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Friday, 2 September 2011
Fast Tracking A Excellent Copper Project in Copper Country…
Excelsior Mining MIN-V
Fast Tracking A Excellent Copper Project in Copper Country…
Share Price: $0.50
Shares Outstanding: 55.4 Million
Market Cap: $25 Million
Management:17.4%
Sullivan Family Trust:16.3%
For the last month since my last article I have been stomaching market volatility and trying to find the most risk adjusted copper junior in the market, in unstable times like today you do not want to be investing in a project with a huge CAPEX because the credit markets are still dry, you want to invest in a company that has a reasonable CAPEX this is the sweet spot with high commodity prices, money can still be raised.
It is obvious that copper is in a tremendous bull market rally, the underlying commodity prices will not faultier so you are somewhat protected from the downside when you buy a copper junior vs gold junior, copper is consumed and gone forever the same cannot be said about gold.
Not often do you get an opportunity to invest in a junior exploration company and see it through to production in the mining industry. I would suspect 1/100 projects actually see it through production from discovery. The biggest project killer is time; time is of a essence in a cyclical mining cycle, usually it takes a company 8-12 years from discovery to production, by the time the project is fully financed and permitted the good times are over and the party is long gone and it is no longer attractive to run the mine. Copper is at 4 dollars a pound today, commodity prices are at all time highs today because in the 90s and the early 2000s there was no exploration for metals, as prices were low, today we spending record amounts on exploration and soon we will replenish our supplies and then again we will see a downturn in metal prices. This is the beauty of the cyclical cycle, it is self correcting. The key points we have to look at, as investors are how do I profit from this cycle? Investing in a HUGE project that is 10-15 years in the development cycle like CUU.V or NDM.TO may not be the best course of action right now, investing in smaller companies with near term potential will get you the same return faster, do not be lured by glitzy drill results or promotions, look at near term potential and reasonable costs.
This Not Another Venture Promo…
I have Identified Excelsior as a company that is fast tracking their production Excelsior mining has gotten a lot of things done in a very short period of time. The low cost Gunnison project is located in Arizona, for those of you that are unaware; Arizona is Copper Country, USA this great copper state produces 60% of the Americas copper or 750,000 metric tons. Excelsior is a very special and unique deposit, it can be mined using ISR methods, these kind of mining projects are MUCH easier to permit, the CAPEX is a fraction of a traditional open pit mine and best of all they cheaper to operate, and lastly they do not produce unsightly pits and they are considered to be better for the environment. I will get into describing ISR in more detail later on in the blog. The management team can raise the big bucks needed to fund this project into production. The project is on track to be mining in 2014 a mere three years away. Excelsior has been listed on the TSX Venture for about 2 years, they have made great strides, I expect this trend to continue. Management is top notch, combined they have over 70 years of copper mining experience
The Key Points On ISR Mining.
ISR mining accounts for nearly all uranium mining in the USA, it also accounts for 20% of global uranium mining. This is not a new fly by night method of mining the principles behind it are very simple.
Essentially lots of injection wells, the injection wells are injected with a solution, the solution goes out and collects all the copper from the porous rocks in a safe and controlled manner, then the solution in recovered by recovery wells. The solution that is now filled with copper oxide is taken to a plant and extracted. Thousands of these wells are drilled all over the property.
Essentially lots of injection wells, the injection wells are injected with a solution, the solution goes out and collects all the copper from the porous rocks in a safe and controlled manner, then the solution in recovered by recovery wells. The solution that is now filled with copper oxide is taken to a plant and extracted. Thousands of these wells are drilled all over the property.
You are probably looking at the grades, the average is 0.3%, don’t get fooled by low grades, low grade deposits can be mined efficiently and cost effectively using ISR methods.
Why In-Situ Recovery Mining is VERY attractive:
- Significantly Lower CAPEX, and the operating costs throughout the life of the mine are lower
- ISR Mining is non evasive; no ore is moved, no unsightly open pits are left
- Fewer permits are needed, mines can be in production within 18 months
- Minimal noise, dust and greenhouse gases
- Reclamation cost’s are minimal
Finding a copper deposit that can be mined using In-Situ Recovery methods is like hitting a jackpot; all the stars have to align and when they do it creates a perfect storm. Like I mentioned at the start of this article time is of essence, most companies that are in the stage that Excelsior is in today will not benefit from high metal prices as it will take them 8-10 years before they can be producing, Excelsior plans on doing this exact same feat within 3 years! There are many other factors that can kill a project, but in the end it is a numbers game.
