logo-loader

Excelsior Mining’s in-situ copper mine attracting smart money

Last updated: 10:01 09 Jul 2015 EDT, First published: 08:01 09 Jul 2015 EDT

copper_wires__350_559d7a9b32c3c
Exclesior Mining has received a US$10 million investment from UK based hedge fund Greenstone Resources

The Watergate drama All the President’s Men may seem an odd place to start the analysis of a would-be copper producer based in Arizona. But there is one pithy quote attributed to the informant Deep Throat that is repeated throughout the 138-minute movie, and which has some resonance here.  He tells them: “Follow the money.”  

 

That is exactly the message JJ Jennex, the head of corporate affairs at TSX Venture listed Excelsior Mining (CVE:MIN), had for investors at a conference in Vancouver recently. 

 

The money in this case was the US$10mln investment made by Greenstone Resources, which gave it 28% of Excelsior’s equity. 

 

For the uninitiated, Greenstone is a UK-based hedge fund whose principals are heavyweights of the mining sector and capital markets having moved from Xstrata and JP Morgan. Not only has the deal brought onto the register a supportive, long-term shareholder, it has provided a significant tick in the box for Excelsior and specifically its Gunnison Copper Project. 

 

The cash injection followed a “double colonoscopy” period of due diligence, according to Jennex, but it was worth the wait. “At the end of it they [Greenstone] said, ‘this is the best project we have seen’ and made the investment, but it took them nearly six months.”  

 

Followers of the company will have spotted the update released in the last few days, culled from an additional 17,000 feet of drilling, which revealed Gunnison’s measured and indicated resource had grown by over 1bn pounds to 4.95bn. 

 

It already had enough in the ground to sustain 20 years of production at 110,000 pounds of copper cathode a year. 

 

The upgrade will only burnish the economic credentials of the deposit, which according to the 2014 pre-feasibility study already boasted an impressive 45% internal rate of return.  

 

There is something a little unusual about Gunnison in that it will use in-situ leaching to extract copper. A technique more widely used to mine uranium, it involves drilling holes into the deposit called injection wells, into which a mild acid is pumped. It is recovered pregnant with the metal, which is then processed into copper cathode sheets.  

 

Unusual yes, but in-situ leaching is hugely effective and, because ore isn’t actually being extracted, leaching is a low cost method of mining. 

 

Where large porphyry copper deposits might require capital investment running into the billions of dollars, the estimated initial capex for Gunnison, which is slated for first production in 2018, is a comparatively modest US$285mln. Gunnison is also helped by the fact that major infrastructure - road, rail and electricity – are already in place and readily available. 

 

This all makes a mine eminently financeable, even at today’s copper price of US$2.40 per pound. The direct operating costs are a best in class 69 cents a pound, and $1.37 all in. 

 

Arizona’s San Manuel copper mine, owned by BHP Billiton (LON:BLT), integrated in-situ methods with open pit and underground mining to produce more than 3bn pounds of copper over 14 years. 

 

And as Jennex pointed out: “It works and it’s not new. It is off the shelf technology, so we aren’t reinventing the wheel in any way.” 

 

One of the major impediments to a project of Gunnison’s potential scale is permitting. 

 

In fact there are examples nearby where good operations are being stalled by local dissent and environmental road-blocks. While never a short process, permitting for the Gunnison mine should be a relatively straightforward process for the deposit is remote (in fact very remote). 

 

It should also be pointed out in-situ method is the greenest, water friendly and non-invasive form of mining out there. The mining method’s impact on the surrounding landscape is such that Gunnison will be put back to its originally state.  

 

Excelsior Mining’s plan for the coming year is to build on the work of the pre-feasibility study, Jennex told Proactive Investors. And if the study “mirrors or echoes” the earlier work “we will have one of the most attractive copper projects in the US.” 

 

Now that study assigned a net present value to Gunnison of US$820mln – which makes the company’s $43mln market capitalisation look laughably cheap. Okay, never does a mining exploration company trade close to its NPV, but one might expect the gaping chasm between this blue-sky valuation and the market’s current’s assessment to narrow at some point. 

 

This anomaly, borne of the blanket discounts applied to all TSX juniors, might help explain Greenstone’s interest. It might even provide a reason for rank and file investors to follow the money.

BenevolentAI advances novel ulcerative colitis treatment through Phase 1a trial

BenevolentAI (OTC:BAIVF) chief scientific officer Dr Anne Phelan joins Proactive's Stephen Gunnion with positive safety data from the Phase 1a, first-in-human, clinical study of BEN-8744 in healthy volunteers. Phelan explained that BEN-8744 is a potent, selective PD10 inhibitor, uniquely...

1 hour, 1 minute ago