Monday, January 7, 2013

Copper Fox Brief Talk with the Company

I wanted to get a deeper understanding of the Joint Venture Clause. I spoke with Mike Smith.

The wording does say 60 days to the JV. This is no mistake. But we have to look deeper and examine the spirit of the agreement. Does it make sense? Well, in a word, yes. It stipulates a best effort is required to form the framework. When it was written there was a pretty clear intent that Teck would act or they would walk. This is still true today in some ways.

The intent is to produce a JV with a willing partner but in this case the intent was stated from the get go that there would be no JV. "We want it sold". Given that position, we can waive the 60 days. When I asked Elmer (CEO) during the conference call to explain the company's position on this he concluded that it didn't make sense to put the cart before the horse when there is an absolute 120 clause. He wasn't entirely clear about the intent effecting the 60 day clause. I suspect this is because we would only rely on that if push came to shove. But then again, why would Teck want to carry an unwilling partner? Obviously, we'd be talking turkey and get a deal done.

So what's next? The next step is to publish the official notification to Teck and start the clock. Unfortunately, we don't know what they will do so we have to plan the year's work. This is a bit tricky since we don't know what money we'll have for Schaft Creek. But, we have to do the exercise anyway. I think that if we were to see a robust drilling plan elucidating how the company intended to unlock more value from the project we would see a share price reaction.

For one thing, it would allow the company to express the potential much better. I've had several discussions as to why we publish the driest NRs ever written and the answer is always the same. This is a corporate walk and they refuse to write anything speculative. Hence, there is nothing in the BFS that wasn't fully thought out before it was published. Things other companies would had made a media frenzy over are not discussed in NRs. The company has no intentions of pumping anything.

This is why Teck likes them. Teck does use two cases when they look at option agreements. They want the ugly and then the probable. This is exactly what they got. Go have a look at their other prospect both past and present.

I wanted to ask Mike about WRN this morning but he was a bit busy with other matters and has not examined it in detail. Needless to say, they will do it. They have been examining the past 5 years or so worth of BFS publications. (They also want a comparative model base for negotiations obviously just like we all do). I was not going to ask him to defend CUU's BFS but merely as a check on the realities of their projections given the current mining environment in BC, well, and globally. Everyone should know that we have 25 big projects on the go but need 44 in the next decade. This will come later.

Returning to the contract. The contract is a blend of agreements going back 50 years. In law, nothing is written in stone. No contract is without leeway. Look at the 10 commandments or the declaration of Independence. Everything is negotiable. This is a good thing in our case. We are putting the best effort forward and we are keeping with the spirit of the agreements as best as we can. The good will we put forth is a big component. Teck is apparently responding in kind.

Next week should bring a positive catalyst. Bear in mind they do have 45 days from the NR to publish the full monty and if that's required then so be it. I suspect given the absoluteness of the BFS we will see the notice shortly.

As for those who jumped ship to try catch a rise off WRN. Read the fine print! There were a number of questions as to why it didn't rocket skyward. Look at the permits required. The road won't build itself and the cost might be underestimated. They have to take equity to get the mine built. CUM ring a bell? Yes, the have a lower strip ratio. What happens when CUU drill the overburden classed as waste? Look before you leap. WRN has great prospects over the next 2 years but I wouldn't bet on it all coming in today.    

1 comment:

  1. Well here we are a couple weeks after the much anticipated BFS. After a lot of thought I conclude we are paying the price for presenting the market with an incomplete BFS. More work is needed to convert the inferred resource and redo the numbers. The market appears to be betting against Teck backing in and based in what the BFS numbers suggest why wouldn't they? I've have had my account at agora banned twice for suggesting we will drop on this BFS and it's a shame. There were a few people I enjoyed PMs with and now those conversations are lost. Thanks hub leaders. If anyone ways to send me a message I'm at Shaunsaw on stockhouse. Glta and great blog Web, T2T