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 Cost2 of $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 P80 of 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:
- Hard rock waste includes 85 million short tons of pure limestone, a highly marketable material.
- Excludes recovery of sulfides from conventional leaching. Some sulfides are expected to leach and provide up-side to recoveries and copper production.
- Includes acid plant, leach pad, SX-EW, crushing facility, truck shop, mining pre-strip, highway move, owners' costs and other minor infrastructure.
- Sustaining Capital includes $346 million in deferred stripping costs
- Cash Cost includes mine operating, crushing and leaching, process plant operating, and general and administrative costs ("G&A").
- Sustaining Cost includes Cash Cost, Sustaining Capex, Deferred Stripping, and Royalties.
- 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)
- 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
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:
- Mineral Resources that are not Mineral Reserves do not have demonstrated economic viability.
- Mineral Resources are reported at a 0.05% total copper cut-off grade within an optimized pit.
- Rounding as required by reporting guidelines, may result in apparent discrepancies between tons, grade, and contained metal content.
- 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.
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.
- 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.
Mitigation. Additional investigation of the weakly cemented alluvium could remove uncertainties for this productivity differential.
- Mine Design Uncertainty. The tonnage expected to be placed on the leach pad could change as more drilling and engineering are completed. Metal prices, changes in metal recovery, or increases in operating costs could change the potential tonnage of heap leachable material.
Mitigation. Additional investigation as the project moves toward implementation should reduce the uncertainty.
- Copper Recovery. The heap leaching process for recovering copper from oxidized mineralization can be unpredictable. Metallurgical testing has established that coarse crushed mineralization is amenable to copper heap leaching and recovery. Metallurgical testwork results have been used to approximate results of leaching, although they may not reflect the LOM actual leach recovery performance. There is risk that additional testwork or actual performance could indicate the possibility of lower copper recoveries at the current crush size, acid application rate, or leach cycle estimates..
Mitigation. Operational strategies will involve adjusting crush sizes, flowrates and acid strengths based on operational experience to maximize infiltration rates and increase PLS grades.
- Leach Pad Flow Attenuation. Production of excess fines, compaction of lift surfaces on the leach pad, decrepitation of host rock mineralized material, and precipitation of minerals due to acid depletion could cause the formation of zones of low permeability. As with all leach pads, there is risk of poor vertical solution flow and leach pad hydrodynamics.
Mitigation. Placement and distribution of the leach material will be monitored to prevent compaction and enhance uniform distribution of leach solutions. Boreholes drilled through zones identified with low permeability can enhance vertical migration of solutions. Segregation or special treatment of materials that are identified as decrepitation (breaking down) and/or releasing fines may be necessary to mitigate this type of flow attenuation.
- Acid Consumption/Cost. This Project relies on large volumes of sulfuric acid to liberate and dissolve copper from the leach pad materials to produce a saleable product. Acid consumption is estimated to range from 24 to 70 pounds of acid per ton of leach material based on the various rock types and carbonate content. The actual acid consumption could potentially be higher.
Mitigation. Controlling excess sulfuric acid consumption may require careful management and segregation of the materials as they are placed on the leach pad. The height of each lift could be increased to reduce the time that the lower portion is subjected to leach solutions consuming acid. Placing geomembranes or low permeability layers between lifts could isolate depleted, acid-consuming materials at the bottom of the pad. Studies into mineralized material sorting to reject high carbonate-low copper mineralization will be conducted to determine the applicability and economics of this technique. Mineralized material sorting has the potential to reduce acid consumption in practice.
- Permitting Difficulties. Permitting for mining projects in the western US and Arizona has often been an arduous and unpredictable task in the recent past. Regulations and social attitudes can change. Although the Company has previously been able to obtain all operating permits in a reasonable time frame, there is no certainty this track record will continue.
Mitigation. Permitting difficulties for changing the mining method for the deposit can be mitigated by developing support within the local community, identifying, and fixing potential areas of contention before they arise, getting support from community leaders in advance of applying for permits. Another measure is developing realistic permitting schedules that incorporate time to deal with challenges which also helps minimize deleterious consequences.
