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Excelsior Releases Feasibility Study with Post-Tax NPV of $807 Million

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Excelsior Releases Feasibility Study with Post-Tax NPV of $807 Million

 

 

 

 

 

Excelsior Mining Corp. (TSX-V:MIN) (FRANKFURT:3XS) (OTCQX:EXMGF) is pleased to announce the results of a comprehensive Feasibility Study on the North Star Deposit of the Gunnison Copper Project, located in Cochise County, southeastern Arizona. The project is designed as a copper in-situ recovery mine using solvent extraction-electrowinning.

 

 

Highlights of the FS (United States dollars)

 

  • Net Present Value (“NPV”) of $1.172 billion pre-tax and $807 million post-tax
    • at 7.5% discount rate using a life of mine (“LOM”) copper price of $2.75/lb;
  • Internal Rate of Return (“IRR”) of 48% pre-tax and 40% post-tax;
  • Initial construction capital costs of $46.9 million
    • includes 20% contingency, 16% EPCM, freight, mobile equipment, owner’s costs and capital spares;
  • Payback period for initial capital of 2.3 years pre-tax and 2.8 years post-tax;
  • Average life of mine operating costs of $0.65/lb;
  • All-In Cost (LOM capital costs plus operating costs) of $1.23/lb;
  • 42 million pounds of copper added to the Probable Reserve;
  • Life of Mine: 24 years of commercial production;
  • Staged production profile: initial production rate of 25 million pounds of copper cathode per annum using the existing Johnson Camp Mine (“JCM”) facilities, followed by an intermediate expansion stage to 75 million pounds per annum and final expansion stage to full production of 125 million pounds per annum (includes the construction of an acid plant at full production). The staged production profile makes possible the funding of future expansions out of cash flow.

 

 

Commenting on this news, President & CEO, Stephen Twyerould said, “The release of our Feasibility Study completes the last major technical milestone prior to receipt of operating permits. We have once again delivered a very robust product with outstanding economics. Excelsior’s entire team can take pride in this outcome and our belief that the Gunnison Copper Project will be the next new copper mine in the United States.”

 

 

Sensitivity Analysis

PRE-TAX
 

Acid Plant

Non-Acid Plant

Cu Price

$3.25

$3.00

$2.75

$2.50

$2.25

$3.25

$3.00

$2.75

$2.50

$2.25

IRR

62%

55%

48%

41%

34%

63%

56%

48%

41%

33%

NPV*

$1,588

$1,380

$1,172

$963

$755

$1,396

$1,187

$978

$768

$559

AFTER-TAX
 

Acid Plant

Non-Acid Plant

Cu Price

$3.25

$3.00

$2.75

$2.50

$2.25

$3.25

$3.00

$2.75

$2.50

$2.25

IRR

51%

45%

40%

35%

29%

51%

46%

41%

35%

28%

NPV*

$1,086

$947

$807

$664

$522

$972

$831

$691

$548

$405

*million $ at 7.5% discount rate

 

 

Twyerould added, “Because of the special characteristics of the North Star deposit, and by extension our ability to employ the in-situ mining method, the project economics remain exceptionally strong even at low copper prices. As demonstrated in the table above, the high margin enjoyed by the Gunnison Copper Project is our critical advantage and the key to our risk management.”

 

 

The FS was completed by M3 Engineering & Technology Corporation of Tucson, AZ and is effective as of December 5, 2016. The technical report summarizing the results of the FS, and prepared in accordance with National Instrument 43-101, will be filed on SEDAR and Excelsior’s website within 45 days of this news release. Results of the FS disclosed in this press release are in United States Dollars.

 

 

Financial Analysis

 

 

As highlighted in the tables below, the FS demonstrates excellent project economics. Based on an initial production rate of 25 million pounds per annum, the FS base case generates a post-tax NPV of $807 million (at a cash flow discount of 7.5%), an IRR of 40.1% and a payback period for initial capital of 2.3 years. This financial analysis is based on a number of assumptions which will be fully set out in the Report.

 

 

The base case uses the following parameters over the 24-years of production:

 

 

  • Copper selling price of $2.75 per pound;
  • Total copper recovery of approximately 48% (based on a combination of metallurgical recovery and estimated sweep efficiency);
  • Average of approximately 9.0 pounds of acid consumed for every pound of copper produced;
  • Initial acid price of $100/ton for years 1 to 3, $125/ ton for years 4 to 6, declining to $46.19/ton as of year 7 (acid plant is built in year 6);
  • State tax rate of 6.97% and a federal tax rate of 35%;
  • Staged production commencing at 25 million pounds per annum, ramping up to 75 million pounds in year 4, and then to 125 million pounds per annum in year 7.

