Gunnison Copper Corporation press release
Gunnison Copper Announces Preliminary Economic Assessment of Open Pit Mining at its Flagship Gunnison Project in Arizona's Copper Belt
TSX - Toronto Stock Exchange · Copper · Limestone · Molybdenum · United States
Webinar Scheduled for Friday November 15th at 12pm ET
Phoenix, Arizona--(Newsfile Corp. - November 14, 2024) - Gunnison Copper Corp. (TSX: GCU) (FSE: 3XS) (OTCQB: EXMGF) ("GCC" or the "Company") is pleased to announce the results of a Preliminary Economic Assessment ("PEA") on its 100%-owned Gunnison Project in the Cochise Mining District, Arizona. The Gunnison Project is presented as a conventional open pit and heap leach operation which will produce finished copper cathode for domestic U.S. consumption. All dollar amounts are in US dollars and "Tons" refer to U.S. short tons (1 short ton equals approximately 0.91 metric tonnes).
The Company will present at a webinar hosted by Adelaide Capital on Friday November 15th at 12pm ET. Questions can be submitted during the session or in advance to deborah@adcap.ca. The webinar will be livestreamed on the Adelaide Capital YouTube Channel, where a replay will be available after the event: https://bit.ly/adcap-youtube. Register here: https://streamyard.com/watch/heaHcYsvWeCw.
Highlights of the PEA (United States Dollars)
The Gunnison Project, a fully vertically integrated operation producing finished copper cathode on-site in Arizona for domestic U.S. supply chains, has an after-tax net present value (8%) of $1.3 billion and an internal rate of return (IRR) of 20.9% at a long-term copper price of $4.10/lb; One of the most substantial open pit copper projects in the U.S. with total Measured and Indicated ("M&I") Mineral Resources in the open pit of 551 million tons at a total copper grade of 0.35%, capable of supplying 8% of recent annual U.S. domestic copper production1 Simplified and lower risk path to permitting; the Gunnison Project has current operating permits and there is a more streamlined amendment process to State and Local permits to proceed with open pit mining; Significant benefits for the community and local economy through the payment of over $840 million in U.S. federal, state, and local taxes, partnerships with local institutions such as Cochise College, and the creation of over 650 local jobs; Average annual copper cathode production of 83,700 tons (167 million lbs) over the first 16 years and total production of 1,355,900 tons (2,712 million lbs) over the entire 18 year mine life at an average Cash Cost (C1) of $1.42/lb and Sustaining Cash Cost2of $1.94/lb of copper produced; Total initial capital cost of $1.3 billion and after-tax payback period for initial capital of 4.1 years; Environmental advantages include lower water usage per pound of copper produced versus copper concentrate producers, up to 10% reduced energy consumption due to on-site clean energy production, and zero risk of environmental impacts from tailings dam failures as there are no tailings produced.
Dr. Stephen Twyerould, CEO, commented: "The positive outlook for copper prices, combined with advancement of sulfide leaching technologies, and the greater overall copper extraction afforded by open pit mining and heap leaching, has prompted us to focus on an open pit alternative to ISR. We are very excited by these results, which clearly demonstrate the project is substantial and highly competitive amongst its peers."
Craig Hallworth, CFO, commented: "Gunnison Copper, with its newly optimized Gunnison Project and soon to be producing Johnson Camp Mine, presents an attractive opportunity for investors to gain leverage to the copper price through a pure play vehicle. Given the portfolio's location in the Arizona Copper Belt, the fully permitted status of Johnson Camp and streamlined path to permitting for Gunnison via permit amendments, we look forward to directly supplying critical U.S. supply chains in the clean energy, defense, and manufacturing sectors in our expected macro environment of rising copper prices and producer multiples."
Roland Goodgame, SVP Business Development, commented: "The future of Gunnison has evolved to a lower risk open pit option with great economics. The opportunities the Gunnison project presents will benefit the local community and the greater Arizona economy. Significant direct jobs (over 650) and indirect jobs will be created in addition to $842 million in revenues to local, state and federal tax. The historical mining assets in the Cochise Mining District will be leveraged and fully developed to benefit the local community."
The PEA is preliminary in nature and includes inferred mineral resources that are considered too speculative geologically to have the economic considerations applied to them that would enable them to be categorized as mineral reserves. There is no certainty that the conclusions reached in the PEA will be realized. Mineral resources that are not mineral reserves do not have demonstrated economic viability.
The PEA was completed by M3 Engineering & Technology Corporation ("M3") of Tucson, AZ and is effective as of November 1, 2024. The Technical Report (the "Report") summarizing the results of the PEA and prepared in accordance with National Instrument ("NI") 43-101, will be filed on SEDAR+ and GCC's website within 45 days of this news release. The prior technical report on the Gunnison Project included the Johnson Camp Mine ("JCM"); however, with the new open pit development of the Gunnison Project and the current construction and upcoming restart of production at JCM in 2025, the Company will no longer develop the Gunnison Project and JCM using common infrastructure. As a result, an updated technical report on JCM will be prepared and filed.
