Copper Fox Metals: De-Risking Continues at Van Dyke; PFS Decision Just Weeks Away

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Copper Fox announced this morning that it has assembled a team of mining professionals to assist with the preparation of an Execution Plan to complete a Pre-Feasibility Study (PFS) level study for the Van Dyke ISR project, located in Arizona. With management choosing to adopt a phased approach to the PFS, the initial step will be the Execution Plan which will set out to map the scope, timing and estimated costs of the various programs and studies needed to meet the threshold of a PFS level study. Once finalized, the Board will evaluate the findings and will then come to a decision whether or not to progress to the PFS stage for Van Dyke.

Of the two advanced-stage projects in the portfolio, Van Dyke is the project in which management has complete control over (recall that the Schaft Creek project is a 25/75 JV with Teck Resources Ltd. owning the majority). Given the recent successes from other Arizona ISR or heap leach projects such as Florence (Taseko Mines, TGB, TKO), Cactus (Arizona Sonoran Copper, ASCU) and Gunnison (Gunnison Copper, GCU), we feel that the time is right to concentrate on advancing the Van Dyke ISR project.  This view is shared with management who are implementing a process and putting the right team together in order to finally make that PFS decision. As the flagship project further gets de-risked under the Execution Plan, we maintain our C$0.60 per share price objective. Results from the Execution Plan are expected in the weeks ahead. 

VAN DYKE EXECUTION PLAN SETS THE STAGE FOR AN EVENTUAL PFS DECISION

With Copper Fox management choosing to adopt a phased approach to the Pre-Feasibility Study (PFS) decision, the initial Execution Plan will set out to map the scope, timing and estimated costs of the various programs and studies needed to meet the threshold of a PFS level study. Once all the information is compiled in the Execution Plan, the Board will evaluate the findings and will then come to a decision whether or not to progress to the PFS stage for Van Dyke. The Execution Plan will play a pivotal role in setting the future direction for Van Dyke, the company’s flagship asset. Results from the Execution Plan will be expected in a matter of weeks, at which point the Board will analyze the findings and come to a decision.

Led by Stantec, a global leader in surface and underground mining engineering and design, a total of five contractors have been retained for the Execution Plan. The selected firms bring broad knowledge and experience to Van Dyke seeing as most have accumulated considerable experience in the field given previous engagements with two other advanced stage Arizona ISR projects.  A preliminary geometallurgical model will also be prepared for the Van Dyke project. The modeling is expected to provide a better understanding of the variability and distribution of the soluble copper mineralogy and is expected to also identify geometallurgical domains and identify "gaps" in the current sample distribution across the deposit to facilitate targeting of future drillholes.

PREVIOUS VAN DYKE STUDIES: PRELIMINARY ECONOMIC ASSESSMENTS IN 2015 AND 2020

In 2015 Copper Fox completed an NI43-101 compliant Preliminary Economic Assessment on the Van Dyke Project (dated November 18, 2015). The PEA suggested that Van Dyke is a technically sound ISR copper project, utilizing underground access and conventional SX-EW recovery methods. Using a $3.00 per lb LT copper price and acid soluble copper recovery of 68%, given an estimated LOM of 11 years, a post-tax NPV8% of $149.5M was calculated, along with an after-tax IRR of 27.9%. These figures were estimated using an Inferred resource of 183M tonnes containing 1.33B lbs of copper at an average total copper grade of 0.33%.

The updated 2020 PEA used a LT copper price of $3.15 per lb and an increased LOM now totaling 17 years. The economic analysis includes allowances for capital, operating, sustaining, royalties, reclamation, and closure costs. The initial capital cost was estimated at $290.5M, compared to the $204.4M as estimated in the 2015 PEA. Given the parameters, the after-tax NPV and IRRs went from $149.5M and 27.9% in 2015 to $644.7M and 43.4% in 2020.  Though from 2020, the PEA estimates are largely in line with some of the more advanced ISR projects in Arizona (mainly, Florence). Stressing conservatism, our estimates incorporate an element of inflation for construction, procurement, labor etc. Our higher cost estimates are somewhat offset by our LT copper forecast of $4.50 per lb.

