Copper Fox Metals Announces Positive Results of Preliminary Feasibility Study on Schaft Creek Copper-Gold-Molybdenum-Silver Deposit
Preliminary Feasibility Study projects pre-tax 18.6% IRR, US$11.7 billion
undiscounted pre-tax cash flow and 4.7 year payback
CALGARY, Sept. 15 /CNW/ - Copper Fox Metals Inc. (CUU-TSX-V, CPFXF-S/P)
announced today that the National Instrument 43-101 ("NI43-101") compliant
Preliminary Feasibility Study ("PFS") on its 70% owned Schaft Creek deposit in
northwestern British Columbia indicates the deposit can be developed
economically as an open pit mine and recommends going to a full feasibility
study.
The study projects (see Appendix A for "Key Project Parameters and
Results"):
- A Measured and Indicated Resource of 1.393 billion tonnes with
0.25% Cu, 0.18g/t Au, 0.019% Mo, 1.55g/t Ag at a Copper Equivalent of
0.20% cutoff;
- A Mineable Reserve mill feed of 812.2 million tonnes of 0.301% Cu,
0.212g/t Au, 0.020% Mo and 1.76g/t Ag;
- 18.6% before tax internal rate of return;
- $11.734 billion Pre-Tax Cash Flow (undiscounted);
- $2.764 billion NPV before taxes, discounted at 8%;
- The revenue generated by all the by-products covers all operating
costs and adds a credit of (US) $0.32 /lb of copper produced to the
revenue stream. Thus, a negative operating cost for copper is
estimated;
- 4.7 years before tax payback, and 4.9 years after tax payback.
"We are extremely pleased with the results of this study," said Guillermo
Salazar, President and CEO of Copper Fox Metals Inc. "This study represents a
major milestone in the progress to develop Schaft Creek and positions us to
move forward in fall 2008 with the full Feasibility Study. We have already
started this work expected to be completed in the first half of 2009".
For the base case, recoverable rock value per tonne is US $31.47 and cash
operating costs are US $12.49 per tonne. The PFS confirms the viability of
Schaft Creek and highlights the advantages of the project including: location,
comparatively low capital expenditure requirements and operating costs and
high metal recoveries."
The full report is expected to be available on the
www.copperfoxmetals.com and www.sedar.com websites in compliance with
Regulatory deadlines.
About the Preliminary Feasibility Study (PFS)
The NI 43-101 compliant PFS was undertaken by a team led by Matt R.
Bender, P.E., Director of Process, Mining & Metals of Samuel Engineering, Inc
of Denver, Colorado and independent Qualified Person who is the signatory of
the PFS report. The PFS was initiated in 2007 following completion of the
Schaft Creek Preliminary Economic Assessment (PEA). The effective date of the
PFS is August 2008. Contributors to the report include, in addition to Samuel
Engineering, Inc., include Knight Piesold, Moose Mountain Technical Services,
Associated Geosciences Ltd., Hyyppa Engineering, LLC, G&T Metallurgical,
Rescan Environmental Services Ltd., DST Consulting Engineers Inc., BGC
Engineering, McElhanney Consulting Services Ltd., HM Hamilton & Associates
Inc., PR Associates, Walter Hanych (BsC, Geol), Vandan Suhbatar (Ph.D, Met)
and Copper Fox Metals Inc. This Press Release has been reviewed and approved
by Matt Bender, P.E.
SUMMARY
For a mill capacity at Schaft Creek of 100,000 tonnes per day, the
estimated Initial Capital Expenditure is (US)$2.95 billion. This sum includes
a contingency allowance of $536.5 million (US) dollars (22%). The Exchange
Rate used throughout the report and this News Release is one Canadian dollar =
one US dollar.
-------------------------------------------------------------------------
Before Taxes After Taxes
Diesel @ $1.0/lt
-------------------------------------------------------------------------
IRR 18.6% 15.3%
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Cash Flow, Undiscounted US$11,734,537,000 US$7,692,885,000
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NPV at 8% US$2,764,475,000 US$1,597,500,000
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NPV at 12% US$1,208,843,000 US$522,898,000
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Payback Period 4.7 years 4.9 years
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Recoverable Rock Value (US)$31.47
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Life of Mine Recoverable Rev. US$25,559,408,000
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Mine Life 22.6 years
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Production Target 4th Quarter 2013
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A number of factors affected cost included in the CAPEX and OPEX
estimates from the PEA to the PFS, such as increased planned mill capacity
(from 65,000 to 100,000 tpd), market, metal price, volatilities of
construction material costs and comparable studies about rising OPEX and CAPEX
costs from other parties working in the area. These, in turn, led to a review
of forecasts and estimates for labour, construction material, sustaining
capital and working capital. This resulted in a delay in the release of this
study and an increase in the CAPEX and OPEX from those reported in last
December's PEA. The Feasibility Study is expected to be completed in first
half of 2009.