 

 

FINANCIAL ANALYSIS SUMMARY

 

Pre-Tax

Post-Tax

IRR

48.3%

40.1%

Initial Capital Payback (years)

2.3

2.8

NPV (million) @7.5%

1,172

807

Ratio of initial Capital of NPV7.5

0.04

0.06

COST METRICS

 

Million $

Cost/lb Copper

Direct Operating Costs

1,418

0.65

Royalties and Other Production Costs

461

0.22

Initial Capital Costs

46.9

0.02

All-in Cost (all capital + operating)

2,668

1.23

Taxes

995

0.46

 

 

Total initial capital expenditures (including 20% contingency, 16% EPCM, capital spares, owner’s costs, mobile equipment and freight) are estimated at $46.9 million. The production well field is estimated at $14.6 million and upgrades to the SX-EW and related infrastructure costs are estimated at $26.8 million. Initial production of copper cathode through the JCM facilities is estimated to be 25 million pounds per annum. Total sustaining capital costs over the life of the mine are $742 million, which includes production well-field expansion, SX-EW expansion, acid plant construction and water treatment facilities. The Direct Operating Cash Cost is $0.65/lb and the All-In Cost (all capital and operating costs) is $1.23/lb.

 

 

The Company has also evaluated a secondary case without an Acid Plant. In this case the project retains strong economics, highlighted by a pre-tax NPV7.5 of $978 million and an IRR of 48.4% (post-tax: NPV7.5  of $691 million and IRR of 40.5%). Total initial capital expenditures remain the same as the “Acid Plant” scenario. Total sustaining capital costs over the life of the mine are $661 million, which includes production well-field expansion, SX-EW expansion and water treatment facilities. Average life-of-mine operating direct cash costs are estimated at $0.97/lb for the “No-Acid Plant” option with an All-In Cost of $1.50 per pound.

 

 

KEY PARAMETERS

 

Acid Plant

No-Acid Plant

Copper Cathode sold (million lb)

2,165

2,165

Copper Price ($/lb)

2.75

2.75

Gross Revenue (million $)

6,019**

5,954

Operating Costs

(million $)

Cost $/lb

(million $)

Cost $/lb

Production (Wellfield)

641

0.29

1,303

0.60

SXEW

497

0.23

512

0.24

Water Treatment Plant

113

0.05

113

0.05

G&A

167

0.08

167

0.08

Direct Operating Cash Costs

1,418

0.65

2,095

0.97

Royalties

272

0.13

272

0.13

Other Production Expenses

189

0.09

180

0.08

Initial Capital Costs*

(million $)

Cost $/lb

(million $)

Cost $/lb

Production (Wellfield)

14.6

0.01

14.6

0.01

SXEW + Infrastructure

26.8

0.01

26.8

0.01

Owners Costs

5.5

0.00

5.5

0.00

Sub-total Initial Capital Costs

46.9

0.02

46.9

0.02

Sustaining Capital Costs

(million $)

Cost $/lb

(million $)

Cost $/lb

Production (Wellfield)

396

0.18

396

0.18

Plant + Infrastructure

346

0.16

265

0.12

Sub-total Sustaining Capital Costs

742

0.34

661

0.30

All in cost (all capital + operating)

2,668

1.23

3,255

1.50

Taxes

995

0.46

754

0.35

* includes 20% contingency
** assumes sale of excess acid in some years

 

 

Mineral Resources and Mineral Reserves

 

 

Mineral Resource Estimate

 

 

The total mineral resource estimate for the North Star Deposit is based on results from 122 drill holes totalling 158,785 feet and is effective as of October 1, 2016. The estimate is classified as a measured, indicated or inferred mineral resource, consistent with the CIM definitions referred to in NI 43-101. Excelsior is not aware of any environmental, permitting, legal, title, taxation, socio-political, marketing or other issues which may materially affect its estimate of mineral resources.

 

 

North Star Resources (Oxide and Transition at 0.05% cut-off)

Category

Short Tons (million)

Total Copper %

Pounds of Cu (million)

Measured

199

0.36

1,427

Indicated

674

0.27

3,567

Total M&I

873

0.29

4,995

       

Inferred

187

0.17

630

 

 

The North Star mineral resources were modeled to respect the detailed lithologic, structural, and oxidation modeling completed by Excelsior. Copper mineral domains were interpreted on east-west vertical cross sections on 100-foot spacing, which encompass the 2.3-mile north-south and 1.3-mile east-west extents of the deposit. These domains were then used to explicitly constrain the estimation of copper grades into 50 x 100 x 25 foot (x, y, z) model blocks using 20-foot composites and inverse-distance interpolation. The grade estimation is further controlled by the incorporation of search ellipses that reflect the orientations of modeled structural zones, as well as those of favorable stratigraphic units in areas unaffected by the structures.

