“When you have that window of opportunity called a crisis, move as quickly as you can, get as much done as you can. There’s a momentum for change that’s very compelling.”
– Anne M. Mulcahy
Market participants on the TSX Venture, particularly those in the gold sector over the past six months, understand the full implications of that quote. Nations, from east to west, are breaking out in violence and monetary chaos. As a result, gold has been the top performing asset in 2016, resulting in stock prices of miners and explorers of the precious metal taking off…
The UN states,
“The number of people seeking refugee status in Europe has soared over recent years. This is due in large part to war in Syria and Iraq, as well as conflict and instability in countries such as Afghanistan, Eritrea and elsewhere.”
In times of strife and economic uncertainty, bold decisions, and timely acquisitions, can reap unimaginable rewards.
The mining gold bull market is back. There is no debating this. The Globe and Mail reported earlier this month that gold “bullion [is] off to its biggest rally to start a year in four decades.” We confirmed the breakout in February and March as not being a false rally. Gold stocks have awoken from a near 5-year bear that began after the precious metal peaked in September of 2011. The upswing has caught many by surprise; and historical rallies for the precious metal suggest the current run may be just getting started.
Fortune reported this week that Brits are investing in gold at unprecedented levels. The article reads:
“The speed at which people are purchasing gold is unprecedented,” said Joshua Saul, CEO of The Pure Gold Company
“We are seeing people convert as much as 40 to 50 percent of their net worth into physical gold, (compared to) 5 to 10 percent in the past,” he said.
It is important to realize that gold bull markets typically last years after a downturn like the one it just emerged from, not just a few months. And institutional money, the so-called ‘smart money,’ knows this. Even private equity is stepping into the gold sector. Just look at the activity surrounding Gold ETF holdings… they have risen to 2013 levels amidst near record buying of physical backed ETFs this year. Bloomberg reported in late-April, that
“China’s gold miners plan to extend the biggest buying spree in four years as the nation seeks greater clout in the global bullion industry.”
With high quality gold assets hard to find, particularly in this environment of increased M&A, and rising premiums, we began to look at companies who demonstrated foresight… companies that were well ahead of this gold bull market… the few companies who were buying gold assets when prices were depressed.
It’s easy to follow a trend, but rare to lead…
We went back to find out who was buying up assets in 2014 and 2015, during the worst years of the bear market, when few were interested in the sector. Those are the trailblazers. Those are the stories we intend to bring forward.
After many weeks looking over data and old press releases we found a handful of standout companies that acquired gold assets that were, in some cases, bought for pennies on the dollar. And almost all these companies had one common denominator: The management team or financier behind the acquisition was proven, and had done this before.
But one management team in particular stood out to us for their deal making prowess…
Combined, the management team of our new Featured Gold Company have been involved in building over 20 mines and $5 billion in buyouts. You know how much we focus on past buyouts…
After meeting with the CEO, and learning about how his team picked up a former producing high-grade gold asset with extensive infrastructure (NI 43-101 Compliant Resource of 1.84 million ounces @ 11.6 g/t AuEq Inferred and 240,000 oz @ 13.3 g/t AuEq Indicated) from the largest gold miner in the world, during the worst bear market in a generation, we knew this was a company to bring forward…
This is not your typical junior gold stock on the TSX Venture… its backstory is quite remarkable.
You see, Barrick was the previous owner of this high-grade gold asset. The world’s largest gold miner purchased it in a deal worth approximately $141.5 million in 2007; and then spent roughly $100 million advancing the project…..
Before revealing the now-public junior gold stock, some context…
In 2007, the gold market had risen for a number of years in a row, the mining sector was white hot, but the precious metal traded in the $600-$700 range. As gold approached its all-time high above $1,900 an ounce in September of 2011, and the U.S. debt ceiling was making headlines with the government threatening default, Barrick was probably feeling pretty good about their purchase. However, after an avalanche of cheap money was deployed by central banks, resulting in little to no inflation, gold began its epic collapse – losing nearly 45% in value and taking mining companies, big and small, to multi-decade lows in 2015. Most of this you already know, but in this desert of despair emerged the story of our new Featured Gold Company – one of impeccable timing, and conviction.
Why Did Barrick Sell?
