Yellowhead's Harper Creek Project

Mining Talk
Yellowhead is going to be a mine. Will the share price grow as they head towards production? There will be some gains to be had. Given the abuse non-producers are taking I've lowered my expectations to $1.06 by next year. On a take out I would expect $1.50

about 3.5 billion pounds of copper
about 53 Million shares
about 66 pounds per share
Share Price 66 cents. So about a penny per pound.
The credits do have an impact of about $20 a ton but I'm not going into that much detail. By comparison Copper Fox's Schaft Creek on an eq basis is 50 pounds per share or a value of 2 cents a pound. (CUU has an option agreement with Teck)

Why so cheap?
Outlook:

• Submission of the Company's Environmental Assessment application for the Harper Creek project;
• Preparation and submission of the Company's application for a British Columbia Mines Act Permit for Harper Creek;
• Ongoing consultation with the First Nations and local communities to address any potential environmental and socio-economic impacts of Harper Creek and the Company's mitigation strategies;
• Continue exploration activities to better define the resource/reserve at Harper Creek;
• The Company is seeking strategic partners, project financing and equipment financing to facilitate equipment orders and construction financing when permits are in place.

These are the reasons the market isn't responding. The co has to raise big money and get the enviro's through. Just on these two items we see a bargain price in a safe jurisdiction. Looking at this you'd think it was a company in a banana republic but it's in BC. A look at the global copper mining costs shows that BC is one of the better places to mine. Sure there are other very cheap place to mine copper but those come with stability prices. Since copper mines are typically around for a quarter century the small price for stability often outweighs the gains from short term thinking as applied to many other countries.

A lot of people think that when a company comes off the speculation curve that there won't be much to gain. This is wrong. What's at stake is the ability to produce. Even this mine could fail to produce. It's very unlikely but possible. And, this is why a major will pay a premium for a fully permitted operating mine. They will pay more if it's in a safe place. Keep your eye on this co's institutional holdings.

Yellowhead's Harper Creek Project is a copper-gold-silver volcanogenic sulphide deposit located in south-central British Columbia, approximately 150 kilometers by highway north of Kamloops.  Feasibility Study results announced on March 2, 2012 showed a pre-tax NPV₈ of $749.7 million with an IRR of 20.2% based on long-term metal price projections of US$2.50/lb Cu, US$1,250/oz Au and US$20/oz Ag, and a US$:Cdn$ exchange rate of 0.86:1.  The Feasibility Study demonstrated a 28 year project life at a milling rate of 70,000 tpd (25.55Mt/y). The project as designed is expected to produce a total of 3.63 billion pounds of copper, 372,000 ounces of gold and 14 million ounces of silver contained in concentrate.

At a 0.14% Cu cutoff,  Proven Reserves are estimated at 401.18Mt @ 0.272% Cu, 0.031g/t Au and 1.15g/t Ag; Probable Reserves 303.22Mt @ 0.248% Cu, 0.027g/t Au and 1.13g/t for a total Proven and Probable Reserve of 704.4Mt @ 0.262% Cu, 0.029g/t Au and 1.14g/t Ag.

The Feasibility Study is based on an updated resource (refer to news release dated February 16, 2012).  At a 0.20% Cu cutoff Measured Resources are estimated at 348.5Mt at 0.31 % Cu, 0.034g/t Au, 1.3g/t Ag; Indicated Resources at 466.5Mt at 0.28% Cu, 0.03g/t Au, 1.3g/t Ag for a total Measured and Indicated Resource of 815Mt at 0.29% Cu, 0.032g/t Au and 1.3g/t Ag (5.26 billion pounds of copper contained).  A further 80.17Mt at 0.30% Cu, 0.033g/t Au, and 1.4g/t Ag are estimated in the Inferred Resource category (0.53 billion pounds of copper contained) and is reported as waste in the mine production schedule until it can be upgraded by additional infill drilling.

Yellowhead has a 100% interest in the Harper Creek Project (subject to the payment of a 3% NSR royalty capped at $2.5 million, adjusted for inflation and an additional 2.5% NSR royalty on an estimated 1.5 Mt of ore which is expected to be mined beginning in year 16 of the Feasibility Study mine plan).

Copper Fox - No Teasers

I was expecting a teaser this week but it didn't come. So perhaps next week? But knowing these guys, we may not get one at all. A lot of companies would be proud to tell the world about what they have but CUU has never done that. It's like they are not even aware that they have a share price. I know I've talked about this a number of times. Our last word by NR called this a Historical Milestone soon to come and here we are in Dec! Empty handed. Again. With the looming holidays it's looking like another delay is going to come to pass. The volume today shows what the market thinks about the possibility of the BFS.

I am mildly surprised there's not more selling. It would make sense for people to draw off a bit in anticipation of meeting their months ends and the holiday expenses.

There was quite a mixed bag on the global markets this last week and this week we are starting off with more of the same. This article sums it up http://www.reuters.com/article/2012/12/03/us-markets-global-idUSBRE88901C20121203   Are we done discounting? No, I don't think so. I think it's going to get a lot worse. There have not been any signs that the USA can head off the fiscal cliff. Sure they pay lip service to us, the public but deep down inside, they all know trouble is brewing.

Back here at home things don't look so rosy either. The bright spots are Alberta and BC as Sask. is cooling off. And so, investors in CUU are asking why the company isn't hastening the BFS and rightly so. Then reality sets in. Teck calls the shots now. It's up to them to accept the BFS. The last work from CUU was that they were not done the BFS. They told us in a NR that the mine plan component was done and reviews were under way back in Sept 25. From then on we have not heard a word. When you call them you are told they are on the final strokes.

We don't buy it. many think Teck is studying the document. I think they are studying a draft and reviewing the data they downloaded against the draft but there is no finalized BFS. CUU said we would get the short form as soon as the BFS was done. Since we don't have it we can assume it's not done. So what's left to do? Sign it? Probably. But, with each week it's delayed we get closer to the uncertainty the "fiscal cliff" represents. One question that has been raised is "are they doing this on purpose?" CUU would not but Teck certainly would. They would do what ever they can to drive the price down. Hey, it's just business.

By not making the BFS public CUU appears to think we can't get a better deal than what Teck might offer. I bet that behind the scenes Elmer is working on a multi player deal that would back stop Schaft Creek from being sold for nothing. You only have to look at the price for a pound of copper at Lumina's 30 billion pound deposit. Sure they could face an uphill battle with taxation and other uncertainties but soon they will be a penny a pound. At that point someone will buy them or they will be holding it for a very very long time. As investor attention shifts away they will get cheaper and cheaper. At some point they will accept a pittance for it instead of nothing at all. They should have tried harder earlier.

In light of what's happening in Africa and other non-developed nation you'd expect so appreciation of value in safe zones. This is not happening. So CUU also blew their best chances to maximize the value. Despite the gains in grade and increases in pounds we have a different world today. It may turn out that last year was the best time to sell.