Excelsior Mining Corp – Putting More Meat on the Bones

I have mentioned several times this year that I am very optimistic about the future of Excelsior and their Gunnison Copper Project in southeastern Arizona and based on the news flow out of Excelsior, I continue to have confidence in my optimism. Building on really strong PEA results announced earlier this year, and backed by Mark Morabito’s newly transformed Forbes West, Stephen Twyerould and his Excelsior team continue to work feverishly to advance the project towards what I believe to be a very realistic goal of commercial production by 2015.

PERMITTING EXPERTISE

Finding an oxide copper deposit sitting below the water table is a truly rare find. The reason that most investors have not heard about in-situ copper recovery is because these kinds of projects are so rare; in fact, I cannot point to any outside of Arizona. If finding an in-situ copper project is hard to do, then it must be equally hard to find people who have experience working on them. One area where experience with in-situ projects is invaluable is permitting. Over the past few decades, a number of in-situ copper projects have been successfully permitted in Arizona. There are people out there who know how to get this type of project permitted and yesterday, Excelsior has retained exactly this kind of invaluable expertise. Haley & Aldrich, an engineering consulting firm that specializes in project permitting, has been engaged to help guide the Gunnison Copper Project through the permitting process.

Haley & Aldrich is loaded with in-situ copper permitting expertise starting with their VP and Manager of Mining Services, Eric Mears. Excelsior has apparently done its homework in contracting with this individual as he comes with a wealth of permitting experience related directly to in-situ copper mines – specifically the Arizona-based in-situ copper projects at Florence, Miami and San Manuel. Mears and his team have been through the permitting process for all of these projects with the most recent example being the Florence Copper Project where Mears was instrumental in getting the project fully permitted back in the early 2000’s.

The question that is most often asked of Excelsior is “How will the project get permitted?” It’s a fair question in light of permitting delays that have occurred for other projects in Arizona. The first thing that one has to understand about Arizona is that, although it is, and will likely always be, a “mining state”, the ease of permitting varies from county to county. I’m told Excelsior benefits from having its project located in Cochise County; which is a sparsely populated, conservative county that is eager to attract new industry. The location is ideal; now add to this equation the strength and permitting expertise of Haley & Aldrich, and Excelsior’s confidence in ultimately being able to execute on its mining plan is well founded.

In many cases, delays in the permitting process result from negative community reaction. As regular readers of my blog know, Excelsior is not anticipating any serious negative mass community response. There has been an open pit copper mine in operation for a number of years, just a mile north of the project area, so the local residences have a history of peaceful co-existence with mining operations. In addition, the nearest settlement, a group of approximately 100 homes, is about three miles to the south and is not anticipated to be effected by the project. However, Excelsior’s announcement today shows that they are not taking anything for granted and the appointment of Haley & Aldrich solidifies Excelsior’s commitment to ensuring that the permitting process is handled with precision and professionalism.

PRE-FEASIBILTY HAS BEGUN

With the announcement of the 2012 work program, Excelsior has laid out its plan to complete a pre-feasibility study by the end of the year. I see 2012 as being the year that Excelsior can put some real meat on its bones. We already know that they have the metal – 3.21 billion pounds indicated (511 M tons at 0.31%) and 0.88 billion pounds inferred (159 M tons at 0.28%); more than enough metal to feed a 70-100 million pound operation for two decades or more. What the pre-feasibility will focus on is hydrology. Excelsior needs to fully map out exactly how the groundwater is flowing, as this will ultimately define the mine plan. For in-situ copper recovery projects, it is hydrology upon which the ultimate success of the project rests.

Once all of the hydrology has been mapped out, Excelsior should use the information to build a mine plan. Here’s how it will generally work – in areas of slow moving water, the spacing between the injection wells and the recovery wells will need to be tighter; whereas in areas with faster moving water, the well spacing can be further apart. All of this is a cost-reward decision that can only be made once the entire project is mapped for hydrology. To help accomplish this, Excelsior is planning six large holes for hydrological test wells upon which a series of pumping tests will be executed. These are large permanent wells that will certainly enhance the understanding of the hydrological parameters of the project. These holes will be combined with geophysical testing for hydrology. Next year, 2013, Excelsior is expected to drill even more hydrology holes with the goal of completing a comprehensive hydrology map.

In terms of metallurgy, the tests that were conducted last year returned results that were as good, or better, than the historical tests that were done by Magma Copper in the 1990’s. Now Excelsior will do another five tests with up to 10 column leach tests. This should enhance the company’s understanding of the recovery rate and the projected acid consumption rate. If Excelsior can duplicate the results achieved last year, then this should again add to the overall confidence that they have an economically viable project.

In combination with the metallurgical and hydrological data, Excelsior is also planning to complete up to 18 diamond drill holes to increase the structural and geological understanding of the Gunnison Project. Readers should note that Excelsior’s last in-fill drill program succeeded in adding a billion pounds of copper to the overall resource. While I do not expect that we will see a similar massive increase to the resource as a result of these 18 drill holes, I do believe it is not unreasonable to expect additional copper to be identified. Results from all of these tests should start to be received by the summer, which will then be combined to produce the pre-feasibility study scheduled to be released before year-end. Excelsior has yet to miss a milestone so I have a lot of confidence that they can deliver on time.

IN-SIDER BUYING

One of the things that truly speaks to the quality of a project and its management team is the consistent occurrence of insider buying. Mark Morabito, Chairman of Excelsior Mining, just purchased 500,000 shares of Excelsior to add to the more that 250,000 he purchased earlier this year. Mark is one of the most astute investors that I know – he would not be making these purchases if he did not anticipate making a decent profit. Furthermore, another director of Excelsior has also recently purchased 340,000 shares. All of this insider buying suggests that the management team is aligned with the investor, and right now, one of those investors is me. By putting their own money on the line, the management group is saying that they believe in Excelsior just as much as I do.

Bottom Line

On the technical front, Excelsior is doing all the right things in order to continue toward its goal of commercial production by 2015. I anticipate continued good news and positive project advancement from Excelsior as 2012 unfolds.