In 2015 — during the heart of the gold bear market — in a bid to clean up its balance sheet Barrick announced plans to reduce its debt by $3 billion by 2016. The company implemented a massive divestiture mandate and sold off assets around the world, from Chile to Nevada and Papua New Guinea…
The Globe and Mail published an article on August 6, 2015, titled Barrick puts everything on the table in bid to slash debt, cut costs…
At one point during the downturn, Barrick had more than $13 billion in debt…
It was during this period, when things could not have looked worse for gold miners, that our new Featured Company, K92 Mining (KNT:TSXV), began negotiations with the world’s biggest gold miner… they had their eye on the Kainantu Gold Mine in Papua New Guinea. This is an asset, along with the surrounding property, that we think has the potential to one day make K92 Mining a buyout candidate…
K92 Mining acquired the Kainantu mine and property from Barrick Gold for just US$2 million cash and US$60 million in potential earn out payments that are totally in K92’s control…
This is a project Barrick acquired in a deal worth approximately $141.5 million; and proceeded to spend approximately $100 million developing and producing gold from… What’s more, before Barrick acquired the asset Highland Pacific spent an estimated US$80 million on the project.
So, K92 Mining owns a high-grade gold project that has had over $300 million spent on it in the past 10 years or so; and the up front cost to the company was just US$2 million in March of 2015. Timing is everything in this game…
The Project: High-Grade & Weeks Away from Scheduled Production
K92 Mining’s Kainantu Gold Mine is located in the Eastern Highlands province of Papua New Guinea. Gold was discovered in this area of Papua New Guinea in 1928 in the Kainantu alluvial gold areas. However, modern exploration did not commence until the early 1980’s…
“Nolidan notes that Barrick originally purchased the Kainantu Project for the porphyry Cu-Au potential and internal reports rank the project very highly on a global scale. The decision to divest the project was made for corporate rationalisation reasons based on global competition for exploration expenditure rather than geological prospectivity reasons.”
Check out the timeline of events related to the project over the last decade:
K92 Upside Potential and the Location
K92 Mining has secured mining leases and associated permits for 10 years, renewed on February 16th, 2015. This is important for several reasons…
On a macro level, let’s say a proxy war breaks out between the U.S. and Russia, or Iran and Israel. What if military conflict erupts in the South China Sea? Or a civil race war breaks out in America. Perhaps the Fed announces a multi-trillion dollar stimulus package or takes rates negative; how about a second Brexit scenario with an EU nation? Gold could increase another $250 to $500 an ounce rather quickly in any of these scenarios… the multiples junior miners with ounces in the ground and exploration upside could achieve, is massive. Look how much they’ve climbed this year after gold increased just $200 an ounce. Some junior gold stocks are up fivefold or more since January.
The Globe and Mail reported earlier this month that the average premium paid on gold deals “worth at least $1-million is about 42 per cent in the current quarter, up from 29 per cent in the first quarter, data compiled by Bloomberg show.”
The bull market is happening now, not in 6 months, or two years. Exploration plays making discoveries, or assets poised for production, are being revalued. K92 Mining has the potential to deliver production, and a new discovery.
While companies in North America, or other regions, jump through the necessary hoops to start up a mine, K92 Mining is targeting to begin production in a matter of several weeks.
The other X-factor that cannot be ignored is the grade of K92’s asset:
Nolidan, the firm hired to perform the NI 43-101 compliant report, published on April 15th, 2016, reported K92 Mining’s Kainantu property has: *NI 43-101 Compliant Resource of 1.84 million ounces @ 11.6 g/t AuEq Inferred and 240,000 ounces @ 13.3 g/t AuEq Indicated. With an average grade around 12 grams per tonne, this is the highest grade gold asset we have ever featured, bar none.
* The technical report was prepared in accordance with National Instrument 43-101 (“NI 43-101”) by Anthony Woodward, MAIG. Readers are encouraged to review the full text of that report, which is available under the Company’s profile on SEDAR
K92 Mining has an environmental permit, valid for a remaining 40 years. The asset is also secured with no peace or order issues. There has been USD $41.3 million invested in exploration drilling and definition drilling with the current resource estimate based on 78,935 metres of drilling via 767 drill holes, according to the company.