In the years since the updated PEA, much work has continued at Van Dyke with the goal being to mitigate any  potential operating issues by developing a better understanding of the deposit characteristics. That said, a geotechnical assessment of the planned decline was conducted, as was the initiation of hydrogeological monitoring, mineralogical and solubility studies and various other geotechnical and hydrogeological studies. As released last summer, the results from a geotechnical study pertaining to the development of a proposed decline (conducted by an international mining consulting firm) concluded that (among others):

• The current drillhole data coverage will support the completion of a Pre-Feasibility Study (PFS)

• The Geotechnical parameters of the Gila Conglomerate are generally consistent, and match expected ranges of the Gila Conglomerate in other parts of the Globe-Miami Mining District.

• A preliminary assessment of the rock quality of the Gila Conglomerate suggests that excavation of the spiral decline utilizing a roadheader is viable.

HOLDCO MARKETS VAN DYKE ESTIMATES

As per our estimates for Van Dyke, we acknowledge the inflationary environment which certainly since the 2020 PEA has increased materially. Cost inflation since the 2020 PEA will certainly impact everything from labor to procurement of materials to contracting. Its worth noting that using Taseko’s Florence ISR project as a guide (a Technical Report was published in 2023), we’ve seen that as construction has progressed, costs have been relatively accurate while timelines have not shifted - initial ISR production from Florence is still expected by Q4/2025. That said, we model a 16 year LOM operation at Van Dyke with a total of 1.05B lbs of copper being produced (average of 66M lbs Cu per year with peak production near 85M lbs per year). As per economics, we use a $4.50 per lb LT copper price and a $1.58 per lb C1 cash cost. Ultimately, estimating initial capex at $335M we calculate an after-tax NPV8% of $747.2M and an after-tax IRR of 34.6%.  Our production and cost estimates, along with comparisons to the previous Van Dyke PEAs (2015 & 2020) are displayed below. 

ARIZONA SX/EW COPPER RECOVERY; NOW THE FOCUS OF MUCH ATTENTION

Whether a heap leach project or ISR, as evidenced by Florence, Cactus and Gunnison/Johnson Camp, there has recently been numerous positive developments and project validations with those respective, Arizona-based projects.

Ultimately, the respective ISR or heap leach projects mentioned above stack well against each other. Taseko’s Florence has the head start seeing as a test ISR production facility was built early on in 2019. The company is maintaining its guidance for the start of full scale ISR production by year end.  Looking at the various Technical reports, one metric we like looking at is LOM project value divided by initial capital intensity (essentially after-tax NPV / initial capex). As can be seen below, the SX/EW projects are higher than the underground projects in that department. Moreover, though Van Dyke ranks with a 2.2x ratio (below Florence’s 4.0x and Cactus’ 3.0x) we note that the economics from the Van Dyke PEA was driven by a relatively low $3.15 per lb LT copper price. This amount is considerably lower than Florence and Cactus – their respective reports used a LT price of $3.75 and $3.90 respectively.  

In a matter of weeks, we will know if the decision is made to advance Van Dyke to the PFS stage. If so, an additional drilling program will likely be planed for (the first drilling campaign post-PEA). Modeling has already indicated that the Van Dyke deposit has significant potential for resource expansion. The deposit remains open to the southwest where an approximate 1.5km long exploration target has already been identified. We believe that the risk remains on the upside for further resource expansion.

CONCLUSION & VALUATION

In light of recent successes with other Arizona based ISR or heap leach projects such as Florence, Cactus and Gunnison, we are glad to see the continued de-risking of the flagship Van Dyke project. We look forward to the PFS decision in the weeks ahead.  That said, we maintain our C$0.60 per share, 12-month price objective. Driven by a $4.50 per lb LT copper forecast, we use a NAV8% DCF derived price objective for Van Dyke. A mine plan, capital costs and operating cost assumptions are estimated and applied in our DCF model. Estimates and assumptions are based on published technical reports and/or peer projects. Our pro-rata valuation for Schaft Creek is based on the 2021 Preliminary Economic Assessment.

Given the most recent close, shares of Copper Fox trade at attractive levels versus peers: at a 0.11x P/NAV valuation and at an EV of C$0.02 per booked CuEq lbs. Our price objective equates to upside of +135% from the most recent close. For additional information please refer to our initiation report dated June 18, 2025.