Gold Miners Update #8 ; A Very Lucrative Miner Joins The Emerging Juniors
Having recently written a post concerninig Q2 earnings, this follow up is in regards to a emerging junior miner which is likely to be a multi-bagger or bought out. I also wish to add one junior I overlooked in my last post, which a fellow fool pointed out to me.
Kirkland Lake Gold - Although it only trades on TSX and Pink sheet, I think those who believe in the precious metal mining story should definitely take a look on this gem. First off, they have had some operational and legal hurdles over the past couple of years, which are now behind them (remeniscent of Coeur d'Alene ey?). They have also already incurred the high cash costs as is typical when beginning a new operation ( Cash Costs as seen in the valuation at the bottom will decline substancially ). They are in perhaps the most mining friendly country in the world with the possible exception of Australia, but why compare apples to apples? Perhaps most importantly, especially during a time where credit is granted to a select few, Kirkland is debt free with 28m in cash excluding the 25m private placement they recently engaged in. This solid financial position is augmented by the fact they have minimal capital requirements for PPE and their effective tax rate will be significantly below the marginal rate = FREE CASH FLOW MACHINE. Okay a bried overview of their operations:
The entire Kirkland portfolio is composed of what previously was thought to be a consortium of run down mines for decades. Kirkland has proven this is not the case at all as they are growing proven reserves and their total resource base at a furious pace. I know the first thought that comes to mind is that this will be short lived - but kirkland's managment has demonstrated their knowledge of mining. Their vice president and head of operationshas over 25 years in the field and has worked in operations for such companies as GoldCorp and their Redlake mine and expansion.
The Macassa Mine, an underground gold mine with limited surface mining operations, is located in Kirkland Lake, Ontario. The mineral extraction in the mine is from underground stopes and processing is done on the property. The company discovered the D zones and other significant zones to the south of the historically productive regions on the Kirkland Lake camp. These zones are collectively known as the South Mine Complex (SMC). Some of the veins within the complex have larger width and superior grades than the main zones. Under the exploration program on the SMC, three of the five holes intersecte considerable gold mineralization. Proven and probable reserves for the SMC are 695,000 tons at a grade of 0.78 oz./t. The measured and indicated reserves 360,000 tons at a grade of 0.66 oz./t, while inferred reserves are 707,000 tons at a grade of 0.79 oz. At the Macassa Mine gold is generally found along breaks or faults, in veins, as quartz-filled fractures, as breccias and as sulphide zones. Exploration off the break has been limited in the past but new work by Kirkland Lake Gold shows that there are excellent targets.
Lake Shore Mine:
The Lake Shore Mine is located in the center of the Kirkland Lake Camp. Recent diamond drilling on the bottom level indicates that the ore continues and that the main break is not weakening as The most productive areas in the mine are the Main Break, the North or the No. 2 vein, the South or the No. 1 vein, and the Narrows Break or the No. 3 vein.
Tech Hughes and Wright Hargreaves make up the rest of entire Kirkland property in addition to their 50% interest in a joint venture on 5 properties with Queenston mining.
So My Updates Ranking: 1.0 - Accumulate, 2.0 Buy (2.5-3.0 Buy on Pullbacks), 3.0 (Hold), 4.0 (Sell).
1.0 - Kirkland Lake*, Jaguar Mining*, Coeur d'Alene Mines*, First Majestic Silver***
2.0 - Silver Wheaton*, Yamana Gold*, Silver Standard Resources**, Agnico-Eagle**, Aurizon Mines*,
2.5 - El Dorado, IamGold, MAG Silver, Newmont Mining, Newcrest Mining*, RedBack
3.0 - Lihir , GoldCorp
4.0- Barrick - Opportunity Cost , GLD - Short the GLD to Buy GDX of a basket of the above
* - ownership of common stock
**- ownership of option
*** - ownership of warrants