Copper Fox hunts for cash

Calgary-based Copper Fox Metals (CUU-V) will try to raise $3.5 million to further finance operations at its Schaft Creek copper-gold project in northwestern British Columbia.

The financing has two components: a flow-through portion will offer common shares at a price of 30 per share (up to 60% of the total offering); and the other will offer units comprised of one share and half of a share purchase warrant at 23 per unit.

Each full warrant will entitle the holder to one additional share of Copper Fox at an exercise price of 35 for 18 months. The company expects the financing to close in December 2005.

For Copper Fox’s president and chief executive, geologist Guillermo Salazar, the company’s activities on the Schaft Creek property come after decades of casting a longing eye toward it.

Salazar learned of the project in the 1970s when Teck Cominco (TEK.SV.B-T) was doing feasibility studies there.

In 2002, with copper and gold prices low and the political situation surrounding mining in British Columbia still uncertain, Salazar was able to get an agreement with Teck Cominco whereby Copper Fox could attain roughly 93% of the property. Attached to that, was a condition that allows Teck to buy back the property within 120 days of the completion of a feasibility study by Copper Fox.

Last year, Copper Fox completed 3,000 metres of wide-diameter drilling. Salazar says test results confirm Teck Cominco’s feasibility study on copper, but returned gold grades 30% higher. Salazar says the increase is due to the wider-diameter core used by Copper Fox.

Shaft Creek’s measured and indicated resource is currently at 307 million tonnes grading 0.37% copper and 0.02% molybdenum. The orebody also contains gold at 0.27 gram gold per tonne and silver at roughly 2 grams per tonne.

The plan is to build an open-pit mine with a strip ratio of 1.15:1. That ratio would be lower with current copper and gold prices, Salazar says. Resources and strip ratios were calculated using a copper price of US85 per lb. and a gold price of US$325 per oz.

Salazar says it will cost between $400 to $500 million to bring the entire property into production. The company’s plan is to mine the higher-grade ore first to generate cash flow, which in turn, will be used to mine the rest of the resource.

Salazar says the 307-million-tonne resource is just 8% of the total 3.5-billion-tonne inferred resource that preliminary tests peg at 0.22% copper.

For now, Copper Fox is securing financing so that a 9,000-metre drill program (3,000 of that larger-diameter core drilling) can begin in late February 2006.

The geologist in Salazar would like to see $6 to $10 million in financing for capital spending in the coming year, but he concedes the actual figure will likely be lower. The company will, however, have the funds in place to comply with the first term of the deal with Teck Cominco.

“But we want to be a lot further along,” Salazar says.