Eric Coffin offers comments regarding MINThis was released yesterday in Eric's HRA newsletter:
"Ive got a number of thoughts on the current market situation and how the potential for a trade war is playing out. I've decided to put those in the next Journal editorial rather than here, though I'm sure its clear to most of you that heightened fears of major trade actions is definitely impacting metals, and base metals particularly. Not the sort of market management groups really wants to release news into, but some things you can't sit on. This morning's news, and the reaction to it is a perfect example.
Excelsior Mining (MIN-T; off 12 cents on 1020k shares at $1.19) confirmed this morning that the EPA has granted Excelsior the final permit required for the operation of its Gunnison copper project, effective August 1st . In last week's update, I noted that while this sort of announcement often generates some "sell on news" I was hoping that selling over the last couple of weeks would have pulled some of that forward, leading to less selling on the day of the announcement.
No such luck. MIN is getting sold hard today, much harder than I would have expected after such a positive announcement. I clearly underestimated how much stock was bought to "play" this release which was overdue and highly anticipated. I find the logic behind the selling a little odd. If you were a buyer because you believed in the project's value, why be this quick to sell if you 're not seeing your price yet? And if you didn't believe in the project's value in the first place, why would you be trying to play the permitting release at all?
Without a doubt, the timing of the release is not helping. Markets generally are getting hit hard today with indices in NY crashing though important technical levels and base metals seeing heavy selling too, since the fears are centered on trade, and particularly China , the worlds largest base metal user. And we're seeing enough volume today for a "volume begets volume" meme to set in.
At the current trading price, MIN is carrying a current market value of US$180 million and an enterprise value of $155 million. That's against an NPV of US $807 million, after tax, using a $2.75 copper price and a 7.5% discount rate. I've noted many times that its common for companies to trade at a discount of their project NPV. That's true, but an 80%+ discount for a company that now has a fully permitted project with a completed feasibility study is definitely a bit much.
Jurisdictional and financing risk are the other common reasons for a big discount to NPV and, again, those do not apply in the case of Excelsior. The US is among the safest jurisdictions and the fact Gunnison now has all permits in hand should mitigate those concerns anyway. I've stated many times that I consider the financing risk at Gunnison to be close to zero and that too has not changed.
The staged development approach carries an up front capex of US$49 million. Even if MIN raised all of that with equity, and that is definitely not the plan , we're talking about maybe 25% dilution if the deal is done at a crappy price. Again, this doesn't justify the selling if even that much dilution paves the way to start-up on a project with an $US800 million NPV that would start production in months, not years."