Excelsior Mining (TSX: MIN) CEO Stephen Twyerould on the Gunnison Copper Project in Arizona, a Rare Near-Term Production Pure Copper Play

March 14, 2018

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Gerardo Del Real: This is Gerardo Del Real with Resource Stock Digest. Joining me today is the President and CEO of Excelsior Mining (TSX: MIN)(OTC: EXMGF), Mr. Stephen Twyerould. Stephen, how are you this morning?

Stephen Twyerould: Really good. Thanks, Gerardo.

Gerardo Del Real: I'm so happy to have you on. I really appreciate you taking the time. You are in a unique position with Excelsior. You are on track to be the U.S.'s next copper producer. You're at a very important point in the company's history. You're awaiting a federal permit. You have, what I believe is, one of the most compelling risk-reward propositions in the entire space. I want to talk about the world class project and how things are coming along there. But before that, I'd love to get to know a little bit more about your background. I know you have over 30 years’ experience in exploration and mining, and I know a good bulk of them, nearly two decades or those, were spent with WMC Resources. Can you tell me a bit about your background?

Stephen Twyerould: Sure. Obviously I'm from Australia, been in the U.S. here since 2005. It's actually because my wife's from Phoenix. That's how we ended up in Phoenix. I've always loved mining, even as a kid. I started with Western Mining Corporation in Kalgurli underground on the Golden Mile, on the gold system there. I spent a number of years at that operation, then moved on to some of their other underground and open pit operations in various roles, was the Chief Geologist for what was then the Windarra Nickel Project. At the time, we had a couple of gold mines, underground and open pit, and a couple of nickel mines, underground and open pit, so that was a pretty neat little operation.

Went on to do my PhD with them on Ernest Henry, which is iron-copper-gold in the Cloncurry District. And then ended up back with WMC in their gold business, looking after sort of all things kind of geological, resource, reserve, exploration, project development, that type of thing. At the time, there were a number of operations underground, open pit and development projects. I suppose my background is more mining than exploration, and it's more sort of development and getting projects from an early stage into production.

Gerardo Del Real: Well, that's going to serve you well, obviously. I mentioned early on, you are in the process, you're actually waiting on your final permit, the federal permit, and I know that this is something that for shareholders and for the company, is a long time coming, a lot of hard work's gone into it. And frankly, I should congratulate you because you've done an amazing job of navigating the permitting process. Anybody in the business for any amount of time knows how tricky that can be, and frankly, you've done an excellent job with it. I'd love to talk about the team in place and who you have helping you get this Gunnison Copper Project into production.

Stephen Twyerould: We started pretty small. When we started, there was kind of like three or four of us involved. Today, we employ sort of over 30 people. We have a number of hydrologists, metallurgists, engineers, geologists, permitting experts, GIS. We like to do the technical work in house as much as we can, but we do get a lot of support from some really smart guys in the state of Arizona here, helping us out with engineering and permitting. But it's gone fairly smoothly, and we're happy with that.

Gerardo Del Real: Let's talk about the project. You mentioned it's located in Arizona. I believe it's about 65 miles southeast of Tucson. Is that correct, Stephen?

Stephen Twyerould: Yeah, quite close to Tucson. Some of our team live in the south end of Tucson, and they're about 40, 50 minutes from work. Our main office, we have a technical office in Phoenix, so I live in Phoenix. We're about two and a half hours drive south. It's really good to have the management team, the operating team, and all of our support base in the state here. It makes it easy to do business that way.

Gerardo Del Real: You've attracted some of the smartest capital in the business, Stephen. You recently did a financing, I believe it was for approximately $30 million dollars. And a big part of that, obviously, is because of the Gunnison Copper Project. I believe we're in a base metal bull market. I believe copper is absolutely in a bull market, and your 2016 feasibility study on the project demonstrated a net present value after tax, of $807 million. Now that's using a $2.75 copper price. If we do a sensitivity analysis and we look at $3.25 copper, which is, we're pretty much there, your net present value goes to just over $1 billion dollars, and your IRR is 51%, with average life of mine operating costs of $0.65 a pound. Can you talk a bit about the resource and the reserve that you have, and just what makes the Gunnison project so special? Because it truly is a world class deposit.

Stephen Twyerould: Yeah, it's all about the deposit, frankly. It's very unique because it's a large copper oxide that is below the water table. That's really unusual in the business. Most copper oxides are sitting on top of a mountain somewhere. What happened in Arizona is there was a tectonic event about 20 million years ago, broke up our mountain, dropped it down into a valley, covered it over with gravel. Because we're naturally fractured and broken, this ore body, and because it's sort of copper oxide below the water table, we can do in-situ recovery, very common in the uranium space, not so common in the copper space because most people don't have this type of ore body.

The deposit itself is sort of close to 5 billion pounds in the ground, measured and indicated. Ultimately, we're going to extract about 2.1, 2.2 billion pounds of copper over a 20-odd year period. And it is that in-situ mining method that we can apply that gives us those really low operating costs, very low capital costs, very low initial capital, and that's just unique. We're just lucky to have that.

Gerardo Del Real: Now, with ISR projects, the other big benefit, of course, is the fact that you have a very environmentally sound process of extracting the metal. Is that correct, Stephen?