 

 

All samples were prepared from manually split half-core sections on site in Arizona. Split drill core samples were then sent to Skyline Assayers & Laboratories in Tucson, Arizona, an independent laboratory, for Total Copper and Sequential Copper analyses. Skyline is accredited with international standard ISO/IEC 17025:2005 General Requirements for the Competence of Testing and Calibration Laboratories. Analytical results for Total Copper, Acid Soluble Copper, and Cyanide Soluble Copper were reported. Excelsior has no relationship with Skyline Labs other than Skyline being a service provider. Standards, blanks, and duplicate assays are included at regular intervals in each sample batch submitted from the field as part of an ongoing Quality Assurance/Quality Control Program.

 

 

Mr. Michael M. Gustin, with the independent firm Mine Development Associates of Reno, Nevada, is a Qualified Person as defined by NI 43-101 and is responsible for this mineral resource estimate. He has verified, reviewed and approved the technical disclosure contained in this section of the news release. Mr. Gustin has verified the data underlying the results by reviewing the drilling, sampling, assay, and quality assurance and quality control data, as well as the geologic interpretations completed by Excelsior.

 

 

Mineral Reserve Estimate

 

 

The FS mineral reserve is based on an economic analysis of the mineral resource using a copper price of $2.75/lb and key parameters developed from prior test work, the 2016 FS and the most recent test work completed in 2015 and 2016. The economic optimization was performed on Measured and Indicated Resources at a cut-off grade of 0.05% total Cu. EBIT (earnings before interest and tax) was calculated on a resource block by block basis using the key economic and technical parameters. For a column of resource blocks to be included in the reserve, the capital costs of establishing the wells for those blocks would have to be less than the combine EBIT for the same blocks. The mineral reserve was estimated after applying engineering and operational design parameters which removed the thinner and deeper portions of the mineral resource. Internal dilution has been included in the final mineral reserve estimate. MDA is of the opinion that the mineral reserve estimate derived in this FS reasonably quantifies the economical mineralization of the North Star Deposit. The reserve estimate is as of October 1, 2016 and the mineral reserves presented in the table below are included in the mineral resource estimate set out above.

 

 

North Star Mineral Reserves (Oxide and Transition at 0.05% cut-off)

Category

Short Tons (million)

Total Copper %

Pounds of Cu (million)

Probable

782

0.29

4,505

 

 

Mr. Neil Prenn, of MDA of Reno, with the independent firm Mine Development Associates of Reno, Nevada, is a Qualified Person as defined by NI 43-101 and is responsible for reviewing and approving this mineral reserve estimate. He has verified, reviewed and approved the technical disclosure contained in this section of the news release. Mr. Prenn has verified the data underlying the results by reviewing the drilling, sampling, assay, and quality assurance and quality control data, as well as the geologic interpretations completed by Excelsior.

 

 

Technical Report and Qualified Person

 

 

The Report will be filed on SEDAR and on Excelsior’s website within 45 days of the date of this news release. The Report will consist of a summary of the FS. The Report is being prepared under the supervision of Richard Zimmerman, SME-RM of M3 Engineering & Technology Corporation, Tucson, Arizona, who is a Qualified Person that is independent of the Company. The Report will also receive contributions from the following additional Qualified Persons, who are also independent of the Company:

 

  • Dr. Ronald J. Roman of Leach, Inc., Tucson, Arizona (metallurgy and leaching recovery).
  • Mr. Neil Prenn, of MDA of Reno, Nevada (mineral reserve).
  • Mr. Michael M. Gustin of MDA of Reno, Nevada (geology and mineral resource).
  • Mr. R. Douglas Bartlett, of Clear Creek and Associates of Phoenix, Arizona (hydrology, mining method, permitting and environment).
  • Mr. Thomas L. Drielick, of M3 Engineering & Technology Corporation, Tucson, Arizona (recovery methods, capital and operating costs, and economic analysis).

 

 

Each of these Qualified Persons has reviewed and approved the technical information contained in this news release that is relevant to their area of responsibility and verified the data underlying such technical information.

 

 

About Excelsior Mining

 

 

Excelsior Mining “The Copper Solution Company” is a mineral exploration and development company that is advancing the Gunnison Copper Project in Cochise County, Arizona. The project is an advanced staged, low cost, environmentally friendly in-situ recovery copper extraction project that is scheduled for commercial production in 2018.

 

 

Prior to the release of the Report on the FS results, additional information about the Gunnison Copper Project can be found in the technical report filed on SEDAR at www.sedar.com entitled: “Gunnison Copper Project, NI 43-101 Technical Report, Prefeasibility Study Update” dated March 23, 2016.

 

Posted December 6, 2016

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