Option Agreement with Teck Cominco Limited
At present Copper Fox has earned a 70% direct participating interest in
the project from Teck Cominco Ltd, through an option agreement dated
January 1, 2002. The agreement stipulates that:
- Copper Fox can earn a further 23.4% indirect carried interest in the
project upon completion of a positive Feasibility Study.
- Teck Cominco has a right to buy back a 20%, 40% or 75% interest in
Copper Fox's interest in the project by matching one, three or four
times Copper Fox's expenditures. This right expires 120 days after
Copper Fox has presented a positive Feasibility Study, as defined in
the Option Agreement, to Teck Cominco.
- In the case of a 75% buy back, Teck Cominco is also responsible for
arranging all production financing.
Capital Costs
Total initial investment in the project is estimated to be
US$2,950,406,000 which represents the total direct and indirect costs for the
complete development of the project. Of this figure, US$1,315,484,000
represent direct mine development costs, US$610,108,000 indirect mine
development costs, US$459,757,000 are owner's costs US$536,000,000
contingency, and US$28,566,000 are provincial taxes on identified capital
expenditures.
The life-of-mine sustaining capital is as follows:
--------------------------------------------------
Mine US$232,893,000
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Mill US$220,000,000
--------------------------------------------------
Tailings US$257,486,000
--------------------------------------------------
Reclamation and Closure US$87,000,000
--------------------------------------------------
Total Sustaining Capex US$797,379,000
--------------------------------------------------
Life of Mine Total direct Taxes are estimated at US$4,041,652,000.
Cash Operating Costs
Cash Operating Costs are estimated at US$12.49 per tonne of ore for the
life of the mine. Average costs are US$4.14/t for mining, US$3.94/t for
milling, US$0.93/t for general and administration, and US$3.49/t concentrate
handling and treatment.
The revenue generated by the production of molybdenum, gold and silver
(US$14.36/t) leaves a positive balance of US1.87 $/t. This translates into an
additional credit to the copper production of US$0.32 /lb of copper produced.
FINANCIAL FORECAST
The independent PFS reports that development of the Schaft Creek deposit
is expected to produce a pre-tax Internal Rate of Return (IRR) of 18.6% and an
8% discounted Net Present Value of (US) $2,764,475,000 dollars. The base case
financial evaluation uses historical three year trailing averages for metal
prices as of August 29, 2008. This approach is consistent with the guidance of
the United States Securities and Exchange Commission, is accepted by the
Ontario Securities Commission and is industry standard.
Commodity Prices
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Base Case Prices
Based on 3 YR historical
trailing averages of the
LME as of August 29, 2008
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Copper (US$/lb) 3.12
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Molybdenum (US$/lb Cochilco) 33.00
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Gold (US$/troy ounce) 692.85
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Silver (US$/troy ounce) 13.09
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Development Plan
The PFS recommends development of the Schaft Creek deposit as a
conventional open pit, electrified, diesel truck and shovel operation. The
sulphide deposit is expected to be processed using a conventional concentrator
to produce separate copper-gold-silver and molybdenum concentrates.
The mill is designed to have a nominal capacity of 100,000 tonnes of
sulphide ore per day. Including low grade and stockpile ore, the annual
stripping ratio is estimated at 1.88 to 1.
Over a projected mine life of 22.6 years, the mill is expected to produce
4.76 billion pounds of copper, 255.2 million pounds of molybdenum, 4.5 million
troy ounces of gold and 32.5 million troy ounces of silver. Rhenium is
recovered in the molybdenum concentrate in significant quantities. At a
present price of $350 per gram of pure rhenium this may represent a
significant additional contribution to income. Copper Fox will report further
results with respect to rhenium during the feasibility phase of the project.
