Copper Fox Metals CEO: Green Initiatives Could Help Drive Copper Demand

Copper Fox Metals CEO: Green Initiatives Could Help Drive Copper Demand


Joining me now is Elmer Stewart from Copper Fox Metals. First of all, before we get started, what’s your symbol, and what exchange are you on? Our symbol is CUU, and we are trading on the Toronto Venture
Exchange. You know, one of the most interesting things that I note about you
and your team, I’ll get you to explain a little bit who your team is, is how
focused you are on copper. Like, I don’t think that there’s anything that you’ve
talked to me about copper that you don’t know, and know firsthand. Why is it, from a investors perspective, so fundamental to appreciate and
understand the depth of knowledge that you have in the metal itself, and what
the market is? I’m asking you to blow your own horn here. That’s right, I don’t expect the average person on the street to understand the
industry and where the industry is going as much as I do because I do spend
a lot of time following trends because to be successful, you’ve got to know. You
got to be able to figure out where the trend is taking you. But if you’re asking me why we’re in the copper space, well, that’s a very simple
answer. I think the demand for copper is going to keep rising for various reasons,
like the green initiative replacement of infrastructure, emerging economies,
growing economies, replacement concepts and things like that. The issue is, as we
talked about earlier, where is the copper coming from? People, the pundits will
say, we have an absolute – this is the lowest amount of development projects
that have been in the pipeline for decades. Head grades are declining, longer lead times, expiration discoveries are declining rapidly, even though we’re
spending more money, we’re finding less and, simply, the history will show you
one project, one prospect, in 10,000 will get through the feasibility stage. 1 in 10,000. What’s the current consumption in the marketplace right now, and what’s it projected to grow over the next year or two? Right now, the consumption is approximately about 23 million tons of copper and that’s the
copper metal. The projections, the conservative
projection, is about 2%. Some people will say it’s 3, some people say it sinks. Now that’s on an annual basis. On an annual basis. Yeah. So to quantify that:
if you consume 23 million tonnes of copper, it reaches by 2 percent, you need
460,000 new tons of copper coming into the market, and we don’t have the
minds to do that. It’s as simple as that, and there are projects on the table that
will do that, but that is compounded annually. So, if you look at it,
it’s not a very good forecast for supply of copper, it’s great for the demand side,
but not the supply side. Well, I wonder whether or not those estimates might be a little bit low too, because if we see the growing interest and production
of electric vehicles, because they will consume a lot of copper. Much
more so than the standard gasoline-powered vehicle. And then there
are emerging economies and they need the copper for every aspect of life, from
industry through to, you know, somebody being able to turn on the light with a switch. You know you’re absolutely correct, because the green
initiative is a new initiative and it depends. Some people are forecasting it’s
going to require a million tons of copper a year. That is in addition – That is just for the green economy. That’s in addition to the
consumption that happens outside the green initiative. Now, if the
emerging economies start to pick up and grow, and they all seem to be growing
at the same time, which is good for the world. That will add more demand. It gets back to the same thing. Where are
you going to find it? Now, the price will allow mining of lower grade. But deposits are only finite. They only go so far and then
they’re done. And, you know, if you look at some of the forecasts, whether they’re
accurate or not, they’re forecasting now, your international copper study
groups, are forecasting by the year 2035, 200 mines will go out
of production because they are depleted. So, 2032, that gives you 13 years, 200
mines, you’re talking, what, 13 mines a year? They need to be replaced to keep up
with current demand, not necessarily increased demand. Sure, yep. That’s exactly it, and if that forecast is correct then the only conclusion you can draw is,
we have to find more copper and it’s not because we haven’t been spending money.
They’re getting harder to find, they’re getting deeper, even though there’s
really big advances in the exploration way to look deeper and deeper and deeper,
it gets right down to the amount of cost, and the deeper you have to look, the less
chance you have making a discovery. So you have about five projects sort of
in different stages of development at this point. Let’s start with your number
one up in northeastern British Columbia, the Schaft Creek project.
