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Summary

Valued at extreme discount to Gunnison's after-tax NPV.

Final federal permit expected within 60 days.

First copper production expected in 2018.

Excelsior Mining (OTCQX:OTCQX:EXMGF)

Featured In: July 2016

Average Cost per Share: C$0.24

Current Market Price (February 14, 2018): C$1.18

We’ve been Excelsior shareholders since mid-2014, with an average cost per share of C$0.24. Despite the company’s strong share price performance over the past 18 months, Excelsior's Gunnison Copper Project continues to be valued at an extreme discount to after-tax NPV.

Remember that Excelsior released a Feasibility Study in late 2016, projecting excellent economics at the Gunnison Project. This included an after-tax NPV of C$1.05b, an IRR of over 40%, a payback of less than three years, and a tiny initial capex of US$46.9m (assuming a 7.5% discount rate, $3 copper, and no acid plant). These are no doubt eye-catching economics. I’ve provided below the copper price sensitivity analysis included in the Feasibility Study.

The market however has always been extremely skeptical of Excelsior’s ability to receive full permitting for the project. So far, this skepticism has proven unfounded, as the company has diligently worked its way through the permitting process. Most recently, in October 2017, the company received the Aquifer Protection Permit (“APP”) from the Arizona Department of Environmental Quality. This was the final permit needed from the State of Arizona to begin construction at Gunnison.

The company is now a single federal permit away from being able to start construction. The document in question is called an Underground Injection Control (“UIC”) permit and is issued by the EPA. In late October 2017, it was announced that the EPA had issued a draft UIC permit for Gunnison. As stated in the company’s news release: “The draft UIC permit will remain open for public comment for a minimum of 30 days; the timing of the issuance of the final UIC permit is subject to this public comment period.”

In late January 2018, the company announced that the public comment period for the draft UIC permit had been extended in order to facilitate a public meeting scheduled for February 27, 2018 in Dragoon, Arizona. While this extension isn’t ideal, I was assured by CEO Stephen Twyerould in a recent sit down that the UIC permit is on track for issuance in March or April of this year.

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