These are transformational times for Kincora Copper Limited (CVE:KCC), also occurring at what could be a low in terms of investor sentiment towards Mongolia.
At the end of May the company announced the consolidation of a significant swathe of ground with Ibex, a private company associated with famous mining entrepreneur Robert Friedland.
With the land comes one of the largest known regional geophysical and surface geochemical datasets globally supporting various style targets, including “mega” (Tier 1 type) porphyry discoveries, “traditional” gold rich copper porphyries and epithermal gold deposits.
Combined with Kincora’s existing portfolio the newly amalgamated ground represents one of the most commanding land packages on what may well become the next major copper producing district in the world.
Most will know of Robert Friedland’s success with Ivanhoe Mines which helped put Mongolia on the international stage having found and sold the great Oyu Tolgoi copper-gold mine several hundred kilometres south of Ulaanbaatar, but only 80 kilometres from the border of the world’s largest consumer of copper, China. Recent resolution of a longstanding dispute over the expansion of the Oyu Tolgoi project supports a potential return to economic growth, positive FDI and investor sentiment towards Mongolia.
But Kincora chief executive Sam Spring believes that’s just the start.
A deposit like Oyu Tolgoi rarely occurs in isolation, he says. Rather, he draws a parallel with one of the world’s great copper producing nations, Chile, which began to be opened up to mining and exploration in the early 1970s.
The situation in Mongolia now is rather similar, he says. And following the consolidation of the new ground from Ibex, Kincora now holds a significant first mover advantage, controlling the majority of the prospective exploration licenses which dominate the key geological trend between and along strike from the Oyu Tolgoi and Tsagaan Suvarga copper mines.
It’s this sentiment that lies behind the recent positive uplift in Kincora shares, from a 2016 low of C$0.015 to the current C$0.045, a threefold rise.
Spring has not been slow to follow up on the potential of the land position.
At the beginning of June he announced that Kincora would be looking to raise C$2 mln in new money in parallel to converting an existing C$2 mln debt into equity.
At a stroke Spring will have wiped out all of Kincora’s debts and capitalised the company effectively to allow meaningful exploration to take place on the land package once plans are made.
It seems likely that a significant drill programme would be undertaken in the event that the majority of the money comes in, although Spring cautions that no actual decisions have yet been made.
“We’re raising money to go and do justice to the potential of this belt and start adding value from our exploration and consolidation strategy,” he says. “I’ve been speaking to various people and the general feeling is that this has got to be initially self-funded.”
By that, Spring means that existing investors and those that may or may not come on board in the current raise are of the mind that now is not the time to dilute the project upside by bringing in a partner to share the funding load.
But the question then becomes whether Spring can get to the C$2 mln that he’s aiming for.
So far, he seems hopeful that he will, but in these still relatively uncertain markets he takes comfort that there are firm commitments in place to ensure the financing component of the Ibex deal is more than bedded down. It’s helpful of course that the raise, when announced, set a C$0.0375 price per share and that since the news about the Ibex deal has sunk in the share price on the TSX-V has ticked up to a handy C$0.045 (and recent high of C$0.055).
More to the point though, existing shareholders understand the story, the potential of the Southern Gobi copper belt, Mongolia as a jurisdiction (noting US$4 billion of proceeds from one of the industries largest project financings was transferred this week relating to the Oyu Tolgoi Stage 2 expansion to Turquoise Hill Resources) and have an appetite to come in.
“We’ve had good interest and initial support from existing shareholders,” says Spring. “It’s a first-come first-served type offering as were keen to make the most of the current field season.”
At the same time though, he concedes that it’d be very hard to say no to a high-end institution even if it did come to the party later.
The Friedland name also adds lustre and certain headlines, but Spring doesn’t want the focus to be or overplay that aspect.
With this consolidation, the attention is back to the belt and creating the right platform to support further discoveries which current known geology, geophysics and interpretations support.
“It’s not often that you can secure a land package, data set and portfolio of targets like this,” he says. “They are the fundamentals to create value for shareholders.”
And, with a clean balance sheet, restructured capital structure, and potential C$2 mln in the kitty, it looks like Kincora will at last be able to get down on the ground and really go to work on its Mongolian projects.