My head is starting to spin a little as we reach the 4th site visit on the 2015 Yukon Media Tour; there’s an excessive amount of information to take in. To get up to speed see Part 1, Part 2, Part 3, and Part 4.
The media members had just boarded another mini-airplane from Burwash Landing and before we knew it were landing at the Kaminak Gold (TSX-V: KAM)’s airstrip. Tony Reda, VP Corporate Development, met us and drove the group into the Kaminak camp. It was one of the more picturesque camps we had visited and waiting to greet us was Eira Thomas, President & CEO of Kaminak. We all grouped together in a dining hall to hear more.
In 2010 the Kaminak team drilled the discovery hole which today defines the Coffee Gold Project. Since that time, the property has undergone 238,000 meters of diamond drilling to prove up a 4.153M Oz (Ind. + Inf.) gold resource which lies within what management is calling a new gold district.
That new gold district lies on the Traditional Territory of the Tr’ondëk Hwëch’in which Kaminak has a positive and ongoing relationship with. On May 17, 2013 the Exploration Cooperation Agreement (ECA) was signed to ensure the project is being advanced in a responsible and environmentally conscious manner. From the ECA news release, Tr’ondëk Hwëch’in Chief Ed Taylor commented, “We are pleased to partner with such a responsible mineral exploration company, and I thank everyone who played a role in finalizing this agreement.”
What is also unique about the Coffee project is that it is situated in a part of the Yukon which has never been glaciated. This is important because the ground has been weathered or highly oxidized making it strongly amenable to heap leach processing, one of the lowest costing extraction technologies available.
Ms. Thomas, CEO stated, “Coffee does represent a new deposit style for the Yukon. Most of the deposits within the Tintina gold belt have some sort of association with porphyry style mineralization. Coffee does not; it is part of a high grade structurally hosted hydrothermal system.”
In 2014 Kaminak released its first NI 43-101 preliminary economic assessment based on USD $1250/Oz Au and $0.95CAD/USD. Coffee is projected to produce 167,000 Oz/Yr Au at an “AISC” of USD$687/Oz Au over 11 years for total production of 1,859,000 Oz Au. This is well below the average “AISC” for heap leach operations of $860/Oz calculated by GFMS Mine Economics, RBC Capital Markets. More importantly, Kaminak’s “AISC” provides a very generous margin, approx. $440/Oz Au, to the gold price should it fall further.
To build this proposed gold mine will cost $304.8M, one of the lower CAPEX projects in the marketplace today. Management is pleased with the assumptions they have made in this economic study and believe the study continues to remain relevant in the current market environment. Their sensitivity analysis showed USD$1,100/Oz Au which demonstrates an after-tax NPV of $194M at a 5% discount rate, after-tax IRR of 18%, and after-tax payback period of 3.5 years. The study does not factor in the current $0.75CAD/USD FX rate which would improve economics.
They are in the process of completing the feasibility study on the Coffee project which began in July 2014 and management are expecting it to be completed before 2015 year end with a press release scheduled for early January 2016. As of the time of our site visit (Aug 11th) management mentioned they were well over 50% done the FS, all field work is complete, and they are in the engineering phase now. For existing shareholders or interested parties the release of the FS will be a major catalyst for Kaminak.
Other ongoing work is the metallurgy where Kaminak has had 90%+ gold recovery from the Supremo and Latte oxidized ore. Cold climate simulations were performed to replicate the frigid temperatures of the Yukon. Crush sizes ranging from ½”, 1”, and 6” were tested for both deposits. The results for Supremo using the respective crush size resulted in 92% gold recovery in 18 days, 94% recovery after 40 days, and 85% recovery after 152 days.
A big to-do for Kaminak is to upgrade 140km of existing forest service roads starting in Dawson City and build an estimated 25km of new road connecting the Coffee project. Using the same metric of $50,000/Km used for previous road construction (shown below) this new road would be an estimated $1.25M. Management noted there will be minimal usage of the road after the mine is constructed. Note this route is still under evaluation but was the most recent plans the Company had.
The access route proposed from Dawson City will have to cross the Stewart river and Yukon river. The solution to that is a barge crossing in the summer and ice road in the winter. The Minto mine, a copper producer in the Yukon uses a barge crossing and it apparently works efficiently for their operations.
In early 2016 Kaminak management will be applying to the Yukon Environmental and Socio-economic Assessment Board (YESAB) to submit for their water license. Looking out 24 months, management hope to have the Coffee project fully permitted and be ready for construction in Q2 2018. If this goes as planned they believe the first gold pour could happen near the end of 2019. The feasibility study when released will confirm if this timeline is realistic.
As of March 31, 2015 on their last filed set of financial statements there was a reported cash balance of $25.17M and positive working capital of $20.24M. Management expects the majority of the cash to be spent by year end which is mainly for funding the feasibility study. Seeing as 5 out of the last 6 financings have been bought deals this speaks highly as to the credibility of management to execute future financings which I do not see as a risk.
Worth noting both Ross Beatty and Lukas Lundin have a 9.98% equity stake in the company. Rick Rule’s, Sprott Resource Investment owns approximately 12M shares equating to 8.35%. All 3 are legendary resource investors and see a promising future for Kaminak.
Kaminak is a Canadian multi-million ounce gold asset with significant room for resource growth. The project is economic even at $1,000/Oz Au. It is situated in the right jurisdiction with strong support from the Tr’ondëk Hwëch’in and is establishing infrastructure to take the project towards production. There are many positives but investors must be cautioned Kaminak’s share price is highly correlated to gold. With any more downward pressure in gold this will most certainly cause further sell-offs in the share price.
Return tomorrow for our final piece of the week, Part 6 on Rockhaven Resources.
Symbol: TSX.V – KAM
Market Cap: $106.36M
Shares Outstanding: 143.73M
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