Tell me a little bit about that and you’ve got a pretty good joint
venture partner on that one. We we’re very lucky to have Teck as our
joint venture partner. A project gets to that size,
you’ve got to know when to fold them, and the fact that Teck came in and backed in
and exercised their back-in-rights, that I think was a real good thing to happen
to Copper Fox, and for the Schaft Creek project, because we took it about as far
as we could from a technical standpoint. Teck will be able to take it further, should it deserve to go further. It’s a big
project, it’s an advanced stage development project, its minimum of
approximately 1.6, 1.8 billion tons of mineralized rock. We don’t know how big
it is, it’s a district play and it’s those kind of projects that could last
for decades, which is what the majors are particularly looking at. So when you attract a partner like Teck, in a way, it is the ultimate validation of your
ability to identify potential resource. Ok no, no we didn’t…we didn’t attract Teck. Copper Fox got the
project by way of an option agreement from Teck in 2002 and, Teck being astute, what they did was, okay, you have to do this, this and
this and the ultimate thing you have to do is deliver a feasibility
study, and when you do we have the right to back in for up to 75% of the project.
So they were thinking ahead about preserving right to back-in. So
when I became involved in Copper Fox in 2009, we pushed through to the
feasibility stage because our investors and shareholders say well, what’s Teck
going to do, I don’t know what Teck’s going to do because, I just don’t. So we
did a feasibility study, we took a conservative approach to it, we gave Teck
this study and they said well we’re coming back in, coming in for
75%, so let’s start negotiating the joint venture. And the fact that we did
the study that was conservative enough, that was good enough for them to warrant
coming back in, I think that for us was a major win. Well, is it not once again conformation, though, about your ability to confirm that that resource is there? And it’s almost the end game now in our strategy of acquiring exploration projects, taking
them through the development stage and then finding a partner to do something
with them. And that is our strategy. We don’t want to be in the mining business, but
we’d like to take projects to a stage because we feel comfortable doing that.
But, our end audience is always going to be a copper producer. Always only copper. Only copper and in North America, only in North America. Why do you want to stay only in North America? Because we hear about people you know going on researching global opportunities. But you say, no,
we’re gonna be disciplined and stay here in North America, what’s the reasoning? Well I’ve got a lot of experience in
international. South America, Central Asia, Africa, worked in Australia for a
while, did some Philippine work, Mexico, and when I came back to Canada, or
took on this job at Copper Fox, North America has two porphyry copper
districts. One is in the Laramide of Southwest United States, ie Arizona, and
the other is northern British Columbia. Copper Fox already had a position in
Schaft Creek because they were the operator, subject to exercise the back-in. So one of the things they did was, I said,
I don’t like companies that only have one project, project fails,
company will fail. So I convinced the board, so we took on some other assets. We looked in northern BC because we think there’s other deposits to be found there,
and in Arizona, we think there are deposits to be found there. For
example, our Mineral Mountain project in Arizona, 2015, it was an acquisition we
did and we now have a porphyry target there that’s 4,500 meters long, 2,000
meters wide, and it’s got all the characteristics of porphyry copper
system. Disseminated copper moly
mineralization in a big area and we’ve got the B veins, we got the D veins on surface, we haven’t found the A veins, maybe we have, a lot of
fracture control mineralization, and as a potassic alteration and a great 62
million year-old Laramide intrusion. So, what we’ve done, we’ve de-risked the company from a portfolio prospect and you’re
almost like a prospect generator. You do some work, you move the project along. The question is, when do we execute the strategy? And by taking Schaft
Creek and moving it into Teck that is almost the completion of the
execution of our strategy. Ultimately, actually, it would be when we would
be able to dispose of our interest in Schaft Creek. And then move on and once again identify other opportunities. Yeah, and so that would be
Van Dyke, which is in Arizona. It’s an ISL project, it’s at the
preliminary economic assessment stage. We could move that along, but then we have a
gap in our portfolio. So then we got to go and find another project, and they’re
not easy because since 2013, we’ve looked at about 80 copper projects and
we’ve only taken on 1 out of 80. Only one. One. Because the people we have are all experienced in mining operations. My
career has spanned from exploration, through discovery, all the way through to
production. My mining engineer I use, he has
got the same background. We have access to very knowledgeable metallurgical
engineers, resource people, environmental people, and we use them all the time
because when we take a look at a project, we do a very deep due diligence. Why?
