and provides options to extend mine life and/or increases in throughput.
Mining operation will commence in an area of higher-grade material for processing in years 1-5 of milling operations before transitioning to the south end of the Liard zone. The push back to the north results in increased annual tonnes of waste mined to provide access to mineralization mined in the next phase of the mine plan. The final phase extends to the ultimate pit bottom which based on the resource block model would end in mineralization. The mine plan includes a stockpiling strategy to ensure optimal LOM mill feed grade. Run-of-mine ore would be delivered to a gyratory crusher at the edge of the pit and transported via conveyor to a coarse ore stockpile near the mill site.
Waste material will be used for road, TMF and infrastructure construction with the balance stored in two separate areas located at varying distances from the proposed open pit.
The processing plant is designed with a planned nominal throughput of 133,000 tpd (at 92% capacity). The annual throughput varies from 48.5 Mt to 51.5 Mt per year averaging 49.1 Mt per year, primarily due to the comminution characteristics of the mineralization.
The milling process is a conventional grinding and flotation circuit, consisting of two process trains to produce a high-quality copper concentrate with significant gold and silver by-product credits and a separate molybdenum concentrate. Each of the process trains consists of SAG mill – ball mills – pebble crushers primary grinding, bulk rougher/scavenger flotation, bulk concentrate regrinding and cleaner flotation circuits. The bulk concentrate produced will be separated to produce market grade copper-gold-silver concentrate and molybdenum concentrate. LOM metal recoveries to copper concentrate containing 28% copper are expected to be 83.1% for copper, 71.0% for gold and 40.3% for silver. The molybdenum recovery to the molybdenum concentrate (containing >50% Molybdenum) is estimated to be 60.1%. Tailings would be transported to the TMF through pipelines.
Forecasted Metal Production
The Schaft Creek copper deposit contains low, but significant gold, molybdenum and silver concentrations. By-product metal credits account for approximately 33% of the CuEq production attributable to the Schaft Creek Project. Metal production is highest in the first five years of full production primarily due to mining of higher-grade mineralization. In the first five years of full production, the average recoverable CuEq production is estimated to be approximately 398.1 million lbs. (180.6 Kt).
LOM, the copper concentrate is expected to contain on average 28% copper, 14.1 grams per tonne gold and 63.0 g/t silver with a moisture content of 9% and the molybdenum concentrate is expected to average 50% molybdenum with a moisture content of 5%. The Schaft Creek copper concentrate as modeled is considered a premium copper concentrate in terms of copper grade, gold-silver by-products and low deleterious element content. The estimated LOM metal and “dry” copper and molybdenum concentrate production is summarized below.
|Concentrate Metal Production|
|Copper Concentrate||tonnes (000’s)||418||393||385||8,091|
|Copper in Concentrate||Mlbs||258||243||238||4,995|
|Copper in Concentrate||tonnes (000’s)||117||110||108||2,266|
|Gold in Concentrate||oz. (000’s)||233||205||176||3,695|
|Silver in Concentrate||oz. (000’s)||770||721||782||16,413|
|Molybdenum in Concentrate||lbs. (000’s)||9,092||8,984||10,784||226,457|
Note: (1) Based on first five years of full production. Year 1 is partial year of production and not included. Numbers are rounded.
The most cost and time-efficient way to ship copper concentrate from Schaft Creek to the Asian markets would be trucking the concentrate via Highway 37 to the deep-water port in Stewart, BC, then transported via ocean-going vessels. Molybdenum concentrate will be bagged, sealed, placed in standard cargo containers, and trucked to the port facility in Prince Rupert, BC, for shipment.
Tailings Management Facility
The TMF has been designed based on the most recent guidance on construction and operation of tailing impoundment facilities. The initial design capacity of the TMF is approximately 1.0 Bt, sufficient for the 21-year mine life. The capacity of the TMF can be expanded significantly with minimal modification to the overall TMF footprint to accommodate up to approximately 2.0 Bt of tailings. The south end of the TMF is located approximately 1.8km northeast of the milling facilities.
The closest provincial road to the Schaft Creek Project is Highway 37. Power would be provided from the Northwest Transmission Line, located on Highway 37, owned by BC Hydro, the provincial electrical authority. The locations of project facilities and other infrastructure items were selected to take advantage of local topography, accommodate environmental considerations, and for efficient, safe and convenient operation of the mine.
The required Project Infrastructure includes:
The Schaft Creek Project is operating under a five-year Multi-Year Area Based permit for exploration related activities. The MYAB was granted in 2018 and expires in 2023. To obtain an Environmental Assessment Certificate and Federal approval, a Province of British Columbia Environmental Assessment Application and a Federal Environmental Impact Statement would be required. Access road and other permits would be prioritized based on the development schedule presented in the PEA.
Permitting, detailed engineering, equipment procurement, construction, and startup to full production, based on the PEA, is estimated to take five-years. The main stages of development include access, site preparation, construction of the TMF, process facilities and infrastructure followed by commissioning. This timeline may be modified due to the significant improvements to infrastructure in the region that has taken place since the completion of the 2013 Feasibility Study, e.g., upgrades to Highway 37 and completion of the Northwest Transmission Line.