Stephen Twyerould: Yeah, it is. This is going to be, for want of a better term, the greenest copper project in the globe. Because we're not digging this up, we're leaving the copper in the ground, and we use a weak acid to just leach some of that copper out and pump it off to our plant, it means we're doing very minimal ground disturbance, so there's a very small footprint. We don't have an open pit. We don't have a leach pad. We don't have waste stock piles. All of that's gone, and then when we're finished mining, we just rinse with a bit of fresh water, we rinse for a number of years until it's clean, and then when we rehab the site, you won't know we've been there. You can build a house, you can run a farm, you can do whatever you want, you won't even know we've been there hardly.

Gerardo Del Real: Incredible. Now, Arizona has a good track record for permitting ISR projects. Is that correct?

Stephen Twyerould: Yeah, there have been several permitted in the past, and several from small to sort of medium size operating in-situ mines. It's more common in Arizona, as I said, because they had that later tectonic event that created that perfect geological environment for in situ, and so this is certainly the state to do this type of mining.

Gerardo Del Real: How is the infrastructure?

Stephen Twyerould: Mate, on our site it's perfect. We have a major freeway, the I-10 freeway, so we can get off the freeway at the local truck stop, there's a freeway exit there, and we are like 400 yards or 400 meters from our front gate. So great infrastructure. We have power on site. We have water wells and all the water we need on site. We already have a processing facility, so we basically pre-purchased our solvent extraction electrowinning plant that exists today. And so that means our initial capital and startup time to production is certainly shorter than most.

Gerardo Del Real: And you're targeting production for late this year, early next year? Is that accurate?

Stephen Twyerould: Yes, absolutely. We've got our state operating permit late last year. We've been through the federal permitting process, and we expect to get the final federal permit sometime in April, May. Shortly after that, we would finish project finance. And then be in construction sometime around May/June, and that should see us seeing some copper coming out of the ground at the end of the year or shortly thereafter.

Gerardo Del Real: Now, I understand that the production schedule, you plan on building out in stages. Is that accurate?

Stephen Twyerould: Yeah. The main reason we're staging it is to sort of make sure we're not exposed to capital risk, to capital blowout, and also so we're not putting the company under stress. Our market cap is around about sort of $200 million US. It would be difficult to go out and build the final stage today. We'd need sort of $350-plus million, significantly more than our market cap. And if by chance, there was a capital blowout, it would be damaging. The whole intent of this staging – and again, the in-situ mining allows us to do this – is we can start small, have very low initial capital, maintain our capital structure in the company, and then grow sort of organically and through debt once we're in production. We start at about 25 million pound per year, per annum, and as I said, we already have the processing facility to do that, and then we'll expand to a total of about 75 million pound, and then finally to 125 million pound of copper cathode per year.

Gerardo Del Real: I mentioned that you've attracted some of the smartest capital in the resource space. Greenstone Resources is a major shareholder. I believe they own nearly 50 percent of the shares? Is that correct?

Stephen Twyerould: Yeah, they earn about 49 percent. They've been really good supporters of the project. Their first investment was in 2014, and they did a ton of due diligence prior to that investment, and then they followed in 2015, 2016, and 2017.

Gerardo Del Real: Excellent, excellent. So we're hoping – and of course fingers crossed – we're hoping for permits here in the next couple of months. What can we expect in the next 6 to 12 months from the company, assuming that all goes well on the permitting front, Stephen?

Stephen Twyerould: Well, we've got a whole number of really good catalysts coming up in the next 12 months, 6 to 12 months. Sometime in the next few months, we've got the final permit. Shortly after that, we'll complete our project finance. We'll be in construction soon after that, and then within 6 months of that construction, we would start to see some copper, and then we would be at nameplate production approximately 12 months after we start construction. So, really it's permit, finance, construction, production, all happening in the next 12 months, and we think all of those are going to be accretive on the share price.

Gerardo Del Real: Well, you also happen to have, like I mentioned earlier, a bull market in copper that I think, frankly, you're hitting the sweet spot of this cycle. Stephen, again, congratulations to your team, and I'll definitely be watching out for permit news. Is there anything else that you'd like to add? I like to say that, in this business, the simpler the story, sometimes you don't get that, but the simpler the story, the better the project sometimes, and this is truly, truly a simple story. You have nearly 5 billion pounds of copper. You have most of your permits in place. We're waiting for that federal permit. You've largely de-risked the project. You have excellent infrastructure, and again, you mentioned the market cap US is approximately $220 million. And I got to believe that once that permit is approved, you're going to see a re-rating pretty quickly.

Stephen Twyerould: That's certainly what we're working on, and that's certainly the thesis here. Look, in short, it's hard to find a pure copper play in the junior space that is close to production, that is near production. We've got safe jurisdiction, we've got excellent management, we've got good financial support and backers. We've done all the hard yards now. We're at the final stretch leading up into production within the next 12 months, very happy.

Gerardo Del Real: Wonderful. Well, Stephen, I look forward to having you back on as you check some more boxes off the milestone list there.

Stephen Twyerould: Yeah, yeah. That's right, and we've been pretty good at that, so we're going to keep doing it.

Gerardo Del Real: You've executed well, you've executed well. Thank you very much again for your time, Stephen.

Stephen Twyerould: Thank you. Thanks for your time.

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