Gunnison Copper Corp (GCUMF)

[Photonics_Guy]

Crux Investor Article

The article is clearly a hit piece published with the intent of harming Excelsior and its shareholders. For what it is worth, I have encouraged Excelsior management to pursue any/all legal remedies against the author and Crux Investor to address the libelous nature of the comments contained in the article.

I completely agree with ArizonaBilly's take on the article:

The Crux article is a POS hit piece. No author listed? Why is that? No position in the stock disclosed? Why is that? Articles on Seeking Alpha, for example, disclose not only the author's name but whether they are long or short. The cynic in me thinks the author of the article made a bundle yesterday shorting MIN/EXMGF.

I've heard from people who know better that the article contains an error in just about every sentence.

Not only that, but the snide tone of the article leads me to believe that the author may have an axe to grind against the company.

The article is chock full of false, misleading and inflammatory rhetoric.
This is not serious due diligence or quality journalism. The author is hiding behind anonymity with nefarious intent.

Here are snippets from the article in italics and my comments in bold.


Not wanting to beat around the bush, we can tell you that the company has had to make so many major adaptations that the key de-risking document, the feasibility study, is now largely irrelevant. All inputs and expectations are up in the air.
PG: Crux introduces the article with a prejudicial sweeping statement that sets the stage for the unsupported claims that follow.

When the go-ahead for any new project, let alone one that incorporates a new technology, is given without substantial empirical evidence and pilot plant work, investors should realise they taken on extremely high risk. We feel that Excelsior Mining is now, and will remain for the foreseeable future, a long way from sustainable and commercial production.
PG: Everyone is entitled to their feelings. However, an “analyst” should present facts, not suppositions.

Excelsior management states quite accurately in their corporate presentation that the method is a very established mining method for Uranium, but this is slightly disingenuous. Uranium leaching is usually done with an alkali solution, whereas copper leaching is done with acid.
PG: For clarity, the term “disingenuous” = liar. The author is effectively accusing Excelsior of lying.
If the analyst had performed even a modicum of due diligence, they would note that most worldwide uranium in-situ deposits use acid, specifically sulphuric acid (same as Excelsior’s Gunnison Copper Project). A minority of uranium deposits use nitric acid. The author correctly states that Carbonate (alkali) is also used in in-situ uranium deposits (primarily the US). Australia apparently exclusively uses acid as does Kazakhstan.

Wikipedia: In situ leach.

“Solutions used to dissolve uranium ore are either acid (sulfuric acid or less commonly nitric acid) or carbonate (sodium bicarbonate, ammonium carbonate, or dissolved carbon dioxide). Dissolved oxygen is sometimes added to the water to mobilize the uranium. ISL of uranium ores started in the United States and the Soviet Union in the early 1960s. The first uranium ISL in the US was in the Shirley Basin in the state of Wyoming, which operated from 1961-1970 using sulfuric acid. Since 1970, all commercial-scale ISL mines in the US have used carbonate solutions.[3] ISL mining in Australia uses acid solutions.”

World Uranium Mining Production

“Some mills and ISL operations (especially in the USA) use carbonate leaching instead of sulfuric acid, depending on the orebody. Where uranium is recovered as a by-product, e.g. of copper or phosphate, the treatment process is likely to be more complex.”

The assumed Sweep Factor of 80% for rock with a Fracture Intensity with 20%-50% core pieces of less than 10 cm seems overly optimistic.
PG: Did the author interview management to get the details on how this estimate was obtained? No.

Excelsior used 70% average sweep; Florence used 90% average. Excelsior broke the total mine into discreet mining blocks and applied a sweep efficiency to each block, while Florence just applied a one size fits all to the whole ore body. I have been to the core shack, is like looking at gravel in all the core boxes, especially in the areas they will be mining for the first 10 years.

The behaviour of solution movement is unlikely to be uniform and unaffected by differences in permeability. In practice fluid movement will prefer the pathways of least resistance, so-called channelling. The geological model and cross section for Fracture Intensity clearly point to the risk of channelling, both along bedding and especially along steeper fault structures. Channelling would greatly reduce the sweep factor by sterilising large volumes of low Fracture Intensity mineralisation from being exposed to the acid solution.
Whereas there is mention of clay minerals close to the intrusive/skarn contact, exactly where the highest-grade copper mineralisation is present, their effect on permeability seems to be ignored.
PG: The resource model the author is referring to was not designed to show structures such as channeling. In addition, the faults are where most of the copper is.

The amount of acid consumed seems to totally ignore the possibility of carbonate minerals and iron oxides affecting the total required. Acid consumption of 10 lb of acid per lb of recovered Cu is very low compared to conventional (non-in-situ) copper leaching operations.
PG: The author doesn’t know much about copper leaching in Arizona. Gunnison consumes twice the industry average acid for copper leaching operations Arizona. The average acid for most Arizona is 5 pounds of acid/pound copper, including that Florence is predicting. Long term, Excelsior will reduce the acid cost by 50% when they build the acid plant, whereas Florence being inside a city will not be able to.

The economic valuation seems to ignore the cost of drilling the overburden.
PG: Absolutely false statement. On page 159, the FS discusses the overburden as being 300-800 ft in thickness. Obviously, drilling through the overburden and into the ore body was included in the drilling costs.

The reference by Excelsior to Taseko’s nearby Florence ISR operation, where a pilot programme proved to be successful, is misleading. The Florence deposit is a copper porphyry that was uplifted to surface and subjected to weathering and oxidation processes before being covered by younger lithologies. The hydraulic conditions have been proven suitable by extensive historical testwork.
PG: Both deposits were created by the same geological event; both projects have the required characteristics needed to mine via in-situ recovery. Excelsior conducted a comprehensive hydrological program that dwarfs anything done by Taseko. What is the motivation behind consistently describing the Florence project in positive terms, while disparaging the Gunnison project?

The company has had to completely overhaul the way in which it leaches copper making the feasibility study irrelevant. All inputs and expectations of production, resource base, and costs are up in the air. It seems that the concerns expressed previously may well be applicable which would have a major effect on contained metal in reserves, metallurgical recovery, acid consumption, operating cost and sustaining capital expenditure.
PG: I completely disagree with the author’s findings. The FS states on page 179,

New wells are anticipated to be installed the year prior for each block brought on line for production. Because injection and recovery wells will be constructed alike, a well can be converted from injection to recovery (and vice versa) by changing out the equipment and wellhead instrumentation.

I have been to the Gunnison Copper Mine on two separate occasions for in-depth tours of the facilities. Management from the start has indicated their intent of installing the equipment required for reversing the flow from injection to extraction wells. Events in January 2020 accelerated that plan for the express purpose of expediting “breakthrough” of PLS from injection to extraction wells by incorporating a push-pull methodology. Yes, they ran into challenges with copper precipitate forming at the well-heads. So they executed their plan to install the flow-reversal equipment earlier to resolve/expedite the time to breakthrough.

The fact that copper has been produced is merely a marketing ploy and it will remain irrelevant until the company has proven its sustainability at a particular level and the cost of production. The Gunnison project again proves the risks of being a pioneer in adopting new technologies. When the go-ahead for any new project, let alone one that incorporates a new technology, is given without substantial empirical evidence and pilot plant work, investors should realise they taken on extremely high risk. Caveat Emptor.
PG: How much due diligence did the author and/or Crux do in preparing for this article? How many detailed interviews of company management were conducted to ensure that the author clearly understood the FS and its representations? ZERO!

Contrast the non-existent due diligence that went into preparing this article vs the $100’s of thousands of due diligence that Greenstone, Altius and Triple Flag performed before they invested millions of dollars into this project.

PG