Should Teck Cominco decide to exercise their back-in right to acquire 75%
of the ultimate 93.4% Copper Fox interest in the Schaft Creek Project, it is
expected to be responsible for securing financing for Copper Fox's portion as
well as theirs. Copper Fox shall pay back its portion of the project debt out
of project revenues. By this time Copper Fox is expected to own 23.35 % of the
revenues generated by the project and is expected to pay its portion of the
debt financing from revenue generated by production income from its 23.35 %
equity of Schaft Creek.
Under such a scenario Copper Fox's share of production is projected to be
1.11 billion pounds of copper (22,400 tonnes per year), 1.05 million ounces of
gold (46,500 ounces per year), 59.6 million pounds of molybdenum (2.64 million
pounds per year), and 7.6 million ounces of silver (336,000 ounces per year)
over the 22.6 year mine life. The Preliminary Feasibility Study reports start
of production to be late 2013.
Environment & Permitting
Rescan-RTEC, a well regarded environmental consulting firm, has been
engaged to assist Copper Fox in the permitting of Schaft Creek. Initial
permits to support commencement of production are expected to be obtained in
the fourth quarter of 2013 in time for sales of concentrates starting in 2014.
Copper Fox is working with all levels of government and the Tahltan Nation to
complete a streamlined assessment and permitting process.
FIRST FIVE YEARS PRODUCTION SCHEDULE
At a mill capacity of 100,000 tonnes per day, the mill feed for the first
five years is expected to be a minimum of 180.0 million tonnes with a grade of
0.32% copper, 0.017% molybdenum, 0.237 g/t gold and 1.587 g/t silver. These
higher grades are expected to be a contributing factor to the rapid repayment
of CAPEX.
MILL RECOVERIES
Mill recoveries are projected to be: copper to the copper concentrate:
88.4%, molybdenum to the molybdenum concentrate: 71.3%, gold to the copper
concentrate: 81.3%, silver to the copper concentrate: 70.7%.
- The grades of the copper concentrate are expected to be: copper,
33.85%, gold, 21.9 g/t, silver, 158.3 g/t.
- The grade of the molybdenum concentrate is 50.0%, and assays 368 ppm
rhenium.
The copper grade in the copper concentrate is higher grade than industry
standard chalcopyrite concentrates because of the bornite content and should
command a premium from smelters and refiners seeking this product. The rhenium
content of the molybdenum concentrate is expected to possibly command a
premium.
RESOURCE ESTIMATES
The resource estimates prepared in 2006-2007 by Associated Geoscientists
Ltd. were reviewed and a new pit optimization plan was designed by Moose
Mountain Technical Services Ltd. of Calgary. The 100,000 tonnes per day pit
and mill feed optimization plan presented in the NI 43-101 compliant PFS is
expected to extract 812.2 million tonnes of minable reserve with a head grade
of 0.301% copper, 0.020% molybdenum, 0.212 g/t gold and 1.761 g/t silver. A
total of 1.54 billion tonnes of waste rock (LOM waste to ore ratio of 1.88) is
expected to be removed concurrently with mining and milling.
COPPER FOX ACHIEVEMENTS
Since the formation of Copper Fox, the company has spent in excess of
32 million CDN dollars in developing the Schaft Creek mineral deposit. Copper
Fox is positioned to complete the full Feasibility Study of the deposit and
readying Schaft Creek for production at a minimum of 100,000 tpd.
Key development achievements include:
- Improving historical core recoveries by drilling wider diameter holes
and using state of the art drilling technology that has resulted in
higher gold assays, but confirmed the historical copper, molybdenum
and silver assay database.
- Confirming the capability of separating copper, gold and silver from
molybdenum and the gangue materials and
- Demonstrating the capability of running a conventional 100,000 tpd
mine and mill complex that would produce high quality
copper-gold-silver and molybdenum-rhenium concentrates.
- Metal Recoveries have improved substantially.
Flotation Recovery Improvements
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Recoveries
by Flotation Historical Results (*) Copper Fox - Pre-Feasibility
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Copper 50-75% 88.4%
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Molybdenum 30-50% 71.3%
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Gold 30-50% 81.3%
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Silver 30-50% 70.7%
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(*) Hecla Mining Co. (1969-1978) & Teck Cominco Ltd (1978-2002)
Social License
Since 2005, Copper Fox has worked with the Tahltan Nation to develop a
relationship based on open, honest and transparent communication. The company
has done this by entering into agreements with the Tahltan Central Council
(TCC) and the Tahltan Nation's government, with the aim of building a solid
working relationship. These agreements include: the Communications Agreement,
which provides funding to build communications capacity within the TCC; the
Tahltan Heritage Resources Environmental Assessment Team (THREAT) agreement,
which outlines how the company works with THREAT through the environmental
assessment process; the Heritage Agreement, which outlines how the company is
expected to protect the heritage and cultural resources of the Tahltan Nation
within the Schaft Creek Project area; and a Memorandum of Understanding (MOU)
between the company and the Tahltan Nation Development Corporation (TNDC)
which ensures that Copper Fox will hire Tahltan workers and use Tahltan
suppliers when price and quality are comparable.