Because we try to identify the fatal flaw, because what is the use of buying
somebody else’s problem? The worst you’re going to end up with is the project goes
nowhere, but just still have the environmental liability to reclaim the project. And we are very concerned about that. We’re not, again, we
want to find projects, but they have to pass the very rigorous due diligence process. And, if they don’t, we’re not interested in it. We’re not in a rush just to find a
project. So we’ve talked about your top two projects, in a moment, you got three
more right? We have an investment in a porphyry project in northern BC,
that’s through another company, another publicly traded company. It’s a good
exploration stage project, but we have two projects in Arizona. And these are
what we call Laramide porphyry copper systems. Mineral Mountain probably being
the most advanced of the two right now, depending what you think. We also have
another one called Sombrero Butte, which is about a mile and a half south of the
Copper Creek Deposit and we have mineralization, geophysical target, it’s all at the drill ready stage already. And the reason why we have
those is because you can create a lot of value through exploration. You can just
drill the discovery hole and see how the industry looks at your company vis a vis, when you don’t have it. When you’re talking to potential
investors saying, ‘well, why should I put my money into your company’ what do you
tell them that gives them that sense that this is a sound investment
for me? Despite the fact that you, you know, you’re such an early stage company. Well I don’t give investment advice based on the advice of my lawyer. But you do talk to people and they’ve got questions. We do, and I answer
their questions as best I can. But here’s the thing, Copper Fox is
primarily set up for, if you’re interested in taking an equity position in the copper space well then you should look at Copper Fox.
I think it’s a very compelling case there. And for the following reasons:
we’ve got a good, balanced portfolio of properties, the most advanced property is
in the hands of a very good operator, and we have a carry joint-venture
interest. So we also have a second development stage project, which is our
Van Dyke Project, and if you put those two projects together, based on the 2013
study for Schaft Creek, and the 2015 study for Van Dyke, you’ve got a net
asset value of around 90, 92 cents a share. Now, the market doesn’t reflect
that right now, but in addition to that you’ve got real upside on making an
exploration discovery either on Sombrero Butte, Mineral Mountain or that company
we have the investment in in northern British Columbia, they could make a
significant discovery. That would be more adding value to our company. So
if you look at it, the other thing is we have a, like, I’ve already gone over the deep, technical knowledge of the people, but our shareholders –
15% the company’s owned by the insiders. And we have a major shareholder and he’s a long-term bull on copper and
gold, so he likes he likes what we’re doing. But the thing is, it’s all value driven
and in the end shareholders have been really good, but the bottom line is you
know, it’s like, we think we’ve de-risked the project so much and if you talk to
some of these traders, they look at these asymmetrical trades, and I’m not sure what that means to me, but if you read what they say, well, there’s low
risk, or there’s high reward, and if you’re coming into a copper cycle like
we did in 2009, we went from 5 cents to 2 dollars and 71 cents
because we caught the leading edge of a copper cycle. If we’re coming into
another copper cycle, can history be repeated? Possibly. But we are a far more
different company now than we were in 2009. Yeah, one of the things that I think I like about you, is the fact that you’ve had a long and successful career, and you
remain incredibly enthusiastic about this company and what the future of
copper looks like. Well, I do because I’ve been in the industry now I think 40, 43, 44 years? And I still like waking up in the morning and going to work. I still
find the industry very fascinating. We’ve created a portfolio of assets and
I am pretty certain we can increase the value of that, and you know, I like getting things done. I like getting up in the morning, I like to
get things done. Sometimes it’s not so easy when the commodity cycle goes
against you, but you’ve gotta, I don’t know how to describe it. You just
get out there and try to get the job done. Well, that in itself is a fantastic
testimonial isn’t it? Well, thank you very much for sharing this, good luck.

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