Preliminary Economic Assessment Summary
The Project is in Cochise County, Arizona, approximately 65 miles east of Tucson and is held or controlled 100% by GCC. The Gunnison deposit of the Gunnison Project was previously designed and developed as an in-situ recovery ("ISR") copper operation. The advancement of sulfide leaching technologies and the greater copper extraction of open pit mining and heap leaching has prompted GCC to focus on the open pit alternative to ISR. Nevertheless, the optionality on the fully permitted ISR operations and well stimulation remains an asset to the Company and this optionality will be maintained. This includes maintaining full compliance with all regulatory and permit requirements including maintaining hydraulic control, pumping, monitoring and regulatory reporting.
The Gunnison Open Pit PEA plans to pre-strip alluvial overburden using leased owner-operated equipment. The deposit is a single large body allowing for more cost effective haulage costs, versus mining from numerous regional deposits. A primary gyratory crusher will be installed to crush to a P80of 6 inches for leaching predominately oxide mineralized materials on the leach pad. A rail spur from the Union Pacific Southern Pacific (UPSP) will provide straightforward access and inexpensive transportation for incoming sulfur and outgoing copper cathodes. The sulfuric acid plant will produce acid with a net cost of approximately $36 a ton and 27 MW of clean energy.
GCC has a successful track record of permitting and community relations. This, along with the fact that the Gunnison open pit has no federal permitting nexus, on flat ground with no identified endangered or threatened species or habitat, and no historical, archaeological, or Native American artefacts, indicates the Company's prior permitting track record can be maintained.
Table of Key Metrics
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Notes:
1. Hard rock waste includes 85 million short tons of pure limestone, a highly marketable material. 2. Excludes recovery of sulfides from conventional leaching. Some sulfides are expected to leach and provide up-side to recoveries and copper production. 3. Includes acid plant, leach pad, SX-EW, crushing facility, truck shop, mining pre-strip, highway move, owners' costs and other minor infrastructure. 4. Sustaining Capital includes $346 million in deferred stripping costs 5. Cash Cost includes mine operating, crushing and leaching, process plant operating, and general and administrative costs ("G&A"). 6. Sustaining Cost includes Cash Cost, Sustaining Capex, Deferred Stripping, and Royalties. 7. EBITDA = Revenue - Cash Operating Expenses; Average annual of Y1 to Y16; Revenue includes sales of copper to U.S. based customers at Spot Price and sales of copper to Triple Flag at Stream Fixed Price (25% of spot) 8. Free Cash Flow = Operating Cash Flow (After Tax) - Capital Expenditures; Average annual of Y1 to Y16
Financial Analysis
The PEA base case generates an after-tax Net Present Value of approximately $1.3 billion (at a discount rate of 8%) and an Internal Rate of Return (IRR) of 20.9%. This financial analysis is based on a non-levered cash flow model, revenues and costs priced in 2024 real US dollars, mid period discounting, and a valuation date set at the start of Project construction.
Key cash flow model parameters include:
Copper selling price of $4.10/lb; Net copper premium of $0.02/lb (metal premium less freight out); Stream deliveries at 25% of market price; NSR royalties of 4.5% applies to all copper produced State royalty of 5.5% applies to the mineralized material mined from State land (~10% of copper produced) Total copper recovery of approximately 69.5%; LoM average of approximately 10.6 pounds of acid consumed for every pound of copper produced (52 lbs per ton of mineralized material processed); Electricity price of $0.079 per Kwh Acid plant construction in year -1 with a price of sulfur of $110 per short ton delivered based on long term price forecast of $75/ton CFR Tampa benchmark plus average direct rail freight in from Mexican smelters of $35/ton. Including co-generation power credits, the realized price of acid produced on site averages $36/ton; Acid buying price of $150/ton if acid is required above the acid plant's capacity, and an acid selling price of $130/ton if excess acid is produced in any specific year; Federal income tax rate of 21% and the State income tax rate of 4.9%. State income tax is deductible for federal income purposes resulting in a combined income tax rate of 24.9%
Table of Capital Costs
The capital cost estimates for this PEA, shown in table below, were developed with a -25% to +30% accuracy. The Company has used an overall contingency of 20% in accordance with Association of the Advancement of Cost Engineering International (AACE) Class 5 estimate guidelines.
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Total initial (pre-breakthrough) capital expenditures (including 20% contingency, EPCM, capital spares, owner's costs, mobile equipment and freight) are estimated at $1,343 million for initial production of copper cathode. Mine costs includes pre-stripping and capitalized pre-operating mobile fleet lease costs. Total sustaining capital costs over the life of the mine are $876 million, which includes deferred stripping, leach pad expansion and mining equipment.
Facilities at the mine site will include one open pit, two waste stockpiles, primary crushing plant and conveying system, heap leach pad, Solvent Extraction-Electrowinning (SX-EW) process plant, sulfur burning sulfuric acid plant with cogeneration capability, technical and operational support offices, mine truck shop and maintenance buildings, refueling systems, electrical substation and distribution, water supply and distribution, warehousing and Union Pacific rail spur.