K92 Mining’s potential to soon be a producing gold miner isn’t the only reason we are introducing them today…
Existing mine infrastructure aside, the Kainantu property is massive, covering a total area of approximately 410km2…
“I think the Kainantu project is one of the most prospective in Papua New Guinea. The strength of the structures and veins are most impressive. And they contain significant high grade gold!”
– ALEX DAVIDSON, K92 Mining Advisor & Former Executive Vice President Barrick Gold Corporation
Irumafimpa is the deposit which hosts K92 Mining’s Kainantu gold mine. In a Caesars Report titled K92 Mining – An excellent risk/reward opportunity in Papua New Guinea, they wrote:
“…Irumafimpa contains just 1.1 million tonnes, Kora/Eutompi’s resource estimate contains an impressive 4.5 million tonnes of rock. Yes, the gold grade is lower (at 7.1-7.2 g/t), but this is being compensated by the copper grade, which is 7 times higher than at Irumafimpa. Based on the location of Kora and Eutompi, it would make sense for K92 Mining to try to reach these zones through the construction of an underground ramp to reach these zones. We would like to emphasize Barrick already started this underground drive and K92 will look to continue this to reach the Kora deposit.”
K92 Mining is targeting to be in the lowest quartile of production costs in the industry on a per ounce basis; and not only bring the mill back online at the 45,000 oz / year range it previously produced via production at the Irumafimpa Deposit, but also to dramatically increase this production rate through their recently completed upgrades to the mill and the potential of mining at Kora.
Package the mine infrastructure with a new gold discovery at Kora or Eutompi for example, and K92 could be a potential buyout candidate for a larger player. Gold miners typically seek resources near or above that 3 million ounce mark.
Mine Timeline to Targeted Production
After rapidly advancing the project towards a restart of mining and processing operations by August 2016, the company has recently announced that they are on time and on budget, and with improved performance metrics that indicate higher processing capacity at the mill than previously thought – all positive news.
Planned Production Restart Timeline:
July 2016
· Drum Scrubber installed
· Ore Feed to Crusher
· Load Commission Mill & Float
· Scheduled ore production commences
August 2016
· First concentrate
source: K92 corporate presentation
K92 has already locked up an offtake agreement with Interalloys Trading Limited covering the first three years of concentrate production from the mine. This is a firm that specializes in the purchase, sale and distribution of metals and has a global customer base.
As K92’s planned production date nears, we’re witnessing the classic hallmarks of big money moving into a gold deal:
- Trading volume has skyrocketed in recent days. K92 Mining has traded over 15 million shares in the last ten trading days. There have been more than 6,000 individual trades in that time frame.
- The company announced the arrangement of a $5 million financing in early-July. Days later increased it to $12.5 million. Companies typically don’t do that kind of an increase unless demand is growing rapidly.
- Rising stock price in a quiet time for the market. K92 Mining only went public a few months ago. What is typically a lull in the market (July), has been white hot for K92. The stock has been trending higher for days.
K92 Mining’s Management and Leadership
Alex Davidson, previously the Executive Vice President Exploration and Corporate Development for Barrick, was in charge of worldwide exploration and corporate development when Barrick owned K92’s Kainantu project. He joined K92 as an advisor shortly after the company acquired the project from Barrick…
For a junior to attract the likes of Mr. Davidson is noteworthy given his past experience at Barrick and knowledge of this project.
Ian Stalker, who we met with earlier this month, is the company’s CEO. Mr. Stalker was the former CEO of UraMin Inc. a small start-up uranium company that went on to be acquired roughly two years 
later in a deal worth approximately $2.5 billion. With nearly 40 years’ experience building and operating mines, the Scottish-born engineer and mine developer is a sure fit for K92. As a former AngloGold Ashanti managing director, Mr. Stalker helped increase gold production there more than tenfold during the 1990s, according to an article from Mining.com.
Douglas Kirwin, an advisor to K92 Mining, was credited with leading the exploration team that made the discovery of the Hugo Dummett deposit at Oyu Tolgoi in Mongolia, one of the largest known deposits of copper and gold in the world. As a result, he was a recipient of the PDAC inaugural Thayer Lindsley medal awarded for the most significant international mineral discovery in 2004.