How do you know if a project can be mined using ISR Methods?
- The resource has to be below the water table
- 9 of the 14 global ISR copper projects are actually located right in Arizona near the Gunnison project
- The rock has to be highly fractured and the copper should be a copper oxide for best results
The Hunt For the Next Ten bagger
Key Points that will make Excelsior a ten bagger:
- Geology
- Operating Costs
- Current Market Cap
- Market Cap VS copper in ground
- Location
- Management
The operating costs for the Florence project are supposed to be slated at around .69 cents a pound; I believe that the Gunnison project will have costs inline with the Florence deposit. The CAPEX should also be inline with the Florence project; these projects are almost identical the only difference is that Curis Resources has an 18-month head start on Excelsior.
The current market cap is grossly undervalued for a company that has 4.7 billion pounds of copper and a potential to increase that significantly.
The Gunnison project is in Arizona, Arizona is copper country, more importantly its ISR mining country; 9 out of 14 global ISR mining projects are located in Arizona. When it comes to ISR mining, Arizona has the most skilled professionals and it has a competent workforce that understands the specific challenges and needs of the industry. The citizens of Arizona are also supportive of mining; they understand that mining is a critical part of the economy.
The deposit is not located in the middle of no where, it is 2.5hr from Phoenix and 60 miles from Tucson, there are major highways and rail lines that connect to the project. This is project is located in a legendary mining district and the company controls almost 3900 acres in the region. The project is not located on or near any Indian reserve, it is far from the public, there is no scenic areas surrounding it and no one currently lives near it, this is truly the perfect place for a mine.
Short Term Catalysts
- Hydrological and Metallurgical Results due within a month; these results will provide substantial evidence to the market that Gunnison is minable using ISR methods.
- A PEA is due later this year, a PEA will prove to the market that this is a legitimate project and the stock will start its inevitable parabolic rise.
- Jackson Hole Update; Ben the bank pretty much promised a QE3 if things got bad, I see copper stocks benefiting the most from QE3 as they have been lagging, and Dr. Copper is a indicator of the economies over all well being. Expect some sort of QE3 later this month
MineOnomics
Excelsior has an indicated resource of 3.21 Billion pounds of copper oxide, and another 1.21 Billion in the inferred category. This is a large project; the expected cost per pound should be under 70 cents a pound. The average for a copper company that is putting a project into production these days is about 1.30, companies like Anvil Mining, Copper Mountain, Mercator Minerals etc, they have all went into production within the last year with a cost per pound average of over 1.20. 150 million pounds at 4.00 would give excelsior 600 million a year, with an average cash cost of .70 cents a pound the total gross profit would be 495 million according to my napkin economics model!
Excelsior currently trades at a measly 0.006 cents per pound this gives the company a market cap somewhere north of 30 million companies such a copper mountain mining trade at 0.14 cents per pound, as Excelsior continues to move up the ladder by proving feasibility and starting construction I see Excelsior reaching higher valuations as the cost per pound will defiantly be lower.
At 50 cents and a market cap of about 25 million, I see no risk investing in this wonderful copper company, I think the company will keep ripping it up proving up more copper and I truly see this producing before 2013. If you want to see what type of potential this company can have when they have their PEA out look at its older brother Curis Resources. I really see Excelsior gaining traction when the PEA is released.
The Grand Summary
The world is increasingly going electric, we are seeing dozens of new electric cars coming into showrooms, we are hearing about smart grids, electric hybrids, an electric car uses on average of 60 kilograms of copper a conventional automobile uses 24 KG. North Americans are tired of being held hostage by political problems in the Middle East and we are generally tired of using fossil fuels that are ruining our planet, and we all have heard by now that China and India have finally decided to join the rest of the civilized world by pluging into the electric grid. Profit from the upcoming electric revolution by buying Excelsior Mining Shares today.
Discourse: This is one of my biggest holdings, I hold this personally and in a fund I manage.
Thank you for reading this week’s edition of Resource Corp!
Its finally September LET THE GAMES BEGIN!!!
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