Tootalljones - Welcome to the board. First time I've seen you post here.
Here is a stab at responding to your excellent questions/comments.
1. The company needs to borrow another 45 million. This is already known, and even if it were not, the sum is very small compared to positives: an operational mine with spectacular returns and economics for shareholders. I think this accounts for very little of the undervaluation, if any.
Response: Totally agree. The original amount of $49M described in the FS is being increased to provide working capital for the 3 months or so that the mine will need to operate before appreciable concentrates of copper in the pregnant leach solution (PLS) are reached. Once the concentrate hits a certain level, then they will start routing the PLS through the EW plant to recover the copper.
2. Getting the final federal permit. My first question is this: Q2A: am I correct in understanding that they have already received a draft of the permit from the EPA, and that it is for a fully operational mine, as proposed by the company and its study?
Response: Yes. Excelsior has received the draft EPA UIC permit and are now in a 45-day 'Public Comment' period that ends on Jan 8, 2018. At that time, a 30-day appeals period commences, with full permit approval/grant expected mid-February.
Excelsior was formally granted the Gunnison Wellfield ADEQ APP permit in 3Q-2017.
There are three permits required for production:
(1) Johnson Camp Mine ADEQ permit: Required to qualify the JCM for operation at the state level. The JCM ADEQ permit was formally granted back in 1Q-2017.
(2) Gunnison ADEQ Aquifer Protection Permit (APP): Required to qualify the Gunnison Wellfield for operation at the state level. The Gunnison ADEQ JCM permit was formally granted in 3Q-2017.
(3) EPA Underground Injection Control Permit (EPA UIC): Required to qualify the Gunnison Wellfield for operation at the federal level. Draft permit received with formal grant expected in Feb2018 as described above.
There is a fourth permit that may be required in year 4 or so if the company elects to move forward with their own Acid plant. There is a possibility that they may just continue to purchase the acid required and forego the expense of building the plant. But in no way will this fourth permit affect production at Gunnison. It is planned to marginally reduce costs once the ability to process at 125MLb of copper annually is reached.
3. What is the confidence level that this mining method will work along the lines proposed by the company? How can we feel assured about this topic as proposed investors?
Response: Great question. It would be good to read the full Feasibility Study Project Risks beginning on page 269. Here are a couple excerpts that touch upon your question with highlights I've added.
25.2 PROJECT RISKS
1. Copper recovery. The ISR process for recovering copper from oxidized mineralization in fractured bedrock has been tested at on core in a variety of bench scale tests. However, it has not been tested in the ground as a pilot test or as limited-scale production at the Gunnison site. Metallurgical testing has established that mineralization is amenable to copper leaching and recovery. Laboratory testing results have been used to approximate results of ISR in bedrock, they may not reflect eventual performance. Potential deviations include:
• Recovery rates (kinetics) that are slower than predicted
• Hydrological conditions and hydrogeochemical reactions at depth resulting in reduced copper recoveries
• Short-circuiting of leaching solutions along major fractures resulting in reduced “sweep efficiency”
• Reduced acid strength due to neutralization by gangue (non-copper) minerals
• Low fracture density and width resulting in poor contact of leach solution with copper oxides
Mitigation. Many of these risks can be addressed by developing operational strategies during both the development and Stage 1 operation of the wellfield. This will include producing detailed local geological/structural and hydrological models while the wellfield is being emplaced to further aid in placement of final well locations. Operational strategies will involve predetermining flowrates and acid strengths based on these models for initiating the wellfield in order to maximize quick breakthrough and economic PLS grades. The average copper recovery estimate of 48 percent of total copper has been reduced from metallurgical testing maximums to address these uncertainties.
My comment: I have heard estimates that the actual recovery rates may be 10-15% higher than what is shown in the FS. Time will tell.
4. Gypsum formation/rinsing. Mineralized areas with significant carbonate content may reach saturation and cause precipitation of calcium sulfate (gypsum) in the formation. Precipitates forming in fractures could reduce flow rates in the formation, retarding the leaching of copper oxides with a consequent reduction in the rate of copper recovery. Gypsum precipitates in the formation might also reduce the rinsing rate, causing an increase in water treatment costs.
Mitigation. The box tests or fracture simulation tests clearly indicated that the precipitation of gypsum did not alter flow rates however, noting the possible impact in flow reduction and rinsing volume requirements should provide greater confidence in the copper recovery and rinsing projections. Leaching schedules have already been lengthened, pumping rates and porosity reduced through time in this prefeasibility study to compensate for uncertainties associated with these types of issues.
25.3 PROJECT OPPORTUNITIES
Several opportunities have be identified which could enhance the viability and economic attractiveness of the Project. Many of these opportunities may be realized by removal of risk and uncertainty that are present at the prefeasibility level.
• Copper recoveries. The anticipated copper recovery of 48 percent of total copper is an estimate based on the best interpretation of existing test work. This copper recovery could be exceeded in practice. Recovery increases could improve the rate of recovery as well as increase total copper recovered. Improvements in the rate of recovery would mean lower flows from the wellfield for the same level of copper production, lowering operational costs, or that the increased grade could result in higher copper production (revenue) for the same operating cost. Improvements in total copper recovered have the obvious benefit of increasing total revenue during the life of the mine.
• Increased copper price. The current financial analysis is based on a copper price of $2.75 per pound. Over the last year, the copper price has ranged from $2.00 to $2.20 for most of the year but is currently approximately $2.65 per pound, which is close to the three year trailing average. Global demand increases for copper have the potential to drive copper prices higher, thereby increasing the economic (revenue) outlook for the Project.
I hope this helps.
PG
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