K92’s Chairman is Stuart “Tookie” Angus. He also sits as Chairman of the billion dollar Nevsun Resources Ltd., which operates one of the highest-grade open-pit copper mines in the world. He was the former chairman of B.C. Sugar Refinery Ltd. and former director of First Quantum Minerals, Canico Resource Corp., Bema Gold and Ventana Gold. Mr. Angus is an independent business advisor to the mining industry and has focused on structuring and financing significant international exploration, development, and mining ventures for the past 30 years. As a founding director for Ventana, Tookie was part of a buyout that created up to $1.3 billion in value.
Click here for the entire management and leadership team.
Wrapping Up
K92 Mining’s stock is up roughly 100% since it began trading in late-May. Be cognizant of the potential for profit taking from early investors, which at some point may put pressure on the stock.
According to Statista.com, the annual average gold price in 2007, the year Barrick paid $141.5 million for the asset, was $695.39 an ounce. Gold is nearly double that value today, but K92’s market cap is still less than $141.5 million…
K92 Mining is financed up to production and beyond having just closed an equity round of $12.5 million. Interest surrounding this company is growing. You can’t walk through our circles in Vancouver without it coming up in conversation. This company, thanks to its timely deal making and management team, has the attention of the Street, and likely some institutional players.
We are biased towards K92 Mining because they are an advertiser client and we participated in the company’s recently completed private placement for our own investment purposes. We may also increase our share position in the company following the release of this report. Please take responsibility for practicing your own thorough and independent due diligence. Learn about the risks associated with investing in small cap resource companies of this nature. We don’t share in your profits or losses. Pick your spots…
The best time to plant a tree is yesterday, but the next best time is today. If this gold bull market is the big one, which we believe it is, explorers and producers that are heavily levered to an increasing price of the metal could continue to make 2016 a memorable year for many Venture investors.
This marks the initiation of our coverage on K92 Mining (KNT:TSXV). We will have further updates in regards to this story over the coming weeks as its targeted production timeframe nears…
All the best with your investments,
PINNACLEDIGEST.COM
K92 Mining Stock Information
- Stock symbol: KNT – trades on the TSX Venture
- Stock price (CAD$): $1.85
- 10-day avg. volume (approx): 1.2 million
- Market capitalization (approx): CAD$130 million
BNN Interview Today with K92 President Bryan Slusarchuk
Online Resources
K92 Mining Corporate Presentation
Risk Factors
Like many mining and exploration operations, there are a significant number of legal, political, environmental, or other risks that could materially affect the potential development of the Kainantu project, many of which are beyond the control of the K92 Mining, including, but not limited to:
- All of the exploration licences comprising part of the Kainantu project are subject to renewal applications with the PNG government. There is no assurance that renewals or extensions will be granted on terms acceptable to the Company, or at all.
- Prior operators of the Kainantu project have failed to operate it economically.
- There are inherent risks involved with mineral exploration and mining.
- There are significant political, regulatory and country risks involved in undertaking business in PNG.
- No definitive agreement has been reached with local landowners as to the compensation to be paid for use of their land forming any part of the Kainantu project. Any planned mining operations could by stalled by protests or legal actions.
- Resource estimates may prove to be inaccurate.
- Unexpected delays and cost overruns with refurbishing the Kainantu mine and production facilities.
- Reduction in the long term market price of gold and copper would negatively impact on the economic viability of the Kainantu project.
- Exploration and mining activities are subject to environmental and other requirements that may increase costs and restrict operations.
- There is no feasibility study on the project and there is no certainty that the proposed operation will be economically viable.
Disclosure, Risks Involved and Information on Forward Looking Statements:
Please read carefully before proceeding. THIS IS NOT INVESTMENT ADVICE. All statements in this report are to be checked and verified by the reader. This report may contain technical or other inaccuracies, omissions, or typographical errors, for which Maximus Strategic Consulting Inc., owner of PinnacleDigest.com, assumes no responsibility.
Important: Our disclosure for this report on K92 Mining Inc. applies to the date this report was released to our subscribers (July 21, 2016) and posted on our website. This disclaimer will never be updated, even after we have sold all of our shares of K92 Mining Inc.
In all cases, interested parties should conduct their own investigation and analysis of K92 Mining Inc. (“K92”), its assets and the information provided in this report.
