Excelsior Mining: the stock underperformed despite strong copper prices
Actions of Excelsior Mining Corp. (TSX: MIN), a small copper exploration and production company in the US state of Arizona, is down about 40% since mid-February and more than 20% last week. The poor stock performance can be attributed to reduced throughputs at its 100% owned Gunnison copper project on 9,560 acres, which is mined via an in situ recovery solution (ISR) based method.
Excelsior now expects to meet its production target of 25 million pounds per year in the first half of 2022. In late January 2021, when Excelsior sold its first 90,000 pounds of copper cathode to Gunnison, the company said it believed in the rate. of 25 million pounds. would be achieved this year.
The presence of carbon dioxide has hampered the ramping up of the target production rate. The company now goes back and forth between water injections – the cycle has demonstrated its ability to remove carbon dioxide and restore flow – during daily operations, and Excelsior expects this action, at over time, will eliminate carbon dioxide as a problem. He is also investigating whether a fluid other than water might be a better rinse aid.
To date, Excelsior has produced approximately 230,000 pounds of copper cathode (including the 90,000 pounds mentioned above). Production continues during ramp-up to nominal capacity.
In situ recovery mining (ISR)
An environmentally friendly mining method, ISR extraction is solution-injected extraction that dissolves copper from the host material. The copper-containing solution, which also includes water and chemicals that speed up the process, is returned to the surface. ISR mining causes little surface disturbance or dust generation, both associated with underground mining.
Gunnison Copper Project
According to a 2017 feasibility study, Gunnison has a net present value of $ 807 million and an internal rate of return of 40%, based on a copper price of $ 2.75 per pound and a discount rate of $ 7. 5%. (Current copper prices are much higher, in the order of US $ 4.63 per pound). Production is expected to rise from an initial level of 25 million pounds of copper per year to an annual rate of 125 million pounds, all based on a mine life of 24 years.
Solid balance sheet
Excelsior raised C $ 31.7 million in equity through a public offer to purchase shares and warrants in February 2021. As at March 31, 2021, the Company’s cash balance was amounted to approximately 31 million US dollars (39 million Canadian dollars). Over the last five quarters reported, Excelsior’s operating cash flow deficit averaged approximately US $ 2.8 million per quarter.
|(in thousands of US $, except for outstanding shares)||1Q 2021||4th quarter 2020||3 quarter 2020||2 quarter 2020||1 quarter 2020|
|Operating income||($ 3,004)||($ 1,839)||($ 1,951)||($ 3,499)||($ 1,448)|
|Operating cash flow||($ 1,869)||($ 3,336)||($ 1,037)||($ 4,713)||($ 3,097)|
|Cash – End of period||$ 31,068||$ 13,606||$ 18,225||$ 22,072||$ 15,637|
|Debt – End of period||$ 15,159||$ 15,864||$ 16,217||$ 16,195||$ 5,090|
|Shares outstanding (millions)||274.4||240.2||239.6||239.6||239.6|
Copper prices have climbed about 120% over the past twelve months, reaching US $ 4.63 a pound last week. Spending on infrastructure has been a priority in China and other countries, as many governments have funded such projects to boost their economies after COVID-19-induced slowdowns. If copper prices were to reverse lower, the stock prices of Excelsior Mining and other copper miners could come under pressure. In addition, shares of Excelsior Mining could suffer if the disposal of carbon dioxide at Gunnison continues to be a problem.
If Excelsior can remedy the carbon dioxide problem at Gunnison and increase the project’s ISR extraction throughput to 25 million pounds of copper per year, and possibly to 125 million pounds per year, the stock’s valuation could be reassessed dramatically. higher. This potential is underscored by sustained copper prices (essentially at record levels).
Excelsior Mining Corp. last traded at $ 0.63 on the TSX.
Information for this briefing was found through Sedar and the companies mentioned. The author has no title or affiliation related to this organization. Not a buy or sell recommendation. Always do additional research and consult a professional before purchasing a title. The author does not hold any license.