Copper Fox CEO Elmer Stewart: Copper Deficit Coming Sooner Than Expected

- January 11th, 2016

Copper Fox CEO Elmer Stewart took some time to chat with the Investing News Network about the results of the company’s recently released Van Dyke PEA. He also spoke about why he’s optimistic about copper prices heading into 2016.

Watch the full video below:


It’s tough out there for copper miners, but that hasn’t stopped Canadian junior mining company Copper Fox Metals (TSXV:CUU) from moving ahead with its projects.
Late in November, Copper Fox released the results of a preliminary economic assessment (PEA) for its Van Dyke in situ leach (ISL) copper project, located in Miami, Arizona. Highlights include anticipated gross revenues of $1.37 billion over the mine’s 11-year life, with life-of-mine direct operating costs of just $0.60 per pound of copper.
Copper Fox CEO Elmer Stewart took some time to chat with the Investing News Network about the results of the PEA, among other things. In particular, Stewart spoke about what led to the company’s success in hitting another milestone for the project in such a difficult market, about price assumptions used in the report and about why he’s positive on copper prices in 2016.
“I am optimistic that prices are going to go up,” he said, citing continued demand from China, growing demand from India and other economies, declining head grades and issues surrounding supply disruption. “Right now, some of the international study groups are showing or predicting a balance or a deficit in 2016,” he added. “I think we’re going to be going into a deficit sooner than people expect out there.”
Watch the video above for more of what Stewart had to say.

Interview Transcription
INN:  First of all, congratulations on completing your PEA recently.  It’s really difficult for companies to reach those milestones in this market.  And what led to your success here?  
ES:  The amount of data we got from the project when we first purchased it.  Occidental Minerals in the 1970s is a considerable amount of work drilling and actually they completed two in-situ leach tests which is essentially – Van Dyke is an in-situ leach operation – and the key for us was being able to confirm that information.  We did that in 2014 with some metallurgical test work and we did that with diamond drilling.  And that in conjunction with being able to demonstrate the value of the property at that time, we figured we had to go forward and the next question was how do we approach this project? because of its location, because of our concerns on the environment, and then.
So, what we really had to do was think outside the box because it allowed us to think about the best way to approach the project.  Clearly we chose the underground option.  So in summation, it’s basically assess what you’ve got, proper planning, and sometimes, you just have to think outside the box to make a project work.
INN: Okay.  And one thing I noticed in particular about the PEA is a very low cash cost of $0.60 per pound for production.  Why so low?  Is that just because it’s an in-situ leach project?  
ES:  Partially yes, because in-situ leach projects usually have a low-cost to produce per $0.60 pound of copper.  They also have low capital costs.  They’re very environmentally friendly and I believe that’s why they’re getting a lot of attention, not only from the industry, but also from the regulators.  
The other thing is, it’s  primarily the acid consumption.  We have a very low acid consumption as a function of the mineralization being hosted in the Pinal Schist and it’s not an in the carbonate rock, so a big factor, yes.  
INN:   Okay.  And your release for the PEA mentioned a base case of $3.00 per pound of copper and right now, the spot price for copper is closer to $2.00 a pound, so, why the difference there?
ES:  The difference essentially is, we looked at the lead time on the project.  And the lead time is a minimum of three years.  So, to forecast using these prices would be erroneous.  So we did a consensus based on industry, based on the banks, and based on industry groups who study the copper sector.  And 2019, 2020, $3.00 was the lowest of the consensus prices, and we felt that was a good price to start using to value our project because that’s essentially if it goes for, that would be the earliest the project would come on production.
INN:   Yeah, that certainly makes sense.  That said, will you still look at lower price case scenarios?
ES:  We’ve done that.  But I think before we start getting too carried away with looking at lower-price scenarios essentially, we have a lot of things we need to confirm.  And that would be the next phase of projects.  But even at today’s prices, if we use lower prices of copper, the project still gives us the same general answer – it warrants further investment even at these prices.  And that was the fundamental question the PEA has to tell us in the first place.  Does it warrant more investment?  
INN:   Okay.  Right.  And on a similar note, what are your thoughts on the copper pricing moving into 2016?
ES:  I’m not saying I’m quite bullish, but I am optimistic that prices are going up in ’16.  That’s because I believe that China’s going to continue to import more copper. I think India is going to become a bigger player.  The US economy, the European economy, the African economy are all increasing, expected to grow next year north of 3 percent worldwide.  
One of the things is supply disruptions out there we see right now declining head grades, deliverability, weather, force majeure events.  I think that all bodes well for bringing the copper supply down and right now even some of the international study groups are showing or predicting a balance or a deficit in early 2016.  So, with what we face with from a physical day-to-day issue and increasing demand overall, I think we’re going to be going into a deficit sooner than people expect out there.  

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INN:  Okay.  That’s good for copper investors to hear, I suppose.
ES:  It is if you have good projects.
INN:   All right.  And speaking of good projects, Van Dyke isn’t the only project you have.  You also have your Schaft Creek, which you have a joint venture with Teck Resources (TSX:TCK.B) for.  How is that progressing?  
ES:  Well, I must say Teck is doing a great job of being the operator of the Schaft Creek project.  [We’re] very pleased with them.  We’re working on optimization studies which we hope to have completed by the end of 2015.  And that being said, then, we’re hoping to have our first JV meeting of the year in January.  And by that time, we hopefully will be able to put out the results of the optimization work.  And, so, we look forward to seeing what the joint venture will be doing.  
INN:   Okay.  And one final question.  What will your next steps be at Van Dyke following the PEA?  
ES:  The Van Dyke project, as I mentioned earlier, is an ISL project.  So we use the SX-EW process to recover the copper.  And it will be a Grade A cathode copper so you ship directly to the end users.  
There are four mines in the immediate vicinity all of which have permitted, constructed, fully usable as SX-EW plants.  My first move when after we finish the technical report, we’ll be going to contact these four companies to see if they’re interested in doing some kind of a transaction with us.  And clearly at the same time, we will be engaged in the town of Miami and the town council and engaging the Arizona and federal environmental groups to see where we go for the next stage of the project.  
INN:   Okay.  Great.  Thank you for joining me, Elmer.
ES:  You’re welcome.  
 
Securities Disclosure: I, Teresa Matich, hold no direct investment interest in any company mentioned in this article. 
Editorial Disclosure: The Investing News Network does not guarantee the accuracy or thoroughness of the information reported in the interviews it conducts. The opinions expressed in these interviews do not reflect the opinions of the Investing News Network and do not constitute investment advice. All readers are encouraged to perform their own due diligence.
Copper Fox is a client of the Investing News Network. This article is not paid-for content.

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