KGL Resources' (ASX: KGL) is one of the best value 'copper plays' on the ASX at the moment, with its shares trading well under cash backing.
The company's market cap. is around $15 million based on the last traded price of $0.11, yet the company currently has $19 million in cash - which equates to over $0.135 a share.
KGL is focused on the Jervois copper-silver-gold project in the Northern Territory, with the company looking at a potential significant resource upgrade after recently discovering extensions.
Drilling will now be fast-tracked.
Jervois is a high grade project at 1.25% copper, and currently hosts resources of 170,000 tonnes of copper and 11 million ounces of silver.
The project has access to existing infrastructure, and is located 350 kilometres north east of Alice Springs on the Plenty Highway, and 250 kilometres away from the Alice Springs to Darwin Port rail link.
"Significant" resource growth potential
Electromagnetic surveys discovered the extensions to the currently defined Resources at Jervois in the Northern Territory.
Conductors, indicating extensions, were located at all of the deposits - Marshall-Reward, Green Parrot and Bellbird - on which the surveys were focussed.
All conductors are in areas of no previous drilling and the company has started drill testing of the conductors and other priority targets has commenced.
Drilling Program
The success of both the 20,000 metre resource extension drilling program concluded in February and the electromagnetic surveys has caused KGL to commence a second phase drilling program immediately.
Extension drilling had intersected a new second zone of copper mineralisation just 50 metres east of the existing Reward resource.
The Phase 2 drilling will:
- Test targets at Marshall-Reward and Bellbird generated during the first phase of drilling;
- Focus on the northern extension of Reward as delineated by the EM survey, and on the newly discovered East Reward deposit 50m to the east;
- Follow up the massive lead-silver-zinc sulphide intersected at Reward in KJCD042 and KJCD048 – the DHEM survey indicates that the high grade mineralisation extends beyond the limits of current drilling and may improve; and
- Aim to generate initial Inferred Resources at the Cox’s Find and Rockface prospects.
Jervois setting and historic production
The project has a 31.4 square kilometre exploration licence, and 6.5 square kilometres of granted mineral leases, with 12 kilometres of prospective strike length.
It is hosted by Bonya Schist in the Eastern Arunta, with outcropping high grade copper mineralisation.
Jervois was discovered in 1929, with small scale copper carbonate mining in 1950’s.
Analysis
KGL Resources' is well placed for a market re-rating, with the company holding over $0.135 per share in cash, yet the last traded price was $0.11.
The company is therefore trading under cash backing.
Further increasing the undervaluation of the company, the current share price does now reflect the value of Jervois - which currently hosts resources of 170,000 tonnes of copper and 11 million ounces of silver.
With drilling being fast tracked to test extensions, there will be strong newsflow in the near-term.
A PFS is also underway to examine options for heap leaching copper oxide.
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