Opportunities
Several opportunities have been identified which could enhance the viability and economic attractiveness of the Open Pit Project. Many of these opportunities may be realized by removal of risk and uncertainty that are present at the PEA level.
Acid Consumption. Mineralized material sorting is a significant value-add opportunity for the Gunnison open pit. Greater than 80% of the mined copper is oxide mineralization, forming visually distinct blue-green and red-brown zones that are ideally suited to optical mineralized material sorting. Preliminary data suggest sorting of this material has the potential to greatly reduce acid consumption and volume of material leached by removing 40 to 50 percent of the process stream as unmineralized, higher acid consuming, waste. This would result in significant savings on operating costs.
Pit Slope Angles. The pit wall angles for the Gunnison open pit are considered reasonable based on the data available, however it is conceivable that pre-feasibility geotechnical data can steepen the pit walls in the gravel-alluvium, thus reducing pre-strip capital costs and life of mine waste mining costs.
Copper Recoveries. The anticipated copper recovery is an estimate based on the best interpretation of existing test work. This copper recovery could be exceeded in practice. Recovery increases could improve the rate of recovery, as well as increase total copper recovered. Improvements in the rate of recovery would mean lower flows from the leach pad for the same level of copper production, lowering operational costs., Or, the increased grade could result in higher copper production (revenue) for the same operating cost. Improvements in total copper recovered have the obvious benefit of increasing total revenue during the life of the mine.
Increased Copper Price. The current financial analysis is based on an average, long-term copper price of $4.10 per pound based on current consensus pricing. Current spot markets are currently 5% to 10% higher than long-term pricing estimates. Global demand increases for copper have the potential to drive copper prices higher, thereby increasing the economic (revenue) outlook for the Project.
Strong and Harris Copper-Zinc-Silver Project. The Company filed a separate technical report dated October 20, 2021, on the Strong and Harris Copper-Zinc-Silver Project titled "Estimated Mineral Resources and Preliminary Economic Analysis, Strong and Harris Copper-Zinc-Silver Project, Cochise County, Arizona" (the "S&H PEA"). At present, the S&H PEA contemplates development of the project on a standalone basis with its own infrastructure. JCM is also now being developed on a standalone basis in collaboration with Nuton, LLC, without sharing infrastructure with Gunnison. However, with the potential development of an open pit at Gunnison, the opportunity for shared infrastructure, capital, and operating costs with the Strong and Harris open pit is significant and may form the basis for future technical reports integrating all deposits: Gunnison, Strong and Harris and Johnson Camp Mine.
Gravel Revenue. 759 million tons of alluvial gravel is expected to be mine during the mine life. Gravel as an aggregate or rock product is a potential source of revenue. The planned rail spur and railyard provides the Company with access to larger markets for the sale of construction aggregates. Presently, the sale of construction aggregates, is not included in the financial analysis presented in this report. However, if just 10% of this material could be sold for a net cost of $5/ton, it could potentially add $380M in revenue to the Project. This does not include the costs of making this material marketable, and there is no guarantee it can me made marketable.
Limestone Revenue. Similar to construction aggregates, 85 million tons of clean limestone waste will be produced from the mining operations at Gunnison. Crushed limestone is highly valuable commodity in cement, aggregate, chemical and agricultural industries, selling for between $10/ton and over $60/ton in the region. Previously, the Johnson Camp-Gunnison area has been investigated as a source of limestone. With the rail spur and railyard, this material could be transported by rail to several regional markets. If 50% of this limestone waste could be sold at $20/ton it could generate approximately $850M in additional gross revenue. This does not include the costs of making this material marketable, and there is no guarantee it can me made marketable.
Alluvium Mining. 67% of the waste mined in the pit is weakly cemented gravel (alluvium). The current design includes 40% drill and blast for this gravel however it is possible much of this material will not need any drill and blast. This will be investigated during the planned pre-feasibility study ("PFS").
Alternative Mining of Alluvium. The current removal of alluvium envisions the use of blast-haul operations. There are potential cost savings by developing other means of removal such as use of conveyors, dozers, or earth movers instead of blast-load-dump equipment. These will be investigated during the PFS".
