Recently Pat McKeough replied to a Member of his Inner Circle seeking his opinion on a Canadian penny stock that is developing an unusual copper project in Arizona.
Excelsior Mining is working with the U.S. Environmental Protection Agency to obtain a permit to extract a large copper deposit through “in-situ” mining. This would cause the least possible disruption to the site. The characteristics of the deposit appear well-suited to this approach, says Pat, and the venture has the potential to be very profitable. But no in-situ project this big has ever been attempted, and that adds risk.
Q: Pat: What’s your opinion about Excelsior Mining? Thanks.
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A: EXCELSIOR MINING (symbol MIN on Toronto; www.excelsiormining.com) is focused on bringing its Gunnison copper project in Cochise County, Arizona, to production.
The company believes that it will soon have all required permits in place to begin construction. It continues to work with the federal U.S. Environmental Protection Agency on obtaining an Underground Injection Control (UIC) permit. That’s the last of three key operating permits Gunnison needs.
The project is located between the two small Arizona cities of Benson and Wilcox, 65 miles southwest of Tucson. Ideally, the deposit is best mined using open-pit methods. But removing rock above the deposit—what’s called the mine’s “overburden”—would cause significant local disruption. As a result, Excelsior plans to use in-situ mining. In situ, or “in the natural or original position,” mining seeks to remove mineral ore from right where it sits. That’s the opposite of removing large amounts of rock and earth above and around the ore site. In-situ recovery is commonly used to mine uranium, and so minimize the release of radioactive dust into the air.
With in-situ copper mining, a series of delivery and recovery wells are drilled into the deposit. With the help of gravity, a weak acid solution is pumped into the copper ore body. That acid dissolves the copper, creating a copper-rich solution that is then pumped to the surface. There, a Solvent-Extraction Electrowinning plant (SX/EW) processes it. Those types of facilities typically produce 100-pound sheets of pure copper cathode.
When the copper in the mine is depleted, that area is rinsed with water to remove any remaining solutions. Control and monitoring wells are positioned around the extraction area with the aim of protecting and maintaining water quality.
Penny stocks: Company has funds to keep moving ahead with Gunnison project
The characteristics of the Gunnison deposit appear well-suited to this process: The copper deposit is located below the water table, a rare geological occurrence more prevalent in Arizona than anywhere else in the world. In addition, Gunnison’s copper deposit has a high degree of natural fracturing, which also suits in-situ mining.
As proposed, the mine would last for 24 years and produce a total of 2.2 million pounds of copper. Excelsior pegs the initial capital cost at $46.9 million U.S. That rises over the life of the mine to as high as $742 million U.S. Excelsior holds cash of $26.2 million U.S., and has no debt, so it has enough funds to keep moving ahead with the project.
The proposed mine for the Gunnison site could start up in early 2019 if the company gets the final permit. However, currently, in-situ copper mining is used primarily as an add-on to existing open-pit mines. A project as big as Gunnison has never been permitted, or even attempted. That adds a lot of risk, although Arizona’s mining-friendly policies should partially offset that. Indeed, if the project is permitted and successfully operated, it could be very profitable.
Inner Circle recommendation: Excelsior Mining is okay to hold, but only for highly aggressive investors.
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