Copper Fox’s most advanced asset is its 25% carried interest in the Schaft Creek Joint Venture (Schaft Creek JV). The Schaft Creek Project is managed through the Schaft Creek JV between Teck Resources Limited (Teck) (75%) and Copper Fox (25%) with Teck as Operator. The Schaft Creek JV was formed in 2013 to manage the exploration and development of the Schaft Creek Project which hosts the Schaft Creek polymetallic copper deposit, one of the largest undeveloped porphyry copper-gold-molybdenum-silver deposits in North America. The Schaft Creek Project covers 56,180 ha of mineral concessions located in Tahltan territory in northwestern British Columbia, approximately 60 kilometers south of Telegraph Creek, near exisiting seaport, transportation and hydroelectrical energy infrastructure.
Preliminary Economic Assessment (PEA) Summary
The results of the 2021 PEA were announced on September 20, 2021 and the 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 Net Present Value (NPV) and Internal Rate of Return (IRR). The 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 as deductions in the financial analysis. Metal Price Assumptions: Cu US$3.25/lb, Au US$1,500/oz, Mo US$10/lb, Ag US$20/oz. The results of the PEA are presented on a 100% project basis and in US$ unless stated otherwise.
- Pre-tax NPV8 of US$1.4 billion and IRR of 15.2%
- After-tax NPV8 of US$842.1 million and IRR of 12.9%
- Annual average EBITDA of US$695.4 million based on first 5 years (years 2-6) at full production and US$10.8 billion Life of Mine (LOM)
- Annual average Free Cash Flow before recovery of capital costs of US$633.4 million based on first 5 years (years 2-6) at full production and US$9.96 billion LOM
- Net Smelter Return (NSR) of US$20.63 per tonne (t)
- 21-year LOM producing approximately 5.0 billion pounds (lbs) or 2.3 million tonnes copper, 3.7 million ounces (oz) gold, 226.0 million lbs molybdenum and 16.4 million oz silver in concentrate
- 133,000 tonne per day LOM nominal milling rate at 92% capacity processing 1.03 billion tonnes of mill feed LOM, representing approximately 60% of identified mineral resources
- Estimated Initial Capital Cost of US$2.65 billion, not including Sustaining Capital Costs of US$848.7 million which is inclusive of US$154.0 million Closure Costs. Operating Costs are estimated to be US$8.66/t processed
- C1 Cash Costs (net of by-product credits) for first 5 years (years 2-6) at full production of US$0.46 per pound of payable copper and US$1.00 per pound payable copper LOM
- All in Sustaining Costs for first 5 years (years 2-6) at full production of US$0.72 per pound payable copper and US$1.18 per pound payable copper LOM
The key changes to the Schaft Creek Project since completion of the last Technical Study in 2013 include:
- Updated mine plan that reduced the strip ratio from 2.16:1 to 1:1
- LOM Operating Costs per tonne processed reduced from US$13.25/t to US$8.66/t
- Initial Capital Costs reduced from US$3.26 billion to US$2.65 billion
- Sustaining Capital Costs reduced from US$1.2 billion to US$815.7 million
- Re-location of the milling facility closer to the pit
- Re-location of the Tailings Management Facility (TMF) closer to the milling facility
- Embankments in TMF reduced from three to two
- Waste rock storage facilities reduced from three to two
PEA Recommended Program
The PEA recommends that the Schaft Creek Project proceed to a Pre-Feasibility Study (PFS) and contemplates a budget of C$23.2 million. 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 PEA identified opportunities that could enhance the investment opportunity of the Schaft Creek Project including:
- Additional metallurgical testwork to increase metal recoveries and reduce processing costs
- Geotechnical drilling to potentially reduce the LOM strip ratio
- Infill drilling to increase confidence in the resource model, extend the limits of the mineralization and upgrade the Mineral Resources to a higher Mineral Resource category.
- Pursue opportunities to reduce the project development execution timeline from the current 5 years
The Mineral Resource Estimate for the Schaft Creek Project are considered to be the minimum for the project (click for report). To date the limits of the Schaft Creek project have not been defined and the area surrounding the deposit is considered to have excellent potential to contain porphyry style copper mineralization (i.e., the Discovery zone, DDH 2012CF427 returned 0.24% copper, 0.14 g/t gold and 0.006% molybdenum over a core interval of 336.7m). The Discovery zone is located approximately 2km to the north of the Schaft Creek deposit and several other exploration targets in the vicinity have not been drill tested. Copper Fox has recently filed a NI 43-101 Technical Report titled “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.