In-pit Leaching. In-pit leaching provides an opportunity to reduce operating costs and improve leach recovery over the life of mined mineralized material. The nature of the Gunnison deposit and aquifer would allow control of leach solutions. Permitting of in-pit leaching would be required through Arizona Department of Environmental Quality, though it is currently being employed at other properties in Arizona. Production sequencing will utilize in-pit leaching as a trade-off to the construction and maintenance of a heap leach pad during PFS work on the Gunnison open pit.
Exploration Potential. The mining district that GCC has consolidated in recent years exhibits significant exploration potential. Modern exploration activity has not occurred in the district. District-wide data consolidation and integration should be conducted to evaluate its overall mineral potential and identify exploration targets. Exploration for the source of the porphyry copper sulfide mineralization at Gunnison has never been conclusively conducted and copper skarn deposits such as Gunnison are often associated with large nearby porphyry copper deposits. Several historic carbonate replacement deposits including the Republic and Moore deposits merit additional exploration attention. Significant areas of Earp Formation, Colina Limestone and Horquilla Limestone are under cover and have not been explored. These same formations host the mineralization in the Hermosa-Taylor deposits being developed by South 32 in southern Arizona.
Recommendations
Based on the results of this PEA, it is recommended that GCC consider proceeding with a PFS of the open pit project which is expected to take approximately 18 months. A feasibility study will be proposed on successful completion of the PFS.
Additional drilling for resource verification and geotechnical coverage is recommended to support mine planning. Updating the acid plant design for the selected capacity is also recommended. Additional planning and costing work are required to establish the schedule and costs for the relocation of Interstate 10 and the addition of the rail spur to the Union Pacific Railroad.
Additional drilling will be required for metallurgical studies. Pilot metallurgical heap leach testing is recommended to investigate the recovery kinetics and flow characteristics for the heap leach design. In addition, mineralized material sorting studies are recommended to determine the effectiveness and economics.
A mine plan, heap leach design, SX-EW design and highway move design are necessary to complete the PFS.
GCC has proposed a list and budget for additional work that will support a Prefeasibility Study (PFS).
Prefeasibility Study Budget for the Open Pit Gunnison Project
| Detail | Cost $US | |
| Resource Upgrade | $ | 4,091,448 |
| Metallurgy | $ | 7,856,000 |
| Geotechnical | $ | 210,000 |
| Pit design | $ | 300,000 |
| Infrastructure design/PFS study | $ | 1,385,000 |
| Total | $ | 13,842,448 |
Ownership, Social License and Permitting
The Project is in Cochise County, Arizona, approximately 65 miles east of Tucson and is held or controlled 100% by GCC through its wholly owned subsidiary Excelsior Mining Arizona, Inc. (GCAZ).
The project is comprised of 9,756 acres including freehold land, state mineral claims and permits and BLM unpatented mining claims and excludes the Johnson Camp and Strong and Harris projects. There is no federal nexus for permitting the project and all permitting is limited to State of Arizona-required permits including the Aquifer Protection Permit, Industrial Air permits and the Mined Land Reclamation Permit.
GCC has a well-developed community engagement plan that has been implemented through numerous public meetings and outreach programs. The Company intends to maintain this approach by continuing to engage with, and meet and discuss its projects with, the local and regional communities and stakeholders.
The Cochise Mining district has legacy mining assets and is a combination brownfields/greenfield site. The Company anticipates the Project will create decades of high paying jobs that will benefit the local communities and the state.
GCC has entered into an option agreement dated November 12, 2024 (the "Option Agreement") with certain local landowners providing the option (the "Option") for a period of six years to acquire a total of 3,906.57 acres of land (the "Option Land"). Portions of the Option Land will contain the proposed open pit and related infrastructure. The terms of the Option Agreement require an initial payment of $1,000,000, and annual payments of $250,000 in years 2, 3, 4 and 5 of the Option. The final purchase price for exercise of the Option is based on the exercise date and is set forth in the table below:
| Final Payment Date | Total Price | |
| During the period within 1 year from Effective Date | $ | 28,000,000 |
| During the period after 1 year but within 2 years from Effective Date | $ | 30,000,000 |
| During the period after 2 years but within 3 years from Effective Date | $ | 31,250,000 |
| During the period after 3 years but within 4 years from Effective Date | $ | 33,500,000 |
| During the period after 4 years but within 5 years from Effective Date | $ | 35,750,000 |
| During the period after 5 years but within 6 years from Effective Date | $ | 37,000,000 |
Royalties and Metal Stream
Greenstone Royalty: Greenstone Excelsior Holdings L.P. ("Greenstone") holds a 3.0% gross revenue royalty over the Gunnison Project. The gross revenue royalty is defined as royalty percentage times receipts, which is the sum of physical product receipts and deemed receipts. The Greenstone royalty applies to the entirety of the Gunnison Project and production therefrom.
