| 3klipze | 04-11-2011 02:56 PM |
Good read, for those who are in and considering buying into CUU
by imerc23 @ SH Quote:
I bought more Copper Fox today. It was a decision that didn't come easily to me, and I'd like to share my reasons.
I'm a cautious investor. My principles are: look for undervalued projects; don't chase a stock that's rising; be diversified; if a stock does well, take some profits off the table; keep lots of cash. And the most important rule of all: If someone tells you to buy an investment that will yield a huge return, then RUN in the opposite direction, because if it sounds too good to be true, IT IS A SCAM.
I bought a few shares of CUU in 2009. I've been immensely pleased with the performance, and true to my principles, I lighted up my CUU position last fall, getting a better than four fold return.
Recently, my advice to my friends has been: If you don't own any CUU, then buy a few shares, but don't go overboard, not at this price. My advice was to look for other stocks that have a better risk/return ratio. In any event, I was sure that I didn't want to buy any more.
But I had a chat with Mrs Imerc yesterday. I told her about a great rare earth stock that I wanted to buy, that had been strongly recommended by an analyst that I subscribe to. The Mrs said to me, "Well, OK, buy that rare earth stock if you really want to, but I can't figure out why you're not buying more Copper Fox, because you're always talking about how great it is!"
So, last night I did more DD. I re-read material on this forum, particularly the analysis by Webgogs. Up till now, the most sober voices on this board have suggested that the target buyout price should be around $5 to $7, and that's always sounded mighty fine to me. When Webgogs first suggested that a reasonable buyout price might in in the $20+ range, I thought "what are you smokin, man??" Come back down to planet earth, Webgogs!
A problem that I've had trying to value Copper Fox is understanding the physical layout. Frankly, the maps that are provided on the Copper Fox website are very confusing to me. But I studied the careful and very helpful images that Chappy has put together (http://www.flickr.com/photos/6035644...n/photostream/), and I see now the scope of this project, what the many of the rest of you have been trying to explain. So I went back my grade school arithmetic: if the new Schaft Creek resource estimate is based on drilling that is twice as wide on an E-W plane than the 2007 estimate, twice as long on a N-S plane, and three times as deep, and if the grade remains the same, then the new Schaft Creek resource estimate could contain 12 times as much minerals as was estimated in 2007. And then -- if the mineralization to the east, under the mountain ("Big Red") has a higher concentration of copper than the original zone, then a resource estimate that includes that portion will be much more than 12 times bigger than the 2007 estimate. But hey, I asked myself, what if back in 2007 the geologists had anticipated that the mineralized zone might be bigger than their actual drill results and had included some of the extra minerals that we've now confirmed? A good question, but the clear answer is -- no they didn't. I went back and looked at the 2007 estimate, and found that most of the estimated mineral resources were in the "Measured" and "Indicated" categories, with very little stated as "inferred". So the 2007 estimate was actually rather cautious and conservative -- they didn't go beyond what they'd drilled to that point.
So, it is entirely foreseeable that the new resource estimate could have a figure that is 12 times bigger than the 2007 estimate. No longer an in-situ value of $60 billion -- now we're talking $700 billion.
And as Webgogs has been patiently explaining to us, that's only Schaft Creek. Copper Fox could well own several properties just as rich as Schaft Creek. Chappies' maps lay them out for us.
So for me, everything finally clicked. Schaft Creek is a game changer. In 2011, we may well have a lot of turmoil and volatility in commodity markets, but I see now that whatever might happen, we won't have a re-run of Nov 2007 when the Big Boyz pulled the plug on Galore Creek and Copper Fox was left stranded. No, we're a Big Boy now. Very big.
I understand now why Webgogs is projecting a buyout above $20/share. In my opinion, his reasoning seems sound. So, we ask the astonishing question -- could it be, that a stock that has already for many of us been a 15 bagger, could be another 10 bagger for those who buy today at $2.70? Yes, nothing is certain, but I believe that such an outcome is very possible.
Here's a final item that I'll share with you all. I had a conversation recently with someone connected to a major media outlet. They've heard about Copper Fox. It's on their radar screen, and they're starting to ask questions. One day there could be coverage that could give a much bigger exposure than Elmer's recent interview on BNN.
So I put the pieces all together. What if the new Resource estimate indicates 12 times more minerals than the 2007 estimate? What if there is major media coverage that a company with a $1 billion market cap owns a mineral resource with an in-situ value of $700 billion, in the first of its several project areas?
"The kingdom of heaven is like treasure hidden in a field. When a man found it, he hid it again, and then in his joy went and sold all he had and bought that field." (Matt 13:44)
The decision was clear. My investing principles are important to me, but this is too big an opportunity to pass up.
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