|Resource Category||Tonnes (Mt)||Cu (%)||Mo (%)||Au (g/t)||Ag (g/t)||Cu (Blb)||Mo (Mlb)||Au (Moz)||Ag (Moz)|
|Meas + Ind||1,345.5||0.26||0.017||0.16||1.25||7.76||510.59||6.97||54.26|
(Mt)=million tonnes, (%)=percent, (g/t)=grams per tonne, (Blb)=billions of pounds, (Mlb)=millions of pounds, (Moz)=millions of ounces. Mineral Resources are reported using the 2014 CIM Definition Standards. The QP for the estimate is Mr. Michael F O’Brien, P.Geo., Red Pennant Geosciences. Mineral Resources are reported within a conceptual constraining pit shell that includes the following input parameters: Metal prices of $3/lb Cu, $1,200/oz Au, $10/lb Mo, $20/oz Ag, and pit slope angles that vary from 40-44³, metal prices are in US$. Metallurgical recoveries reflective of prior test work that averages: 86.6% Cu, 73.0% Au, 58.8% Mo, 48.3% Ag. Mineral Resources are reported using a net smelter return (“NSF”) cut-off of US$4.31/t. Tonnes are metric tonnes, with copper and molybdenum grades as percentages, and gold and silver grades as gram per tonne units. Copper and molybdenum metal content is reported in pounds and gold and silver content is reported in troy ounces. Totals and Metal Content may not sum due to rounding and significant digits used in calculations.
2021 Program Results
A total of 835m of the proposed 3,500m metallurgical and geotechnical drilling planned in 2021 was completed due to the onset of winter weather conditions. Analytical results for the 2021 drill holes are set our below.
Note: The core intervals listed in teh above tables do not represent true widths. CuEq=copper equivalent, %=percent, g/t=grams per tonne, m=meters, TD=total depth of drill hole.
Copper equivalent calculations are based on 100% of the copper content plus 71% of the gold content, 60.1% of the molybdenum content and 40.3% of the silver content. Metal prices used are copper $US3.25/pound, gold $US1,500/ounce, molybdenum $US10.00/pound and silver $US20.00/ounce.
2022 Program Highlights
In March 2022 the Schaft Creek JV approved the 2022 budget and program for the Schaft Creek Project. The program is budgeted at C$6.6 million and consists of up to 5,000 meters of drilling and associated metallurgical and geotechnical testwork to provide information to:
- Review construction timeline and offsite infrastructure costs to reduce initial capital cost and improve project valuation
- Confirm throughput assumptions, metal recoveries and production and ensure a ‘fit for purpose’ process design flowsheet and associated equipment selection
- Confirm opportunities to decrease the LOM strip ratio to reduce operational costs and associated greenhouse gas emissions
- Review environmental baseline data requirements in accordance with the updated project configuration
- Update regulatory requirements and associated permitting timeline
Schaft Creek Joint Venture
In July 2013, Copper Fox and Teck created the SCJV to further explore and develop the Schaft Creek project. The SCJV holds two main assets: i) the Schaft Creek copper-gold-molybdenum-silver project located in northwestern British Columbia and ii) an 85.41% equity interest in Liard Copper Mines (Liard). Liard holds a 30% Net Proceeds Interest in the Schaft Creek project subject to certain terms and conditions. Teck is the Operator of the SCJV.
Under the SCJV agreement, Teck is required to make three cash milestone payments to the Company: (i) $20 million upon entering into the agreement (received), (ii) $20 million upon a production decision approving mine construction, and (iii) $20 million upon completion of construction of mine facilities.
The SCJV agreement provides that Teck and the Company are each responsible for their pro-rata share of project costs in accordance with their interests, except that Teck is solely responsible for the first $60 million in pre-production costs. If pre-production costs exceed $60 million, the Company’s pro rata share of such costs will be set off against the two remaining cash milestone payments (totaling $40 million) payable by Teck to the Company. If pre-production costs exhaust the two cash milestone payments, Teck will further assist the Company by providing loans, as necessary, without dilution to the Company’s 25% joint venture interest.
By way of example, assuming the existing 75% interest held by Teck and the 25% interest held by the Company remain unchanged, pre-production expenditures on the Schaft Creek Project would have to exceed a cumulative total of $220 million in order to eliminate the two cash milestone payments payable to the Company through set-off, after which Teck would be obligated to fund the Company’s pro-rata share of additional pre-production costs by way of loan to the Company (at prime plus 2%).
The definitive Joint Venture Agreement between Copper Fox and Teck dated July 15, 2013, is available under Copper Fox’s profile on SEDAR at www.sedar.com.