Excelsior Mining Corp (EXMGF)

[Photonics_Guy]

Excelsior Is Undervalued

Here's a quick recap using some charts out of the corporate presentation of why I believe Excelsior is tremendously undervalued at this point.

Excelsior has received ALL permits required to achieve nameplate production capacity of 125MLb/yr. It also has received funding on very favorable terms to enter into production at 25MLb/yr by year-ending 2019, with major base metal institutional backing of over US$141M.

The valuation of MIN (at <20% NPV) is far below its peers for projects at similar stages to that of MIN, in spite MIN having one of the best IRR's not only in the US, but the entire world.

If we assume that the Free-Cash-Flow (EBITDA-Sustaining) is approximately US$200 annually, what is a reasonable estimate for how much that translates to in terms of share price? Back of the envelope calculations...

Earnings at 125MLb/yr using $2.75/Lb Cu: ~US$200M Annually
Num Fully-diluted shares: 250M shares
Estimated PE Ratio: 10X PE

PPS = Annual Earnings x PE Ratio / Num Shares = US$8.00/share

This would be a fair valuation if/when MIN achieves 125MLb/yr production capacity. Per the FS, this is scheduled in Year 7, however, Management has repeatedly discussed that their plan is to accelerate the Stage 3 forward in time 2-3 years (Year 4) by bypassing Stage 2. This is possible if Cu pricing remains favorable.

They are able to accomplish the full production capacity without building (and delaying the capital required to build) an acid plant by buying acid instead of manufacturing it on-site. For example, Asarco is 75 miles away in Hayden, AZ and is presently upgrading their acid plant and would easily be able to supply the acid required by MIN for a nominal premium.

Delaying the capital required for the acid plant would save US$82M initially, which would allow the plant to easily be built using cash-flow once 125MLb/yr capacity is achieved. Once the acid plant is built, the cost per lb of copper becomes more favorable.

Risks

1. MIN is not able to meet the "Sweep Efficiency" they estimate in the FS: This means that they are not able to recover as much Cu as they anticipated in the FS. This depends on the hydrology, the amount of carbonate in the ore (which dilutes the acid used to leach), and whether they encounter significant 'cementing' (gypsum formation) during the leaching process.
-Risk Mitigation: Excelsior, Greenstone, Triple Flag, et. al., have performed extensive testing on actual core samples from Gunnison to support the results in the FS. Excelsior did not include in their financial model the additional copper that can be recovered from slower leaching ore in the oxide layer nor did they include the copper recoverable from the transitional sulfide zone that lies below the oxide layer. Management estimates that these additional copper sources may add 10-15% more copper to the results as shown in the FS.

2. Copper price dramatically falls: In the event of a severe global recession, copper pricing may drop significantly.
-Risk Mitigation: Excelsior remains profitable at low copper prices because of the low production cost as a result of using the ISL/ISR method. With 'all-in' costs of ~$1.30/lb, Excelsior remains profitable with significant margin even with copper priced at $2.00/lb.