Kaminak Gold (KAM-V), a popular gold play among junior mining investors, halted the stock then released a Feasibility Study just after the close today.
The FS details a 10-year, open-pit heap-leach mine yielding an after-tax internal rate of return of 37% and NPV of $455 million (at a 5% discount).
The economics have improved since Kaminak released its PEA in June 2014, helped by a plummeting Canadian dollar (0.78 in FS compared to 0.95 in PEA) and lower oil prices.
Kaminak will now advance to permitting, which is administered by the Yukon Environmental and Socio-Economic Assessment Board (YESAB).
All-in sustaining cash costs – less corporate G&A – are pegged at US$550/oz for the mine envisioned by the company. Initial capex would be $317 million and sustaining capital costs including closure costs, $161 million.
“This feasibility study firmly establishes the Coffee Project as one of the world’s best undeveloped gold projects by value and margin that works in the current gold-price environment,” stated Kaminak president and CEO Eira Thomas. “The Coffee Project further benefits from being a simple, open pit, heap leach mining opportunity, situated near infrastructure that delivers low all in sustaining costs and pays back capital in under two years.”
Kaminak is well-funded, with $28 million in the treasury as of Sept. 30, and boasts major shareholders including Ross Beaty, Lundin family trusts and Thomas Kaplan’s Electrum Group. The company had released an updated mineral resource estimate in September.
Some key changes from the PEA include:
– Total ounces unchanged, with a shorter mine life, higher head grade, lower reserve tonnage, and higher strip ratio;
– Increased average total mining rate from approximately 64,000 tonnes per day (tpd) to approximately 92,000 tpd;
– A ridge-top heap leach pad with a shorter initial construction period and lower capital cost per tonne of ore leached than the valley-fill impounding heap leach facility proposed in the PEA;
– An access road from Dawson City utilizing a high proportion of existing gravel roads;
– Improved economics due to a shorter construction period, shorter mine life and higher average gold grade.
In a research note, Canaccord analyst Eric Zaunscherb described Kaminak as “an excellent target for gold development M&A.” Canaccord maintained a Speculative Buy rating and $1.50 target price on Kaminak shares.
“We note that that the project reserve has not grown in terms of gold content (2.2 Moz) but incorporates a considerably higher heap leach grade (1.45 g/t Au) relative the PEA grade (1.23 g/t Au). FS ore appears to include a higher portion of transitional material, supplying higher grade but also resulting in a reduction in average gold recovery to 86% from 88% with higher mining costs,” the note said.
The trading halt on Kaminak shares generated a buzz in CEO Chat, with some predicting a possible takeover. Reaction to the company’s FS was generally positive.
“Beauty numbers!!” commented IDM Mining CEO @robmcLeod, a Yukon veteran who helped discover the White Gold district near Coffee that sparked a staking rush.
“Should be a fair amount of (positive) analyst coverage re this FS … numbers appear fairly conservative, save for the 5% discount rate applied,” commented @dirkdiggler.
However, @Mister_Manager questioned some of the assumptions in the study: “Still not sure where $KAM is going to source $0.85/l diesel, or how they’re building that road for $25 million.”
Related reading: Charging into Yukon’s gold rush | Vancouver Sun
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