Friday, January 4, 2013

Cooper Fox BFS better than it looks

What does $3.2 billion buy?
Project infrastructure will include:
  1. A secure single-lane access road with double-lane sections to support the construction and operation of the Project. This road will include, and extend from, the partially constructed (approximately 40 km) existing Galore Creek Access Road. The road will follow the Galore Creek access road/route for the first 65.2 km from Highway 37. At Km 65.2 it turns north from the Galore Creek Access Route. Approximately forty (40) km of new road will be constructed north through the Mess Creek Valley to the mine site;
  2. A 287 kV power line from Bob Quinn to the site covering a total distance of approximately 81 km;
  3. 105.26 kilometre fuel pipeline from Tahltan Depot Highway 37 to site including diesel fuel supply and distribution;
  4. TSF complete with diversion channels including a reclaim water system;
  5. site haul roads;
  6. new on-site airport, capable of receiving aircraft with a capacity of up to 78 passengers;
  7. a depot located at the juncture of Highway 37;
  8. water supply and distribution system;
  9. sewage disposal plant;
  10. lay down area;
  11. process and ancillary facilities;
  12. power distribution network;
  13. communications infrastructure.

Initial Capital Costs
$ Millions
Direct Costs
Overall site251.06
Primary crushing179.62
Grinding, flotation and regrind594.68
Tailing management facility212.23
Site services and site utilities23.86
Ancillary buildings202.15
Plant mobile fleet'8.88
Temporary services5.2
Off-site infrastructure and facilities202.34
Total Direct Costs$2,163.49
Indirect Costs
Project indirects601.24
Owner's Costs118.04
Total Indirect Costs719.28
Total Direct and Indirect Costs$2,882.77
Contingency @11.5%373.8
Total Initial Capital$3,256.57

We have to ask ourselves how much Galore Creek would benefit by this?
It promises to bring a fuel line and a power line right past Galore. Then there's the road and near by air strip. And what about all the ground work with First Nations? This certainly amounts to the taming of the wild north alpine country.

The power line is 81km long and $200 million was budgeted for it. The NTL line is expected to cost $400 million so despite the terrain the budget is generous. I think it's not going to exceed $180 million. 

A word about the waste rock. They need to put 10-20 holes in it to convert it to paydirt. We saw some of the results and they were excellent. How wide spread those will be is what is keeping people guessing. Consider that if the removal cost was neutralized by what it contains how that would impact the BFS numbers. Even if 1/2 the removal cost was taken off by high grading the mineralized areas of the waste that would make for a large improvement. I looked at the low case of 10% being economic to remove and lowered the mineral prices and even that kept the profit close to the same.

At 30% mineralization at .25% copper you can lower the price of eq copper by 20 cents with little impact. What's even more surprising to me is that we've known about this long before the BFS came out so why act surprised now? This was a choice the company had to make. Dilute more or get Teck to agree that it has a value. Obviously, Teck said ok now show us a profitable BFS with it as waste. Clearly the company did just that.

It's interesting to note that the total waste expected is 1.89 billion tonnes and they plan to use a portion for roads and bedding. It's pretty obvious that this will have to change. I plan to ask them why they would indicate that knowing this is not the case. Is a revised BFS on the way?

Smart people will pay attention to the seven step plan of mining outlined in the BFS. Look at the map while you read it. Stock pile from the North toe of the East face of the mountain. Here there is construction waste and high grade below. Then take the low strip ration from the South end of the Liard. Then attack the North face push backs. Once the bottom is reached "The final phase is 4N which extends to the ultimate pit bottom, which, based on the resource block model would end in mineralization."
Click on a percentage in the above legend to enlarge or reduce this picture

Click on a percentage in the above legend to enlarge or reduce this picture
In case you forgot, look at the picture. Root Zones! These are also not in the BFS! We only know the drills ended in mineralization. Due to pit width there was no point drilling deeper. It's up to Teck to mine it. The blisters below the main blob are not reflections they are in fact more copper.

How this escapes people is beyond me.

One last thing. The break even eq of 0.15% was based off much lower prices. This is why I'm telling you there's a lot of room to fiddle with the prices and waste being converted to payable dirt.

Notes to Mineral Resources Tables
  1. Mineral Resources are inclusive of Mineral Reserves;
  2. While the terms "measured (mineral) resource", "indicated (mineral) resource" and "inferred (mineral) resource" are recognized and required by National Instrument 43-101 - Standards of Disclosure for Mineral Projects, investors are cautioned that except for that portion of mineral resources classified as mineral reserves, mineral resources do not have demonstrated economic viability. Investors are cautioned not to assume that all or any part of measured or indicated mineral resources will ever be upgraded into mineral reserves. Additionally, investors are cautioned that inferred mineral resources have a high degree of uncertainty as to their existence, as to whether they can be economically or legally mined, or will ever be upgraded to a higher category;
  3. A 0.15% CuEq cut-off was selected for the base case resource estimate. A 0.15% CuEq cut-off was the minimum grade of CuEq estimated by Tetra Tech required (using the estimated copper recovery rate, the milling and sales cost) to break-even on an operating cost per tonne basis;
  4. CuEq grade cut-offs were used to report the mineral resource estimation as a function of copper, molybdenum, gold, and silver. The CuEq is based on Tetra Tech's long-range metal prices of US $2.97/lb for copper, US $16.80/lb molybdenum, US $1,256.00/oz gold and US $20.38/oz for silver and metal recoveries of 60.90% for molybdenum, 70.6% for gold and 43.4% for silver. No copper recoveries were applied to the copper equivalent grade;
  5. Rounding as required by reporting guidelines may result in apparent summations differences between tonnes, grade and contained metal content; and
  6. Tonnage and grade measurements are in metric units. Contained copper and molybdenum are reported as pounds and contained gold and silver are reported as troy ounces.

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