Copper Fox Metals

(CUU-TSXV)

The Schaft Creek feasibility study results followed the pattern of many other large,

low grade copper-gold deposits as compared to the preliminary economic assessment

and prefeasibility study results: capital cost and operating costs are higher and

the net present value lower. Investors reacted accordingly, pushing the share price

down. The feasibility study results are positive, but far less so than the earlier studies. The

story is continuing, as there is considerable scope for further upside. Work is now, or

soon will be, underway to investigate the upside potential. The feasibility study anticipates a 130,000 tonne per day mining operation with an initial capital expenditure of $3.2 billion.

The base case, using metal prices of $3.25 for copper and $1445 for the gold, produced

a net present value (8%) of $513 million, an internal rate of return of 10.1%

and a 6.5 year payback. Using three year average prices ($3.63 / $1445), the NPV

was $967 with the IRR at 11.9% and a payback of 5.8 years. The spot prices

($3.69 / $1736) produced only slightly better returns. The most significant enhancement suggested by this study is to conduct further drilling with the aim of improving the 171

million tonnes of inferred resource within the pit shell to the measured and indicated

status. As inferred resources, that material cannot be considered as ore in a feasibility

study. Instead, the inferred resource is treated as waste, requiring operating costs

to move it while gaining no revenue. Converting the inferred resource to ore could

have a big impact on the project economics. The feasibility study also recommends

further metallurgical testing aimed at improving recoveries and reducing operating

costs. The recoveries used in this study (copper: 87%, gold: 73%, silver: 48%,

molybdenum: 59%) provide considerable scope for improvements. Recovering more

metal from the ore passing through the process plant could have a huge impact on

2 www.ResourceOpportunities.comJanuary 16, 2013

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profitability. Management and the engineering team are also working on shortening the five-year timeline to production, which would positively impact the project economics.

Management expects to deliver, or may have already delivered, the feasibility

study to Teck. That delivery will start the clock on a 120 day period during which

Teck must decide to either earn back into the project at a level of 20%, 40% or 75%;

otherwise, their interest will be converted to a 1% net smelter return royalty or to

shares in Copper Fox valued at $1 million. If Teck backs into a 75% interest, they

would fund four times the amount spent to date by Copper Fox and be obligated to

arrange for financing for Copper Fox’s share of the capital cost. Also, the major

would have to commit to having the project in production within about four years.

That would be an aggressive timeline that the major would likely not want to have

hanging over it. Teck will probably not want to lose this project. The current feasibility figures

would not likely support a development decision. However, there are several factors

that point to a substantially higher return. In addition to those factors noted

above, there is enormous scope for outlining more resource along the trend that

hosts the current resource. The agreement with Teck includes an area

of interest surrounding the original claims. Copper Fox holds a great deal of property

along the trend that is outside of the Teck deal and which is highly prospective for

further resources. Whether Teck backs in or not, Copper Fox holds a 100% interest

in that property. Teck has a very large presence in the province,

with its head office in Vancouver. They also operate the Trail metallurgical

facility in the southeast part of the province, which is one of the largest lead-zinc

smelter-refinery complexes in the world. They also operate the world-class Highland

Valley copper mine, just 400 kilometers from Vancouver. Teck has a half interest

in the big Galore Creek copper-gold deposit, located just west of Schaft Creek.

They also have other copper projects in that region. My sense is that the major will want to

retain an interest in the Schaft Creek deposit, but not want the pressure of the development

timeline specified in the agreement. Teck might argue, to buy more time, that the feasibility study is not complete, in that there are unresolved issues. A simple solution would be for Teck to buy Copper Fox. The current value of the junior is just 8% of Teck’s current cash position. Another option is to not back-in right away, which would likely see the Copper Fox share price fall, creating an even better buying opportunity at some time in the future. Another possibility is that the major may simply decide that Schaft Creek is not part of its future. If Teck does not back-in, then Copper Fox would have 100% interest in a large copper-gold deposit for which it could seek another partner or acquirer. The Schaft Creek deposit and Copper Fox have considerable value, ultimately far higher than the current share price. However, it is not clear when that value might be realized and there will be further volatility in the share price in the meantime. Price January 16, 2013: C$0.88

Shares Outstanding: 395 million

Shares Fully Diluted: 422 million

Market Cap: C$347 million

Contact: Investor Relations

1-866-913-1910

www.copperfoxmetals.com

Last updated September 2012-2