The PEA describes a recommended work program for the Schaft Creek Project that contemplates a C$23.2M budget as part of a potential Pre-Feasibility Study. Activities include geological and geotechnical drilling, metallurgical testwork, and additional environmental and infrastructure studies to complete the PFS. The recommended budget includes contingencies, preparation of the PFS and direct costs related to completion of the recommended program.
The exploration potential of the Schaft Creek project is described in detail in the Technical Report entitled “Mineral Resource Estimate Update for the Schaft Creek Property, British Columbia, Canada”, prepared by Tetra Tech Canada Inc. with an effective date of January 15, 2021. The mineralization in the Schaft Creek deposit is open in several directions and additional drilling is required to test the extension of the mineralization in these directions.
The Schaft Creek Project covers a 12km-long mineralized trend that hosts the Discovery and LaCasse zones located between 1.5 to 3.0km north of the Schaft Creek deposit. Limited diamond drilling intersected significant intervals of porphyry style Cu-Mo-Au-Ag mineralization that is open in several directions. Several copper showings have been found north of the Discovery/LaCasse area and south of the Schaft Creek deposit. The exploration potential of the 12km-long trend is considered significant with potential to host additional porphyry style copper mineralization.
Schaft Creek Project Enhancements
The PEA identified opportunities that could enhance the investment opportunity of the Schaft Creek Project including:
Schaft Creek Joint Venture
The Schaft Creek JV was formed on July 15, 2013, to manage the exploration and development of the Schaft Creek Project. The Schaft Creek JV is owned 75% by Teck and 25% by Copper Fox. The mineral claims that comprise the Schaft Creek Project are held 100% by the Schaft Creek JV. The Schaft Creek JV has an obligation to Liard Copper Mines Ltd. in the form of a 30% Net Proceeds Interest in the Schaft Creek Project. Liard, the holder of the Indirect Interest, is owned 85.5% by the Schaft Creek JV, 1.55% by Copper Fox, with the remaining 12.95% held by third parties.
The Schaft Creek JV has the following key terms:
Net Proceeds Interests & Royalties
The Schaft Creek Project is subject to two separate Net Proceeds Interest payments. Royal Gold holds a 3.5% Net Proceeds Interest on certain mineral claims within the resource area. Based on the PEA, the NPI payments to Royal Gold are estimated to be US$258.5 million LOM.
The Schaft Creek JV has an obligation to Liard in the form of a 30% Net Proceeds Interest in certain mineral claims within the Schaft Creek Project. Liard is owned 85.5% by the Schaft Creek JV, 1.55% by Copper Fox, with the remaining 12.95% held by third parties. Based on the PEA, the LOM NPI payments to Copper Fox stemming from this Indirect Interest is US$35.8 million and US$298.9 to the other Liard minority interests.
Certain mineral claims located outside the mineral resource area of the Schaft Creek Project are subject to a 2% Net Smelter Return Royalty, one-half of which can be purchased for between C$1.0 to C$1.5 million.
Areas of Interest
The Teck/Copper Fox Area of Interest is a 2km zone around the original 2002 tenure holding. Any ground acquired by either party within this zone is added to the Schaft Creek JV, unless the ground was previously held and relinquished by either party.
Copper Fox commissioned Tetra Tech to complete a PEA on the Schaft Creek Project in accordance with National Instrument 43-101 Standards for Disclosure for Mineral Projects. Tetra Tech, Red Pennant Communications, Greenwood Environmental Inc., McElhanney Consulting Services Ltd. and Knight Piésold Ltd. prepared and reviewed this PEA.
The scientific and technical information in this release have been reviewed by Hassan Ghaffari, P.Eng, of Tetra Tech, the overall manager for the PEA.
Other qualified persons involved in the PEA were: Tetra Tech: John Huang, Ph.D., P.Eng., Sabry Abdel Hafez, Ph.D., P.Eng.; Red Pennant: Michael F. O’Brien, P.Geo.; KP: Daniel Friedman, P.Eng.; McElhanney: Brendon Masson, P. Eng.
Elmer B. Stewart, MSc. P. Geol., President and CEO of Copper Fox, is the Company’s non-independent, nominated Qualified Person pursuant to NI 43-101, Standards for Disclosure for Mineral Projects, and has reviewed and approves the scientific and technical information disclosed in this news release.
The Preliminary Economic Assessment Technical Report will be filed in accordance with NI 43-101 on SEDAR (www.sedar.com) within the required 45 day statutory period and will be made available on Copper Fox’s website at www.copperfoxmetals.com.
About Copper Fox
Copper Fox is a Tier 1 Canadian resource company listed on the TSX Venture Exchange focused on copper exploration and development in Canada and the United States. The principal assets of Copper Fox and its wholly owned Canadian and United States subsidiaries, being Northern Fox Copper Inc. and Desert Fox Copper Inc., are the 25% interest in the Schaft Creek Joint Venture with Teck Resources Limited on the Schaft Creek copper-gold-molybdenum-silver project located in northwestern British Columbia and the 100% ownership of the Van Dyke oxide copper project located in Miami, Arizona.
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