Forward-Looking Statements:
All statements in this report, other than statements of historical fact should be considered forward-looking statements. These statements relate to future events or future performance. Forward-looking statements contained in this report regarding past trends or activities should not be taken as a representation that such trends or activities will continue in the future. Undue reliance should not be placed on forward-looking statements because we can give no assurance that such expectations will prove to be correct.
Examples of forward-looking information include metal price assumptions, cash flow forecasts, projected capital and operating costs, metal or mineral recoveries, mine life and production rates, none of which are based on any preliminary economic assessment, pre-feasibility study, or feasibility study.
Forward-looking statements are often, but not always identified by the use of words such as “seek”, “anticipate”, “plan”, “aim”, “continue”, “estimate”, “expect”, “may”, “will”, “project”, “predict”, “potential”, “targeting”, “intend”, “could”, “might”, “should”, “believe”, “budget”, “scheduled”, and similar expressions. Much of this report is comprised of statements of projection.
Forward-looking statements include, among others, statements with respect to K92’s plans for production, exploration and development of the Kainantu Mine and potential mineralization. These statements address future events and conditions and, as such, involve known and unknown risks, uncertainties and other factors, which may cause the actual results, performance or achievements of K92 to be materially different from any future results, performance or achievements expressed or implied by the statements. Such risk factors are listed above.
Maximus Strategic Consulting Inc., owner of PinnacleDigest.com, expressly disclaims any intention or obligation to update or revise any forward-looking statements whether as a result of new information, future events or otherwise.
We caution all readers of this report that K92 has not completed any feasibility studies on its project. Exploration information and data verification for the Kainantu Project is provided in the Technical Report filed on K92 Mining’s website.
Risks and uncertainties respecting mineral exploration companies are generally disclosed in the annual financial or other filing documents of those and similar companies as filed with the relevant securities commissions, and should be reviewed by any reader of this report. In addition, with respect to any particular company, a number of risks relate to any statement of projection or forward statement.
Investors are cautioned not to consider investing in any company without looking at said company’s regulatory filings and financial statements. Every reader of this report should review K92’s’ regulatory filings and financial statements (found at SEDAR).
We Are Not Financial Advisors:
PinnacleDigest.com is an online financial newsletter owned by Maximus Strategic Consulting Inc. We are focused on researching and marketing for resource and technology public companies. Nothing in this report should be construed as a solicitation to buy or sell any securities mentioned anywhere in this report (specifically in regard to K92 Mining Inc.). This report is intended for informational and entertainment purposes only! The author of this report, and its publishers, bear no liability for losses and/or damages arising from the use of this report.
Be advised, Maximus Strategic Consulting Inc., PinnacleDigest.com and its employees/consultants are not a registered broker-dealer or financial advisors. Before investing in any securities, you should consult with your financial advisor and a registered broker-dealer.
Never, ever, make an investment based solely on what you read in an online newsletter, including Pinnacle Digest’s online newsletter, or internet bulletin board, especially if the investment involves a small, thinly-traded company that isn’t well known.
We Are Biased:
Most companies featured in the Pinnacle Digest newsletter, and on our website, are paying clients of ours (including K92 Mining Inc. – details in this disclaimer). In many cases, we own shares in the companies we feature. For those reasons, please be aware that we are extremely biased in regards to the companies we write about and feature in our newsletter and on our website.
Because K92 Mining Inc. has paid us CAD$50,000 plus gst to provide our online advertising and marketing services, and we (Maximus Strategic Consulting Inc.) own shares and warrants of the company, you must recognize the inherent conflict of interest involved that may influence our perspective on K92; this is why we stress that you conduct extensive due diligence as well as seek the advice of your financial advisor and a registered broker-dealer before investing in any securities mentioned in our reports.
Maximus Strategic Consulting Inc., owner of PinnacleDigest.com, its officers, directors, employees, and consultants shall not be liable for any damages, losses, or costs of any kind or type arising out of or in any way connected with the use of its products or services, including this report. Maximus Strategic Consulting Inc., owner of PinnacleDigest.com, its employees, consultants and affiliates are not responsible for any claims made by any of the mentioned companies or third party writers in this report. You should independently investigate and fully understand all risks before investing. We want to remind you again that PinnacleDigest.com is often paid editorial fees for its writing and the dissemination of material. The clients (including K92 Mining Inc.) represented by PinnacleDigest.com are typically exploration-stage or development-stage companies that pose a much higher risk to investors than established companies. When investing in speculative stocks of this nature, it is possible to lose your entire investment over time or even quickly.
