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Equity Research
September 22, 2011
Rating: SPECULATIVE BUY Excelsior Mining Corp.
Target Price: $2.10 (MIN – TSXV, $0.45)
All figures in C$, unless otherwise noted Emerging U.S. Low Cost Copper Producer
We are initiating coverage of Excelsior Mining Corp. (“Excelsior”) with a SPECULATIVE BUY rating and $2.10 target price.
Summary: We believe Excelsior has a large and expandable copper (“Cu”) resource at the Gunnison Copper Project (“Gunnison”) that is amenable to relatively low cost in-situ recovery (“ISR”) mining. We believe the regional ISR model is well established, lowering execution risk, increasing production visibility and leading to the development of one of the lower cost (per pound) Cu mines in the world.
 Low Risk Rural Location in Prolific Copper Porphyry Belt of Arizona: Excelsior’s flagship property, Gunnison, is located in the heart of the Copper Porphyry Belt of Arizona, home to more than 14 ISR Cu mines and exploration/development projects. Any risk related to permitting is low as there are no activities, archaeological sites, endangered species, farming or active water use near the deposit.
 Fast Tracking to Production: ISR projects require much less site preparation than other mining methods. We expect a Feasibility Study and the majority of permitting to be completed in 2013, with first production by the end of 2014. As the Gunnison project is similar to Curis Mining Corp’s (“Curis”) Florence project, with regional geological and engineering expertise available we expect an advancing learning curve to accelerate engineering practices and project execution.
 Low Execution Risk: We consider Gunnison a near “blank slate” unencumbered project in a unique attractive geological setting with no zoning or other known encumbrances. This is a geologically unique and prolific oxidized Cu porphyry belt. The region has considerable expertise in Cu oxide ISR mining. Numerous major integrated producers have operated regional Cu ISR operations for decades.
 Low Cost: Arizona ISR Cu mines are historically amongst the lowest cost Cu mines in the world. The nearby San Manuel (BHP Billiton) ISR mines produced 3.25 billion lbs. of Cu over 14 years at an average cost under US$0.40/lb. (Source: BHP Billiton). Few other mine types can duplicate the opex costs at a typical Cu ISR (only 12.5% of all-in cost/lb. at BHP’s San Manuel).
 Valuation: We are initiating coverage with a SPECULATIVE BUY rating and $2.10 target price based on 0.5x our estimated NAV (12% Discounted Cash Flow [“DCF”]; US$4.30/lb Cu LT).
Recent Price: $0.45
52 Week Range: $0.29 - $0.81
Shares O/S Basic (MM): 55.4
F.D. (MM): 77.1
Market Cap: Basic (MM): $25.2
Net Cash (MM): $6.2
Enterprise Value (MM): $19.0
Fiscal Year End: Dec. 31
Valuation MM Per Share
North Star $325 $2.10
NAV $325 $2.10
P/NAV (x) 0.21
Commodities Long Term
Copper (US$/lb) $4.30
Company Description: Excelsior is developing a low cost copper project within the prolific copper porphyry belt of Arizona. Over 60,000 metres have been drilled to date on Gunnison, which has an NI 43-101 indicated resource of 3.21 billion pounds of oxide copper (511 million tons at 0.31%) and an inferred resource of 1.26 billion pounds of oxide copper (221 million tons at 0.29%).
The oxide resource has the potential to be mined using in-situ recovery methods. This would allow the copper to be recovered at a much lower cost than conventional mining methods.
Merrill McHenry, MBA, CFA
Mining and Metals Analyst
416.867.2379
mmchenry@byroncapitalmarkets.com
Sandy Lam
Associate
647.426.0287
slam@byroncapitalmarkets.com