In addition to these agreements, Copper Fox has provided support to
initiatives and projects that support the advancement of Tahltan youth and
culture. These include: support for the Tahltan Language Camp, Youth Science
Camp, bursaries to support continuing education and support for the Resource
Forum.
As part of its commitment to open communication, Copper Fox has hosted
open houses in the Tahltan communities of Dease Lake, Iskut and Telegraph
Creek as well as the northern communities of Smithers, Terrace, Stewart and
Kitimat. As the Schaft Creek Project advances towards feasibility these
community meetings will continue and the company will seek further feedback on
the project.
Enhancement Opportunities:
Samuel Engineering notes that the economics in the PFS do not take into
account opportunities for improvement of the project economics based on:
- Further improvements to the process design based on additional
metallurgical test work, for example:
- optimizing primary and secondary grind size - thus reducing
grinding circuit size and power;
- optimizing rougher and cleaner flotation circuits - thus reducing
both size and number of flotation cells;
- optimizing concentrate grades;
- optimizing solid/liquid separation - thus reducing size of
thickeners and filters.
- Optimize tailings deposition method;
- Optimization of mill location;
- Inclusion of revenue from rhenium;
- Increasing the overall resources of the deposit;
- Conversion of Inferred Resources into Measured and Indicated
Resources; and
- Sharing of infrastructure development costs and power with
neighbouring potential producers and other stakeholders.
On behalf of the Board of Directors
Guillermo Salazar, President and CEO
The TSX Venture Exchange has not reviewed the contents of this news
release and accepts no responsibility for the adequacy or the accuracy
thereof.
Cautionary Note Regarding Forward-Looking Information
This news release includes "forward-looking information" within the
meaning of the Canadian securities laws. All statements, other than statements
of historical fact, included herein and including, without limitation;
anticipated dates for receipt, commencement or completion of permits,
approvals, construction, production and other milestones; anticipated results
of drilling programs, scoping, prefeasibility and feasibility studies and
other analyses; anticipated availability and terms of future financings;
estimated timing and amounts of future expenditures; Copper Fox's future
production, operating and capital costs; operating or financial performance;
geological interpretations and potential mineral recovery processes, are
forward-looking statements. Information concerning mineral reserve and
resource estimates also may be deemed to be forward-looking information in
that it reflects a prediction of the mineralization that would be encountered
if a mineral deposit were developed and mined. Forward-looking information is
necessarily based upon a number of estimates and assumptions that, while
considered reasonable by management, are inherently subject to significant
business, economic and competitive uncertainties, risks and contingencies. For
any forward looking information given, management has assumed that the
geological, metallurgical, engineering, financial and economic advice it has
received is reliable, and is based upon practices and methodologies which are
consistent with industry standards. There can be no assurance that such
information will prove to be accurate, and actual results and future events
could differ materially from those anticipated in such information. Important
factors that could cause actual results to differ materially from Copper Fox's
expectations include: fluctuations in copper and other commodity prices and
currency exchange rates; uncertainties relating to interpretation of drill
results and the geology, continuity and grade of mineral deposits; uncertainty
of estimates of capital and operating costs, recovery rates, production
estimates and estimated economic return; the need for co-operation of
government agencies and native groups in the exploration and development of
properties and the issuance of required permits; the need to obtain additional
financing to develop properties and uncertainty as to the availability and
terms of future financing; the possibility of delay in exploration or
development programs or in construction projects and uncertainty of meeting
anticipated program milestones; uncertainty as to timely availability of
permits and other governmental approvals; and other risks and uncertainties
disclosed in Copper Fox's continuous disclosure filings with Canadian
securities regulatory authorities at www.sedar.com. The forward-looking
information in this news release is based on Copper Fox's current expectations
and Copper Fox assumes no obligations to update such information to reflect
later events or developments, except as required by law.