The Gunnison Project is also subject to a Metal Stream Agreement with Triple Flag Mining Finance Bermuda Ltd. ("Triple Flag") that is applicable to all oxide minerals production from the parts of the Project located in the "Stream Area". The Metal Stream Agreement is summarized in the table below, where mppa denotes million pounds per annum.
Triple Flag Metal Stream Agreement for the Gunnison Project
Stream Deliveries | Excelsior Mining Arizona Inc. ("Seller") is required to deliver Grade A Copper Cathodes in an amount equal to the "Payable Copper". The amount of Payable Copper is calculated based on a percentage of the amount of copper that is sold and delivered to Offtakers under the terms of Offtake Agreements (for percentages see heading - Payable Copper). | |||||||
| Payment | The Buyer pays to the Seller a price for copper equal to 25% of the daily official LME Grade A Settlement quotation for copper quoted in U.S. Dollars, as published in the Metal Bulletin. | |||||||
"Payable Copper" means a percentage of the Reference Copper equal to: | ||||||||
| Payable Copper | Scenario | Stage 1 | Stage 2 (75 mppa) | Stage 3 (125 mppa) | ||||
| Upfront Deposit | 16.5% | 5.75% | 3.5% | |||||
Upfront Deposit + | 16.5% | 11.0% | 6.0% | |||||
| At the current stage of the Project, the Buyer has made the initial Upfront Deposit ($65 million) and the Seller is ramping up to 25 mppa. | ||||||||
| The "Expansion Option" provides Buyer the option to invest an additional $65 million in the event Seller approves an expansion to at least 50 mppa. | ||||||||
Callinan Royalties Corporation (now a wholly owned subsidiary of Altius Minerals Corporation) holds a gross revenue royalty over the Gunnison Project. The gross revenue royalty is defined as royalty percentage times receipts which is the sum of physical product receipts and deemed receipts. The royalty rate is 1.625% while the plant capacity is less than 75 million pounds per annum and 1.5% once plant capacity is greater than or equal to 75 million pounds per annum.
Pursuant to the terms of the Bowlin option agreement, Bowlin Travel Centers, Inc. has been granted a 1% gross revenue royalty on any copper mined and processed from certain areas of the property.
The Arizona State Land Department (ASLD) owns a sliding net return royalty (2.0% to 8.0% and estimated at 5.5%), payable to ASLD and the State Trust.
Prior Operations
The Gunnison Project was previously designed as a copper in-situ recovery ("ISR") mine using solvent extraction-electrowinning ("SX-EW") to produce copper cathode. The ISR operation commenced ramp-up to production in 2020; however, as previously disclosed, it had operational issues related to low flow rates, so the Company began evaluating alternatives and opportunities to fix the ramp-up challenges. Well stimulation (small scale, shallow level, hydraulic fracking), has the potential to fundamentally change the performance of the wellfield and fix many of the low productivity issues. The Company has obtained a permit for well stimulation and the next step would be to conduct field trials. If well stimulation is successful, it could provide an operation with superior economics to the open pit operation and be in copper production much quicker than an open pit. However, due to the technical risks of ISR and substantially improved viability of the open pit operation, GCC intends to focus the PFS on an open pit operation as the alternative to ISR. If future financing is available for ISR activities, the Company may elect to conduct well stimulation field trials, but such field trials will not hinder the open pit studies. The Company intends to maintain the optionality of future ISR operations and well stimulation trials as this remains an asset to the Company. This includes maintaining full compliance with all regulatory and permit req'ts, including maintaining hydraulic control, pumping, monitoring and regulatory reporting.