Table of Operating Costs
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Mining operating cost estimates, prepared by Independent Mining Consultants (IMC), are based on an owner's team managing mining activities, using an owner-operator model. Process operating cost estimates and G&A cost estimates were prepared by M3, as summarized in the table above (note numbers may not add due to rounding). Sequencing of operations and annual cash flows are detailed in Exhibit 1 and 2, at the end of this news release.
The operating site includes numerous infrastructure and location advantages including:
Union Pacific rail line right next to the property with a 2 km rail spur envisioned. High voltage power lines with clean power from SSVEC. Close to local and regional labor pools of Benson, Willcox, and Tucson. Flat land conducive for development. Deposit is within an enclosed basin; therefore no 404 permit is required. No endangered flora or fauna on the property.
Table of Profitability Metrics
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Table of Sensitivities
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Mine Plan and Production Profile
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Figure 1 shows the stacked total mining profile of waste and process feed. Overall strip ratio is ~2:1, however 67% of the waste is alluvium gravel which has the advantage of lower mining costs. The equivalent striping ratio based on hard rock waste mining costs is approximately 1.57:1.
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Figure 2 shows the LoM stacked annual copper production by conventional oxide leaching compared to sulfide leaching. Sulfide leaching makes up only 14% of the total LoM copper production and does not commence until year 8 of operations.
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Mineral Resource Estimate
The mineral resource estimate for the Gunnison Deposit is based on results from 122 drill holes totalling 158,785 feet and is effective as of September 4th, 2024. Gunnison deposit mineral resources are classified in order of increasing geological confidence into Inferred, Indicated, and Measured categories in accordance with the "CIM Definition Standards - For Mineral Resources and Mineral Reserves" and therefore Canadian National Instrument 43-101. GCC 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.
The Gunnison deposit mineral resources are reported within an optimized pit at cut-offs that are reasonable given anticipated open-pit mining methods, processing costs, and economic conditions, which fulfills regulatory requirements that a mineral resource exists in such form, grade or quality and quantity that there are reasonable prospects for eventual economic extraction.
The pit-constrained mineral resources are tabulated using an internal cut-off grade of 0.05% TCu. No mineral resources were estimated within overburden (Tertiary/Quaternary alluvium), and the reported mineral resources are restricted to lands controlled by GCC.
| Total Resources | | | | | Resource Class | Short Tons (millions) | Total Cu (%) | Cu Pounds (millions) | | Measured | 191.3 | 0.37 | 1,420 | | Indicated | 640.2 | 0.29 | 3,684 | | Measured + Indicated | 831.6 | 0.31 | 5,104 | | Inferred | 79.6 | 0.20 | 325 |
Notes:
1. Mineral Resources that are not Mineral Reserves do not have demonstrated economic viability. 2. Mineral Resources are reported at a 0.05% total copper cut-off grade within an optimized pit. 3. Rounding as required by reporting guidelines, may result in apparent discrepancies between tons, grade, and contained metal content. 4. The Effective Date of the Mineral Resource estimate is September 4, 2024.
The Gunnison mineral resources were modeled to reflect the detailed lithologic, structural, and oxidation modeling completed by GCC. Copper mineral domains guided by these geological controls, 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. Sequential copper assay ratios were used to define three-dimensional surfaces separating the Oxide, Transitional, and Sulfide zones of the mineralization.
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 ("Skyline") in Tucson, Arizona, an independent laboratory, for Total Copper (TCu) and Sequential Copper analyses, Acid Soluble Copper (ASCU) and Cyanide Soluble Cu (CNCu). Skyline is accredited with international standard ISO/IEC 17025:2005 General Requirements for the Competence of Testing and Calibration Laboratories. Analytical results for (TCu), (ASCu), and (CNCu) were reported. GCC 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. Jeffrey Bickel, C.P.G., with the independent firm RESPEC Company LLC ("RESPEC") 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. Bickel 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 GCC. Mineral resources that are not mineral reserves do not have demonstrated economic viability. As the Company has completely rescoped the operation from ISR to open pit using a PEA, the prior mineral reserve estimate on the Gunnison Project is no longer current and should be disregarded.
Risks
Certain risks and opportunities are associated with the Project, as is typical for mine development projects. These risks may include and are not limited to environmental permitting, title issues, taxation, public/political opposition, or legal impediments to operating this type of mining/processing operation at this location. The following Project-specific risks have been identified along with the measures that GCC envisages to mitigate the risk.
1.
Slope Stability. Slope recommendations received from Call & Nicholas, Inc. ("CNI") were based on rock quality designation (RQD) data from core holes and experience at other Arizona mines in similar rock formations. Actual slope angles may have to be decreased, increasing the amount of waste handling required.
Mitigation. Geotechnical drilling, along with in-depth slope stability analysis, could result in achievable pit slope angles that are more shallow or steeper than the angles used in the analysis that will be presented in the report.
1. Blasting Costs. Drilling and blasting in the weakly cemented alluvium overburden is assumed to be approximately 2.6 times more productive than in the bedrock. Overestimation of blasting productivity in the overburden would result in increased costs.