Copper Fox Metals CEO Elmer Stewart discusses the future of copper demand and why he sees copper playing a key role in future industries.
Copper Fox Metals (TSXV:CUU,OTC Pink:CPFXF) CEO Elmer Stewart joined the Investing News Network to discuss the future of copper demand and why he sees copper playing a critical role in future industries.
According to Stewart, current projections suggest that the emergence of electric vehicles and other green technologies could continue to bolster demand for copper. In order to meet that demand, Copper Fox is currently developing the Schaft Creek copper-gold–molybdenum–silver project located in Northwestern British Columbia. The company originally secured the project directly from Teck Resources (TSX:TECK.A,TSX:TECK.B,NYSE:TECK), which retained a 75 percent buyback option.
Under the leadership of Stewart, Copper Fox conducted a feasibility study on the Schaft Creek project, which led Teck Resources to exercise its buyback option to secure 75 percent of the project. In addition to its Schaft Creek project, Copper Fox also owns three copper projects in the laramide porphyry copper systems in Arizona, the Van Dyke project, the Sombrero Butte project and the Mineral Mountain project. According to Stewart, the development of multiple projects has allowed the company to mitigate risk as a whole, leveraging partnerships when necessary.
Below is a transcript of our interview with Copper Fox Metals CEO Elmer Stewart. It has been edited for clarity and brevity.
Investing News Network: I’m here now with Elmer Stewart from Copper Fox Metals. First of all, before we get started, what’s your symbol? What exchange are you on?
Copper Fox Metals CEO Elmer Stewart: Our symbol is CUU and we are traded on the Toronto Investor’s Exchange.
INN: From an investor’s perspective, why is it so critical to appreciate and understand the depth of knowledge you have when it comes to copper?
ES: I don’t expect the average person on the street to understand this industry and where it’s going as much as I do because I do spend a lot of time following trends. To be successful, you’ve got to be able to figure out where the trends are taking you. But, if you’re asking why we’re in the copper space, 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, though, is what we talked about earlier. Where is the copper coming from? Pundits say this is the lowest amount of development projects that have been in the pipeline for decades. Head grades are declining, longer lead times, exploration and discoveries are declining rapidly; even though we’re spending more money we’re finding less. History shows one prospect in 10,000 will get through the feasibility stage.
INN: What’s the current consumption in the marketplace right now and what’s it projected to grow to over the next year or two?
ES: Right now, the consumption is approximately 23 million tons of copper and that’s the copper metal. The conservative projections are about 2 percent, some people will say it’s 3 some and will say it’s 6 percent on an annual basis. To quantify that, if you consumed 23 million tons of copper and it increases by 2 percent, you need 460,000 new tons of copper coming into the market and we don’t have the mines to do that. It’s as simple as that. There are enough projects on the table that will do that, but that’s compounded annually. It’s not a very good forecast for the supply of copper. It’s great for the demand side, but not the supply side.
INN: I wonder if those numbers are low. The growing interest and production of electric vehicles could consume a lot of copper.
ES: You’re absolutely correct because the green initiative is a new initiative, and some people are forecasting it’s going to require a million tons of copper a year. That’s in addition to the consumption that happens outside of the green initiative. If the emerging economies start to pick up and grow, and they seem to be doing so, that will add more demand. It gets back to the same thing: Where are you going to find it? Price will allow mining of lower grade, but deposits are only finite. They only go so far and then they’re done.
If you look at some of the forecasts, international copper study groups are forecasting that by the year 2035, 200 mines will go out of production because they are depleted. By 2032, that gives you 13 years and 200 mines, so you’re talking 13 mines a year.
If that forecast is correct, then the only conclusion you can draw is that we have to find more copper and it’s not because we haven’t been spending money. They are getting harder to find and they’re getting deeper even though there’s been big advances in exploration. The deeper you have to look, the less chance you have of making a discovery.
INN: You have about five projects 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 it. You have a pretty good joint venture partner on that one, don’t you?
ES: We are very lucky to have Teck Resources as our joint venture partner. When a project gets to that size, you’ve got to know when to fold them. The fact that Teck came back in and exercised their back-in rights was a real good thing to happen to Copper Fox and the Schaft Creek project, because we took it 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. It’s approximately 1.6 to 1.8 billion tons of mineralized rock minimum. We don’t know how big it is. It’s a district play, and it’s the kind of project that could last for decades, which is what the majors are looking at.
INN: When you attract a partner like Teck, is it the ultimate validation of your ability to identify a potential resource?
ES: We didn’t attract Teck. Copper Fox got the project by way of an option agreement from Teck in 2002. Teck being astute, they said, “You have to deliver a feasibility study, and when you do, we have the right to back in for up to 75 percent of the project.”
They were thinking ahead about preserving the right to back in. When I became involved with Copper Fox in 2009, we pushed through to the feasibility stage because our investors and shareholders were saying, “What’s Teck going to do?” So we did a feasibility study. We took a conservative approach to it. We gave Teck the study and they said, “We’re coming back in and we’re coming back in for 75 percent, so let’s start negotiating the joint venture.”
