TORONTO (miningweekly.com) – TSX-V-listed copper junior Copper Fox Metals in December announced the positive results of a feasibility study on the Schaft Creek project, in north-western British Columbia (BC), providing for a substantial, economically feasible project with significant expansion potential.
The study, which built on four years of metallurgical and geotechnical work, provides for an openpit mining operation that would process 130 000 t/d over a 21-year mine life, producing an estimated 4.88-billion pounds of copper, 4.21-million ounces of gold, 25.1-million ounces of silver and 214.92-million pounds of molybdenum.
The current project, with its nominal 130 000 t/d milling capacity, represents a 30% increase from that previously proposed in the preliminary feasibility study prepared in September 2008, with a 20% increase in the estimated capital expenditure (capex).
The study placed a price tag of $3.25-billion on the project, including contingencies totalling $374-million and sustaining capex is expected to total $1.24-billion over the proposed mine life, including $200-million for the BC Hydro tariff.
The project’s base case pretax net present value was calculated using long-term metal prices and exchange rates and an 8% discount rate, as required by Teck Resources, which has an earn-back option on Schaft Creek, at C$513-million and the internal rate of return is 10.13%, with a payback period of 6.5 years.
Copper Fox expects to deliver the feasibility study to Teck, after which Teck will have 120 days to decide what it wants to do. The diversified miner can choose to acquire a 20% stake by spending an amount equal to Copper Fox's expenditures to date, a 40% stake by spending three times Copper Fox’s investment, or a 75% stake by spending four times Copper Fox's expenses. As at mid-2012, Copper Fox had spent $84.9-million on the project.
Copper Fox president and CEO Elmer Stewart in a conference call said the company’s intention was from the outset to develop the project to be sold, and Teck Resources is believed to be the most likely candidate.
By using half of the previously established 1.8-billion-tons reserve, the feasibility study found the Schaft Creek project currently holds proven and probable mineral reserves of 940.8-million tons containing 5.6-billion pounds of copper, 5.7-million ounces of gold, 363.5-million pounds of molybdenum and 51.7-million ounces of silver. The project also has an inferred resource of 2.9-billion pounds of copper, 3.3-million ounces of gold, 206.2-million pounds of molybdenum and 31.6-million ounces of silver.
The company said the feasibility study provides for the expansion of the project based on the current mineral resource and exploration potential of the Schaft Creek mineral trend.
The potential to significantly expand the tailings storage facility, the current concentrate storage and shipping agreement with Stewart Bulk Terminals and access to electrical power are positive features that support possible future expansion of the Schaft Creek project, while also providing the opportunity to lower operating and capital costs and increase operating revenue, could be identified during the detailed engineering phase of project development.
Copper Fox said the study recommends further diamond drilling to determine the extent to which the 171.16-million tons of inferred resource that lie within the proposed openpit, now treated as waste, could be upgraded to either a measured or indicated mineral resource, that would categorise this rock as a revenue generator.
However, the Schaft Creek project is located in a remote, undeveloped region of BC. The closest provincial road to the mine site is Highway 37 and the closest town is Telegraph Creek, located about 60 km to the north.
Copper Fox is in the process of preparing its environmental assessment application, which is required before application can be made for permits to construct the access road and power line to the Schaft Creek site.
Copper Fox's plan is to reach agreement with Galore Creek Mining, comprising joint venture (JV) partners NovaGold Resources and Teck Resources, for use of the partially constructed access road. The JV partners started building a mine at Galore Creek a number of years ago but suspended the project when capital costs more than doubled.
Copper Fox proposes to jointly use the access road from Highway 37 to about Kilometre 65, including construction of the More Creek Canyon bridge and completing an additional 25.2 km of the Galore Creek road for a total distance of 65.2 km. The road is intended for moving equipment and materials to and from the site, while an airstrip capable of receiving aircraft of up to 78 passengers, would ferry personnel to and from the project.
Power for the project would be provided from the Northwest Transmission Line currently being constructed by the provincial electrical authority, BC Hydro. An 81 km, 287 kV power line would run to the processing site substation.
Infrastructure plans also provide for the construction of a 105.26 km diesel-fuel pipeline from Tahltan Depot Highway 37 to the site.
Copper Fox holds a 100% working interest in the site, but Liard Copper Mines holds a 30% carried net proceeds interest. Completing the feasibility study means that Copper Fox now owns Teck's 78% stake in Liard. Adding in the 2% of Liard that Copper Fox had bought, the company now owns 80% of Liard, which means it indirectly owns 80% of the junior's 30% net proceeds interest. Royal Gold also holds a 3.5% net profits interest in Schaft Creek.
Copper Fox’s Toronto-listed shares traded at 80 Canadian cents apiece on Monday, having dropped 23.58% of its value since the publishing of the feasibility study.