Disclosure of Compensation and Stock Ownership:
Set forth below is our disclosure of compensation received from K92 Mining Inc. and details of our stock ownership in the company as of July 21, 2016:
Maximus Strategic Consulting Inc., owner of PinnacleDigest.com, has been paid CAD$50,000 plus gst to provide online advertisement coverage for K92 Mining Inc. for a pre-paid six month online marketing agreement. The company (K92 Mining Inc.) has paid for this coverage. The coverage includes, but is not limited to, the creation and distribution of reports authored by PinnacleDigest.com about K92 Mining Inc. (reports such as this one), as well as display advertisements and news distribution about the company on our website and in our newsletter. We (Maximus Strategic Consulting Inc.) participated in K92’s recent private placement (see company press release from July 21, 2016 for details). In that private placement we purchased 25,000 units at $1.00 per unit. Each unit issued consists of one common share and one-half common share purchase warrant of K92, with a whole warrant giving the holder the right to purchase another common share for a period of 12 months from closing at $1.50 per share. All securities issued pursuant to the private placement are subject to a four month hold expiring November 21, 2016. We (Maximus Strategic Consulting Inc.) intend to sell every share we own, as well as any shares we may purchase in the future, of K92 for our own profit. All shares we (Maximus Strategic Consulting Inc.) currently own or purchase in the future of K92 will be sold without notice to our subscribers. Please recognize that we benefit from price and trading volume increases in K92. Please recognize that we are extremely biased when it comes to K92.
PinnacleDigest.com’s past performance is not indicative of future results and should not be used as a reason to purchase any security mentioned in this report or on our website.
The past success of members of K92’s management team and advisory team are not indicative of future results for K92.
All information regarding K92’s stock price and market cap was sourced from Quotemedia and the company’s website.
Cautionary Note Concerning Estimates of Inferred Resources:
This report and supportive documents used in the research process of this report use the term “Inferred Resources”. U.S. investors are advised that while this term is recognized and required by Canadian regulations, the Securities and Exchange Commission does not recognize it. “Inferred Resources” have a great amount of uncertainty as to their existence, and great uncertainty as to their economic and legal feasibility. It cannot be assumed that all or any part of an Inferred Resource will ever be upgraded to a higher category. Under Canadian rules, estimates of “Inferred Resources” may not form the basis of feasibility or other economic studies. U.S. investors are also cautioned not to assume that all or any part of an “Inferred Mineral Resource” exists, or is economically or legally mineable.
Mineral resources which are not mineral reserves do not have demonstrated economic viability. The estimate of mineral resources may be materially affected by environmental, permitting, legal, title, taxation, socio-political, marketing, or other relevant issues.
Maximus Strategic Consulting Inc. and PinnacleDigest.com (including its employees and consultants) are not chartered business valuators; the methods used by business valuators often cannot justify any trading price for most junior stock exchange listed companies. K92 Mining Inc. is considered to be a junior stock exchange listed company.
Any decision to purchase or sell as a result of the opinions expressed in this report OR ON PinnacleDigest.com will be the full responsibility of the person authorizing such transaction, and should only be made after such person has consulted a registered financial advisor and conducted thorough due diligence.
Information in this report has been obtained from sources considered to be reliable, but we do not guarantee that it is accurate or complete. Our views and opinions regarding the companies we feature on PinnacleDigest.com and in this report are our own views and are based on information that we have received, which we assumed to be reliable. We do not guarantee that any of the companies mentioned in this report (specifically K92 Mining Inc.) or on PinnacleDigest.com will perform as we expect, and any comparisons we have made to other companies may not be valid or come into effect.
To get an up to date account on any changes to our disclosure for K92 Mining Inc. (which will change over time) view our full disclosure at the url listed here: https://www.pinnacledigest.com/privacy-policy-terms-use-our-disclosure
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Trading in the securities of K92 Mining Inc. should be considered highly speculative.