This news release by Copper Fox uses the terms "resources", "measured
resources" and "indicated resources" as well as the terms "Reserves" and "Mill
Feed". United States investors are advised that, such terms are recognized and
required by Canadian securities laws, the United States Securities and
Exchange Commission (the "SEC") does not recognize them. Under United States
standards, mineralization may not be classified as a "reserve" unless the
determination has been made that the mineralization could be economically and
legally produced or extracted at the time a reserve determination is made.
Mineral resources that are not mineral reserves do not have demonstrated
economic viability. The terms "Reserve" and "Mill Feed" have been used to
define resources which extraction has been optimized and metallurgical
recoveries defined to the satisfaction of independent professional engineers.
NI 43-101 is a rule developed by the Canadian Securities Administrators, which
established standards for all public disclosure an issuer makes of scientific
and technical information concerning mineral projects. The requirements of
NI 43-101 are not the same as those of the SEC.
Appendix 'A'
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Schaft Creek Prefeasibility Study
Key Project Parameters and Results
September 9, 2008,
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Total Resource (M&I) tonnes 1,393,282,171
Total Reserve tonnes 816,706,750
LOM Mill Feed tonnes 812,230,421
LOM Waste tonnes 1,543,190,551
LOM Strip Ratio 1.88
Daily Feed Rate tpd 100,000
Mine Life yrs 22.6
Connected Load MW 146.8
Avg Power Demand MW 121.4
Power Cost $/kWh 0.0469
Foreign Exchange Rate US$1 = C$1
Total Initial Capex (000's) 2,950,406
Directs (000's) 1,315,484
Indirects (000's) 610,108
Owner (000's) 459,757
Taxes (000's) 28,566
Contingency (000's) 536,490
Working Capex (000's) 146,420
Total Sustaining Capex (000's) 797,379
Mine (000's) 232,893
Mill (000's) 220,000
Tailings (000's) 257,486
Reclamation & Closure (000's) 87,000
Total LOM Opex (000's) 10,138,610
Total LOM Opex $/t ore 12.49
Mining $/t ore 4.14
Processing $/t ore 3.94
G&A $/t ore 0.93
Conc Handling & Treatment $/t ore 3.49
Contingency (0%) $/t ore 0.00
Total LOM Taxes (000's) 4,041,652
Concentrate
Metrics Head Grades Grades Recoveries
----------------------------------------
Cu % 0.301% 33.85% 88.4%
Mo % 0.020% 50.0% 71.3%
Au g/t 0.212 21.90 81.3%
Ag g/t 1.761 158.30 70.7%
Base Case Pricing (Trailing 3 Year Avg - August 29, 2008)
Cu $/lb 3.12
Mo $/lb 33.00
Au $/oz 692.85 Direct
Ag $/oz 13.09 Tax
Cash flow Results Before Tax After Tax Effects
----------------------------------------
IRR % 18.6% 15.3% -3.21%
NPV at 0% (000's) $11,734,537 $7,692,885 ($4,041,652)
NPV at 5% (000's) $4,787,931 $2,983,847 ($1,804,084)
NPV at 8% (000's) $2,764,475 $1,597,500 ($1,166,974)
NPV at 10% (000's) $1,868,441 $979,686 ($888,755)
NPV at 12% (000's) $1,208,843 $522,898 ($685,945)
Payback Period yrs 4.7 4.9
Rock Value(*) $/t ore $31.47
LOM Recoverable Revenue $(000's) 25,559,408
Cu % 54.4%
Mo % 32.2%
Au % 12.0%
Ag % 1.4% Annual
Total Metal Production LOM Annual Tonnes
----------------------------------------
Cu lbs 4,762,524,025 211,104,788 95,757
Mo lbs 255,194,418 11,311,809 5,131
Au ozs 4,493,445 199,178
Ag ozs 32,480,015 1,439,717
CFM Portion of Metal Production LOM Annual Tonnes
----------------------------------------
Cu lbs 1,112,049,360 49,292,968 22,359
Mo lbs 59,587,897 2,641,307 1,198
Au ozs 1,049,219 46,508
Ag ozs 7,584,084 336,174
Facilities Startup 4 QTR 2013
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(*) Rock Value = LOM Recoverable Revenue/LOM Mill Feed
For further information: Investor inquiries: Jason Shepherd, Phoenix
Communications Group, Tel: 1-866-913-1910, E-mail:
investor@copperfoxmetals.com
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