Saturday, December 8, 2012

Copper Fox News. What does it mean

Cheap money is good money. Last time I talked to the co they said they had all the money they needed. So why extend the warrants? First, at about $1.35 the company is signalling to us that the sp is about to correct. Second, we all know full well that the finale is coming for the BFS. If that holds true we'll need money for Arizona. Plain and simple. I suggested a while back that the company should just retain some cash from the sale to increase share holder value in the spin co. It also sets them up to go full tilt on Az. Last, why not throw EE a bone one last time? It was his money that saved the company in the first place.

I also touched on the subject of CUU needing a cut off point. It seems many people got this wrong and think the warrants are signalling a delay and more dilution. But, since the money will be retained in Az we would have had to go get it anyway. This way we don't pay fees for it and we are writing agreeable terms. So there's no harm in doing it now. There's been some questions as to why now and what about the ones that expired and what about vested shares? CUU has tended to follow the letter of the law. In the current situation there was a need to NR the extension and the extra value of hinting that the sp is going to put those in the money. Vested shares are just that, vested. No BFS yet, no expiry. Did anyone think this was going to go this long? I bet no one did.

There a lot of unhappy people making a lot of noise about the warrants and vested shares. They don't like the dilution and they don't think management has earned those shares they handed out. I completely understand. My own report card on the management shows us a student who is struggling to get a C-. That's not a great career starter. Elmer wanted to do a Hunter but this is no way to kick that off. In time it will fade from memory and it is better than Ivenplats past record. (You know who I mean). Still, I would have preferred a happier ending. (Much earlier). So now we have to content ourselves with the quality of the ending.

I've kept track of the stock I would have put money into and CUU has to come in pretty big just to make up for the lost opportunities. I think it can but I've reached the point where it will be hard for CUU to meet that objective. By the end of the year I doubt CUU can make up the lost opportunities. On the bright side I have built up a fair bit of dd for the next round. I've actually got my next 5 years worked out.

I think the outside date is the second week of Jan. I've been told enough times that if it comes sooner it must be dropped. The earliest is Monday. Xmass may drown it out so timing sucks but people will write about this deal. A lot of people will want to publicly pat themselves on the back.

This could end up as a 10 billion dollar deal. The foundation of that would be based on the strength of the BFS. We have to have the legal foundation for the execution of the contract. We have to make sure nothing can stand in the way of collecting our pay. Each item in the contract has to be thoroughly verified. So we should expect that the delays are due to us making sure there's no disagreement. I take this to mean that CUU intends to make the deposit available to other parties and Teck at the same time. This will give Teck time to think about it. They already have access to all the information. CUU may get offers for it's JV portion outside of Teck's control but Teck does have a built in head start.

This may be one of the first times a Jr got the jump on a major. CUU has made every mistake they could along the way and struggled through mistakes piled on them by contractors and finally arrived intact with a BFS. An incredible journey.

So we end up with nearly 4 billion pound eq copper that we own outright. We also own shares of a royalty under the Liard agreement. We own land that is connected to the trend and the land that will become the access point. We own land that will be needed for storage. Best of all, we own the option agreement that Teck has to satisfy. I say Teck has to satisfy it because the ball is going to be in their court in under 2 weeks. Some armchair experts say that the weight of the option agreement really gives Teck just 2 options and a few dissenters say Teck will be forced to take the 20%.

What's 4 billion eq of copper worth? With an attached mine you could expect up to 30%. It comes with a royalty attached to the whole mine not just CUU's portion. It comes with built in finance for the mine and the convenience of just being handed the keys or accepting a check every month.

Should Teck take 20% then CUU has the right to sell the project. With 80% of the deposit and the royalties in hand plus the approvals largely in place to make this a mine, I think it would not be that hard to find buyers. Having that large of a portion, about 16 billion pounds eq copper, they could lower the price on the pounds and still come out big.

For those of you who think CUU can never raise the money to build the mine. Royal Gold would be in the mix in an instant. Barrick would also have to line up. CUU would have no problems selling mineral streams and those companies could arrange the funding. It would take some time but I think CUU could come out a little better with about 40% equity remaining. Poland is in the hunt for more BC copper. They like it here. I can't see a consortium passing this up if Teck took a back seat. I suspect Teck has already asked Elmer to middle the agreements and that's why he was appointed to the Bod of Liard.

Stay tuned. If I get time I'm going to do a more precise review next week.  


  1. This blog got me excited....makes perfect sense. I like how in the recent news release it said the private placement will "remain unchanged", knowing that the stock currently stands at $1.02. They could have changed it to the current price but did not, shows confidence and integrity in the stock. Mr. E is indeed being rewarded, and this news release is not symbolic of a delay for the BFS.
    Webgogs, the "potential" of a 10 billion dollar deal is in reference to us retaining 80% of the deposit right? Your blog nails down the current process underway....lets hope for that "big" deserved buyout and soon.

  2. The saying goes, the market always knows. And the market is clearly saying Copper Fox is worth around $1. Some people seriously think a major will make an unprecedented buyout of Copper Fox for 200-600% valuation above the MDA, I think they need to see a Psychologist. That's insanity!

  3. We've heard this over and over. So by your claims, the 4 times expenses equaling 75 cents per share plus 25 cents per share is all we will get. That means 2.5 billions pounds of copper and 2.5 million ounces of gold and all the other deposits CUU has found are worth nothing. No who's insane!