Between 2019 and 2022 the global copper market is facing an increasingly undersupplied situation:
This looming undersupplied market situation has some analysts forecasting a return to US$4/lb copper over the coming years. However, trying to profit from higher copper prices as an investor is often tricky; many of the world’s largest copper producers are diversified metals producers which only derive a fraction of their annual revenue from copper production. A pure play copper producer with a clean balance sheet in a safe jurisdiction is the ideal way to play the looming global copper supply/demand imbalance.
What if you could invest in a copper miner that will be in commercial production in less than a year at all-in costs of US$1.23/lb? In addition, this company will produce more than 2 billion pounds of copper over a 24 year mine life and it has completed a Feasibility Study which indicates a post-tax NPV (7.5% discount rate) of US$807 million using a conservative US$2.75/lb copper price. This company also has a current market cap of less than US$150 million.
Too good to be true right?
Well it is true and a weak market for junior mining shares over the last few months has delivered investors a fat-pitch opportunity in the form of shares of Excelsior Mining (TSX: MIN, OTC: EXMGF):
MIN.TO (Year-to-Date)
After a strong start to the year which saw Excelsior shares more than double, a weak market for mining stocks and a recently announced US$26 million financing have dragged shares back down close to C$1.00. This could be an opportune time for investors to get into Excelsior before the company achieves several major milestones in 2018 (including entering commercial production).
Excelsior’s Gunnison Project is unique in that it is below the water table and will use an in-situ recovery method. There are several other advantages which make Gunnison stand out from the crowd:
- Low capex (~$50 million).
- Commercial production set to begin within 12 months (Q4 2018).
- Low permitting risk due to low population density in the area, low water use, and substantial community and legislative support (public review period ends in January 2018 and final federal permit is expected to be received shortly thereafter).
- Lower costs: $1.23/lb all-in cost, average life-of-mine operating cost of $.65.
- The in-situ recovery method which will be used is an environmentally sound, process of extracting metals from deposits.
While the outlook for copper is essentially as robust as it’s ever been, the Gunnison Copper Project has compelling economics even at US$2.25/lb copper:
Excelsior is in the final stage of its state/federal permitting process with the public comment period for the federal mine permit ending in 30 days, at which point construction engineering and the first stage of construction can begin:
Excelsior CEO Stephen Twyerould has over 30 years of industry experience including many years of operational mine experience. As Excelsior advances the Gunnison Copper Project against a robust copper price backdrop over the coming years I expect an upward repricing of its share price, potentially to multiples of its current price.
In the life cycle of a junior mining company Excelsior is actually in the sweet spot as it exits the feasibility/permitting stage and enters the construction and start up stages:
The author is long MIN.TO shares at the time of publishing and is therefore biased. Do your own due diligence, it’s your money and your responsibility.
Disclaimer:
The article is for informational purposes only and is neither a solicitation for the purchase of securities nor an offer of securities. Readers of the article are expressly cautioned to seek the advice of a registered investment advisor and other professional advisors, as applicable, regarding the appropriateness of investing in any securities or any investment strategies, including those discussed above. Some of the stocks mentioned are high-risk venture stocks and not suitable for most investors. Consult the companies’ SEDAR profile for important risk disclosures.
EnergyandGold.com, EnergyandGold Publishing LTD, its writers and principals are not registered investment advisors and advice you to do your own due diligence with a licensed investment advisor prior to making any investment decisions.
This article contains certain forward-looking information and forward-looking statements within the meaning of applicable securities legislation (collectively “forward-looking statements”). Certain information contained herein constitutes “forward-looking information” under Canadian securities legislation. Generally, forward-looking information can be identified by the use of forward-looking terminology such as “expects”, “believes”, “aims to”, “plans to” or “intends to” or variations of such words and phrases or statements that certain actions, events or results “will” occur. Forward-looking statements are based on the opinions and estimates of management as of the date such statements are made and they are subject to known and unknown risks, uncertainties and other factors that may cause the actual results, level of activity, performance or achievements of the Company to be materially different from those expressed by such forward-looking statements or forward-looking information, standard transaction risks; impact of the transaction on the parties; and risks relating to financings; regulatory approvals; foreign country operations and volatile share prices. Although management of the Company has attempted to identify important factors that could cause actual results to differ materially from those contained in forward-looking statements or forward-looking information, there may be other factors that cause results not to be as anticipated, estimated or intended. There can be no assurance that such statements will prove to be accurate, as actual results and future events could differ materially from those anticipated in such statements. Actual results may differ materially from those currently anticipated in such statements. The views expressed in this publication and on the EnergyandGold website do not necessarily reflect the views of Energy and Gold Publishing LTD, publisher of EnergyandGold.com. Accordingly, readers should not place undue reliance on forward-looking statements and forward looking information. The Company does not undertake to update any forward-looking statements or forward-looking information that are incorporated by reference herein, except as required by applicable securities laws. Always thoroughly do your own due diligence and talk to a licensed investment adviser prior to making any investment decisions. Junior resource companies can easily lose 100% of their value so read company profiles on www.SEDAR.com for important risk disclosures. It’s your money and your responsibility.