Mexican Businessman Buying As Much As 55% Of Copper Fox

VANCOUVER — A Mexican tomato tycoon, Ernesto Echavarria, who calls himself a risk-taker, is coming to the rescue of Copper Fox Metals (CUU-V, CPFXF-O) with a much-needed $6-million financing that could see Echavarria end up with a controlling stake of the junior.

“Copper Fox has a lot of risk but also lots of rewards,” Echavarria said in an email.

The nightshade white knight, a major stakeholder in the fruit and vegetable distribution company Franks Distribution, has agreed to subscribe to $5 million of a nonbrokered private placement in return for 88.9 million units of a total 106.7 million units. Each unit is worth a share and one share-purchase warrant, respectively redeemable at 5.6¢ and 7.5¢.

The warrants are valid for a year after closing of the subscription.

The non-warrant shares alone will give Echavarria a 39% stake in Copper Fox, but if he exercises all his share purchase warrants he would end up with a 55% interest. Echavarria has set aside $5 million in a trust and intends to release funds in three tranches through June and July.

If the warrants are fully exercised, proceeds of the financing would come close to $14 million.

“It has been a long winter for everybody,” says Copper Fox president and CEO Guillermo Salazar. “But especially for us.”

Copper Fox, which has a 70% interest in the massive copper-gold-moly- silver Schaft Creek project about 120 km southwest of Smithers, B. C., has since fall been trying to source funds to pay back $3 million it owes to creditors while at the same time advancing its flagship project from prefeasibility to the feasibility stage.

In December, it had to kill an effort to raise $3 million in a private placement and then in February, it announced a potential merger with Lions Gate Metals (LGM-V) that ultimately failed after two of Copper Fox’s 31 creditors opposed the deal.

While negotiations with Lions Gate were ongoing, however, Echavarria knocked on Copper Fox’s door and signalled his interest in buying a stake in the company. Echavarria says he learned of Copper Fox through newsletter writer Steve Saville.

Because a deal with Lions Gate was then progressing, Salazar explains, there were only cursory talks with Echavarria. But when the merger crumbled, negotiations with Echavarria began in earnest.

Although Salazar has yet to meet Echavarria in person, he has talked extensively with him on the phone and corresponded through email. “He is a very energetic individual,” Salazar says. “He runs a distribution business that employs thousands.” He also owns interests in mining projects in Sinaloa state, Mexico, Salazar notes.

While Echavarria will sit on Copper Fox’s board of directors according to the terms of the financing, Salazar says he doesn’t know how involved in Copper Fox’s business Echavarria intends to become.

“Will he put his own stamp on Copper Fox?” Salazar asks rhetorically. “It wouldn’t surprise me if he wants to do that.”

For his part, Echavarria appears to agree with Salazar’s direction for the company. Salazar says Copper Fox’s priorities at the moment are first, to “right the ship,” second, to “strengthen” the ship, and then to complete a feasibility study of Schaft Creek.

Likewise, Echavarria says that he has subscribed to as much of the company as he has because he wants Copper Fox to have enough funds on hand “to continue the feasibility study and continue its operation without running out of money.”

Copper Fox is building on a prefeasibility study of Schaft Creek it completed last year. In it, Copper Fox proposed a US$3- billion project that would see construction of a 100,000-tonne-per- day mine, with a 22-year mine life based on a measured and indicated resource of 1.4 billion tonnes grading 0.25% copper, 0.18 gram gold per tonne, 0.019% molybdenum and 1.55 grams silver.

Echavarria says he understands how some might write Schaft Creek off as too big and too low-grade a project to progress, noting that eight to 10 years ago, it might have been unprofitable at US60¢ per lb. copper and US$300 per oz. gold.

“But now things have changed; prices are more than three times higher,” he says. “After the feasibility study, maybe they will think different. . . I want the shareholders and workers that have (risked) their money with Copper Fox to see the feasibility study finished. And hopefully (receive) the rewards of risking in a high-risk project like this.”

Echavarria also appears fully committed. Asked if he would participate in future financings if Copper Fox needed further funds he responded: “Yes, definitely.”

On news of the financing, Copper Fox’s share price gained 1.5¢ to close at 8¢. The company has 112.5 million shares outstanding (pre-financing).