Exhibit 1: Mine production schedule
| Year | Mined Tons mtons | Head Grade | Recovered Copper | |||||
| Total Moved | Mined Material | Alluvium Waste | Hardrock Waste | % TCu | ktons | mlbs | ||
| -2 | 95.0 | 95.0 | ||||||
| -1 | 95.0 | 1.5 | 93.4 | 0.1 | 0.37 | 3.46 | 6.9 | |
| 1 | 95.0 | 22.9 | 71.2 | 0.9 | 0.50 | 74.66 | 149.3 | |
| 2 | 100.0 | 31.1 | 54.0 | 14.9 | 0.41 | 83.30 | 166.6 | |
| 3 | 100.0 | 23.9 | 73.1 | 3.0 | 0.52 | 87.17 | 174.3 | |
| 4 | 100.0 | 30.1 | 63.5 | 6.5 | 0.43 | 87.51 | 175.0 | |
| 5 | 100.0 | 31.0 | 60.9 | 8.1 | 0.38 | 87.49 | 175.0 | |
| 6 | 105.0 | 37.7 | 32.1 | 35.1 | 0.34 | 87.63 | 175.3 | |
| 7 | 120.0 | 33.7 | 77.5 | 8.7 | 0.37 | 87.25 | 174.5 | |
| 8 | 120.0 | 39.6 | 28.0 | 52.4 | 0.31 | 87.28 | 174.6 | |
| 9 | 120.0 | 33.8 | 65.3 | 20.8 | 0.37 | 87.23 | 174.5 | |
| 10 | 120.0 | 36.7 | 41.1 | 42.1 | 0.34 | 86.91 | 173.8 | |
| 11 | 120.0 | 41.0 | 4.1 | 74.9 | 0.30 | 84.48 | 169.0 | |
| 12 | 120.0 | 41.6 | 78.4 | 0.26 | 73.91 | 147.8 | ||
| 13 | 62.2 | 40.4 | 21.8 | 0.33 | 85.86 | 171.7 | ||
| 14 | 42.0 | 38.7 | 3.3 | 0.33 | 86.11 | 172.2 | ||
| 15 | 36.2 | 35.0 | 1.2 | 0.35 | 85.06 | 170.1 | ||
| 16 | 34.8 | 31.9 | 2.9 | 0.29 | 65.96 | 131.9 | ||
| 17 | 11.36 | 22.7 | ||||||
| 18 | 3.23 | 6.5 | ||||||
Exhibit 2: DCF Model Annual Cash Flows ($ millions)
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TECHNICAL REPORT AND QUALIFIED PERSONS
The Report will be filed on SEDAR+ and on GCC's website within 45 days of the date of this news release. The Report will consist of a summary of the PEA. The Report is being prepared under the supervision of John Woodson, PE, SME-RM, of M3 Engineering & Technology Corporation, Tucson, Arizona, who is a Qualified Person that is independent of the Company. The Report will also receive contributions from the following additional Qualified Persons, who are also independent of the Company:
- Mr. John Woodson, of M3 Engineering & Technology Corporation, Tucson, Arizona ((capital and operating costs, and economic analysis).
- Mr. Jeffrey Bickel of RESPEC of Reno, Nevada (geology and mineral resource).
- Mr. Jacob Richey, of IMC of Tucson, Arizona (mining methods).
- Mr. Tom Ryan, of CNI of Tucson, Arizona (pit slope angles)
- Dr. Terence P. McNulty of T.P. McNulty & Associates of Tucson, Arizona (metallurgy).
- Dr. Abyl Sydykov of M3 Engineering & Technology Corporation, Tucson, Arizona (mineral recovery)
- Mr. R. Douglas Bartlett, of Clear Creek and Associates of Phoenix, Arizona (hydrology, mining method, permitting and environment).
Each of these Qualified Persons has reviewed and approved the technical information contained in this news release that is relevant to their area of responsibility and verified the data underlying such technical information.
About Gunnison Copper Corp.
