UPDATED: Excelsior shares near triple on Gunnison copper prefease

Excelsior Mining stock powers afer the release of details on its Gunnison copper project in Arizona, showing high IRR, and modest capex.

Updated to reflect dramatic mid-afternoon shareprice movement.

After junior-developer Excelsior Mining (TSX-V: MIN) released the broad outlines of a prefeasibility study of its Gunnison Copper project in Arizona Friday, its shareprice shot up 80 percent to over C$0.20 on heavy volume at market open in Toronto.

Then, by mid-afternoon, it was up near 300 percent to C$0.45.

While the prefeasibility study was more or less in line with a 2011 preliminary economic assessment (PEA), no doubt the headline IRR number of 60 percent, before-taxes, caught the market’s attention.

According to Excelsior’s assumptions, the Gunnison copper project – designed to use in-situ acid recovery – would cost $285 million to build and once online produce 110 million pounds copper a year in the first 14 years of a 20-year mine life at a cash cost of $0.68 per pound copper.

In outline, as before, Excelsior proposed two versions of the project, one with an acid plant and one without. The acid plant increases upfront costs, but reduces operating costs by recycling acid.

Otherwise the project, using in-situ recovery as elsewhere in Arizona, would mean an acid solution gets injected into the deposit itself and then, after picking up copper minerals in the Gunnison oxide deposit, would be pumped back to surface and processed.

To arrive at its end numbers, Excelsior’s basic assumptions were a $2.75 per pound copper price in the longterm and the use of about eight pounds of acid per pound of copper.

Although Excelsior’s metallurgical tests have shown much higher acid consumption, between 10 to 20 pounds acid per pound copper, the higher rate appears to Excelsior an overestimation as a result of man-made fracturing in drillcore used for metallurgical tests. That is, the acid solution in lab tests accesses more fractures than it would in practise underground, where there would only be natural fractures for the acid solution to follow. 

Assessing that hypothesis in the lab, Excelsior has showed that when man-made fractures in drill core are covered in epoxy – to mimic underground conditions – acid consumption drops dramatically in subsequent assessments of copper recovery.

In reserves, Excelsior reports 632 million short tons @ 0.29 percent copper at the Gunnison project. Copper was discovered at the Gunnison project back in 1960 by Cyprus-Johnson Mining, Excelsior says on its website, and copper deposits on the property were subsequently assessed by Superior Oil Company, Quintana Minerals, Magma Copper and, most recently in the late 1990s, Phelps Dodge.

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