The fact that we did the study and it was conservative enough and good enough for them to warrant coming back in, I think that for us was a major win.
INN: Once again, confirming your ability to prove a resource was there.
ES: It has, yes. 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. That is our strategy. We don’t want to be in the mining business, but we like to take projects to a stage because we feel comfortable doing that. Our end audience is always going to be a copper producer.
INN: Only copper?
ES: Yes, only copper only in North America.
INN: Why do you only want to stay in North America?
ES: I’ve got a lot of experience internationally. I was in South America, Central Asia, Africa, Australia and Mexico. I did some work in the Philippines too, and when I came back to Canada and took the job at Copper Fox, I saw the opportunity. North America has two porphyry copper districts. One is in the laramide of the Southwest United States, i.e. Arizona, and the other is in Northern British Columbia. Copper Fox already had a position in Schaft Creek because they were the operator subject to Teck exercising their back in.
I don’t like companies that only have one project. If the project fails, the company will fail. So I convinced the board and we took on some other assets. We looked in Northern BC and Arizona, because we think there are other deposits to be found there.
For example, our Mineral Mountain project in Arizona, it was an acquisition we did in 2015, 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 systems. Disseminated copper-gold, copper-moly mineralization in a big area. We got the B-veins, we’ve got the D-veins on surface. We haven’t found the A-veins. We have a lot of fractured control mineralization, fantastic alteration and a great 62 million year old laramide institution.
We’ve de-risked the company from a portfolio prospect and it’s almost like we’re a prospect generator. You move, you do some work, you move the project along. The question is, when do we execute the strategy? By taking Schaft Creek and moving it into Teck, that is almost the completion of the execution of our strategy. The ultimate execution would be when we were able to dispose of our interest in Schaft Creek.
INN: Would you then move on to identify other opportunities?
ES: Yes, that would be Van Dyke, which is an ISL project in Arizona. It’s at the preliminary economic assessment stage. We can move that along, but then we will have a gap in our portfolio. Then we have to go and find another project, and they’re not easy. Since 2013, we’ve looked at about 80 copper projects, and we’ve only taken on one out of 80.
INN: Only one?
ES: The people we have are all experienced in mining operations. My career has expanded from exploration through discovery, all the way through to production. The mining engineer I use has the same background. We have access to very knowledgeable metallurgical engineers, resource people and environmental people, and we use them all the time.
When we take a look at a project we do very deep due diligence. Why? We try to identify the fatal flaw, because there’s no use in buying someone else’s problem. The worst you’re going to end up with is that the project goes nowhere but you still have the environmental liability to reclaim the project and we’re very concerned about that. 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. We’re not in a rush just to find a project.
INN: We’ve talked about your top two projects at the moment, you got three more, right?
ES: We have an investment in a porphyry project in Northern BC. That’s through another publicly traded company. It’s a good exploration stage project. We have two projects in Arizona, and these are what we call Laramide porphyry copper systems, with Mineral Mountain probably being the most advanced of the two right now, depending on 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. We have mineralization and a geophysical target. It’s at the drill-ready stage already, and the reason why we have those is because you can create a lot of value through exploration. Just drill a discovery hole and see how the industry looks at your company.
INN: What do you tell investors that gives them the sense that this is a sound investment?
ES: Here’s the thing, Copper Fox is primarily set up for investors who are interested in taking an equity position in the copper space. I think there’s a very compelling case there for the following reasons. We’ve got a good balance of porphyry properties, our most advanced property is in the hands of a very good operator and we have a carried joint venture interest. We also have a second development stage project, which is our Van Dyke project. If you put those two projects together based on the 2013 study for Schaft Creek and the 2015 study for Van Dyke, you got a net asset value of 92 cents a share.
Now, the market does not reflect that right now, but in addition to that, you’ve got a real upside on making an exploration discovery either on Sombrero Butte, Mineral Mountain or the company we have the investment with in Northern British Columbia. That would add more value to our company. If you look at it, 58 percent of the company is owned by the insiders.
The bottom line is that we think we’ve de-risked the project so much. If you read what they say, there’s low risk and high reward. If you’re coming into a copper cycle like we did in 2009, we went from C$0.05 to C$2.71 because we caught the leading edge of a copper cycle. If we’re coming into another copper cycle, can history be repeated? Possibly. We’re a very different company now than we were in 2009.
INN: One of the things I like about you is the fact that you’ve had a long and successful career. You remain incredibly enthusiastic about this company and what the future of copper looks like.
ES: I’ve been in the industry now for 43 or 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’m pretty certain we can increase the value of that.
I like getting up in the morning and getting things done. Sometimes, it’s not so easy when the commodity cycle goes against you but you just have to get out there and try to get the job done.
INN: That in itself is a fantastic testimonial isn’t it? Thank you very much for sharing this.
This interview is sponsored by Copper Fox Metals (TSXV:CUU,OTC Pink: CPFXF). This interview provides information which was sourced by the Investing News Network (INN) and approved by Copper Fox in order to help investors learn more about the company. Copper Fox is a client of INN. The company’s campaign fees pay for INN to create and update this interview.
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