Gunnison Copper Corp. is a mineral exploration and production company that owns the Gunnison Copper Project in Cochise County, Arizona. The project is being developed as a conventional open pit mining operation for copper cathode production. Gunnison Copper also owns the past producing Johnson Camp Mine which, with Nuton LLC, a Rio Tinto Venture, is in Stage 2 of a process to restart the mine using Nuton technologies, with first copper expected to be produced in 2025. Gunnison Copper additionally owns a portfolio of exploration projects, including the Peabody Sill and the Strong and Harris deposits.
For more information on Gunnison Copper, please visit our website at www.gunnisoncopper.com.
For further information regarding this news release, please contact:
Gunnison Copper Corp.
Concord Place, Suite 300, 2999 North 44th Street, Phoenix, AZ, 85018.
Shawn Westcott
T: 604.365.6681
E: info@gunnisoncopper.com
www.gunnisoncopper.com
Cautionary Note Regarding Forward-Looking Information
This news release contains "forward-looking information" concerning anticipated developments and events that may occur in the future. Forward looking information contained in this news release includes, but is not limited to, statements with respect to: (i) the future development plans for the Gunnison Project; (iii) the results of the PEA including operating and capital costs estimates, along with the economics of the Gunnison Project; (iv) the intention to mine the Gunnison Project and future production therefrom; (v) risks and opportunities associated with the Gunnison Project; (vi) future intentions regarding well stimulation trials; (vii) the future completion of a PFS.
In certain cases, forward-looking information can be identified by the use of words such as "plans", "expects" or "does not expect", "budget", "scheduled", "estimates", "forecasts", "intends", "anticipates" or "does not anticipate", or "believes", or variations of such words and phrases or state that certain actions, events or results "may", "could", "would", "might", "occur" or "be achieved" suggesting future outcomes, or other expectations, beliefs, plans, objectives, assumptions, intentions or statements about future events or performance. Forward-looking information contained in this news release is based on certain factors and assumptions regarding, among other things, the estimation of mineral resources, the realization of resource estimates, copper and other metal prices, the timing and amount of future development expenditures, the estimation of initial and sustaining capital requirements, the estimation of labour and operating costs (including the price of acid), the availability of labour, material and acid supply, receipt of and compliance with necessary regulatory approvals and permits, the estimation of insurance coverage, and assumptions with respect to currency fluctuations, environmental risks, title disputes or claims, and other similar matters. While the Company considers these assumptions to be reasonable based on information currently available to it, they may prove to be incorrect.
Forward looking information involves known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of the Company to be materially different from any future results, performance or achievements expressed or implied by the forward-looking information. Such factors include risks inherent in the construction and operation of mineral deposits, including risks relating to changes in project parameters as plans continue to be redefined including the possibility that mining operations may not be commenced at the Gunnison Copper Project, risks relating to variations in mineral resources, grade or recovery rates, risks relating to the ability to access infrastructure, risks relating to changes in copper and other commodity prices and the worldwide demand for and supply of copper and related products, risks related to increased competition in the market for copper and related products, risks related to current global financial conditions, risks related to current global financial conditions on the Company's business, uncertainties inherent in the estimation of mineral resources, access and supply risks, risks related to the ability to access acid supply on commercially reasonable terms, reliance on key personnel, operational risks inherent in the conduct of mining activities, including the risk of accidents, labour disputes, increases in capital and operating costs and the risk of delays or increased costs that might be encountered during the construction or mining process, regulatory risks including the risk that permits may not be obtained in a timely fashion or at all, financing, capitalization and liquidity risks, risks related to disputes concerning property titles and interests, environmental risks and the additional risks identified in the "Risk Factors" section of the Company's reports and filings with applicable Canadian securities regulators.
Although the Company has attempted to identify important factors that could cause actual actions, events or results to differ materially from those described in forward-looking information, there may be other factors that cause actions, events or results not to be as anticipated, estimated or intended. Accordingly, readers should not place undue reliance on forward-looking information. The forward-looking information is made as of the date of this news release. Except as required by applicable securities laws, the Company does not undertake any obligation to publicly update or revise any forward-looking information.
1 U.S. Geological Survey, Mineral Commodity Summaries, January 2024
2 Sustaining Cash Cost = Cash Cost + Sustaining Capex + Deferred Stripping + Royalties
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SOURCE: Gunnison Copper Corp.
