Gold stocks are still turning heads and increasingly find position in the traders and investors portfolio. Some of the notable gold stocks include Goldcorp (NYSE:GG), Newmont Mining Corp (NYSE:NEM), Agnico Eagle Mines (NYSE:AEM).
At the same time, there’s another side of the story that belongs to gold mining stocks that have kept pace with gold prices, thus proving to be great investment options for investors looking to leverage rising gold prices. Kerr Mines (TSX:KER) (OTC:KERMF) is a fine example.
“The past 12 months have been an incredible journey” said Claudio Ciavarella, CEO Kerr Mines. “The Company has completely transformed itself and has made tremendous strides forward. On behalf of your Board and the Management team, we believe the coming year will be another positive step forward in the execution of our strategy”.
There’s just something about gold… it’s nice to own and invest in, but it can be fraught with problems when you try to analyze what a company’s worth. We found a good one in Kerr Mines (TSX: KER) (OTC:KERMF).
We’re not the only gold bugs who’ve shown an interest in Kerr Mines. Precious metals guru Eric Sprott holds a 9.4% position and one thing you can say about Sprott is, he’s a savvy-investor, when it comes to gold stocks.
Kerr Mines owns the Copperstone Mine in Northern Arizona, which is a late-stage development and former producer of gold. Copperstone consists of an 11,800-acre land package that historically produced 500,000 ounces of gold.
Now having lots of acreage doesn’t necessarily mean it’s all ripe with nuggets of gold just waiting to be picked up, but in Kerr Mines (TSX: KER) (OTC: KERMF)’s case, its damn near that rich – and WAY UNDERVALUED in share price, which we’ll explain further on..
The [property] is fully-permitted with extensive infrastructure in place, meaning Kerr Mines has a 450 ton-per-day mill already onsite and the tunnels going down to the high-grade gold ore are already there. Electricity and water are there too, so the cost to Kerr Mines (TSX: KER) (OTC: KERMF) is LOW< LOW
Highlights for the Year ended June 30, 2017 and Significant Subsequent Events
On October 19, 2016 The Company announced that dewatering and rehabilitation work had begun at the Copperstone mine.
On March 2, 2017 , the Company announced it completed its de-watering and underground rehabilitation program at its flagship Copperstone mine in Arizona
In June 2017 the Company then underwent a tender process for the three key contracts to support the execution of the 2017 Copperstone Mine exploration program and pre-feasibility study.
In July 2017 , the three main contracts for engineering, exploration, and mine development were awarded.
On August 15, 2017 , the Company launched the first phase of the 2017 surface exploration drilling campaign for the 2017 Copperstone Mine exploration program and pre-feasibility study.
On August 21, 2017 the Company commenced the first phase of the 2017 underground drill access mine development for the 2017 Copperstone Mine exploration/development program and pre-feasibility study.
On August 25, 2017 the Company began the first phase of the 2017 underground exploration and development drilling program.
On November 2, 2017 Kerr Mines drills 32 feet @ 16.2 g/t gold and extends Copperstone Zone along strike and depth
The Company is executing the first phase of its 9,100 meter (30,000 feet) 2017 exploration and development program to define and expand current resources in the Copperstone Zone and define new resources in the Footwall Target.
The Company is executing a NI 43-101 Technical Pre-Feasibility Report, currently anticipated for Q1 2018. Highlights of the study are as follows:
Board & Management
On April 11 th, 2017, strengthened the Board and Management with the appointments of Claudio Ciavarella as Chief Executive Officer and Martin Kostuik as President and Director.
Strengthened the technical team on June 30 th, 2017 with the appointment of Brad Atkinson as Director of Exploration and Geology and Michael R. Smith as a technical advisor of Exploration and Geology.
Work force expanded at site to include 23 employees and contractors.
Achieving and maintaining a strong balance sheet remains a top priority. The Company continued to strengthen its financial position:
On July 10, 2017 , the Company completed an oversubscribed Non-Brokered Private Placement of $8,000,000 through the issuance of 44,444,444 Units comprised one common share (“Share”) and one-half of one common share purchase warrant (“Warrant”). Each Warrant entitles the holder thereof to acquire a Share at a price of $0.27 per share for a period of 24 months from the date of issuance, provided, that if, at any time the Shares trade at a volume weighted average trading price of $0.40 , or greater, per Share for a period of 20 consecutive trading days.
Operational Update of the Drilling Campaign for 2017 Pre-Feasibility Study and Exploration Program
Kerr Mines is pleased to provide an update to the previously announced commencement of the 2017 Exploration and Development Program. The first phase of this program is comprised of underground and surface drilling programs as well as development drifting for underground drilling access.
A second surface drill has commenced drilling at the Copperstone Project. This addition to the existing surface core drill and underground core drill is a reverse circulation drill capable of drilling to 305 meters (1,000 feet) in all types of ground conditions and will provide very expedient and cost effective results. The drill will be used in areas where geologic characteristics and data from core drilling are well documented.
The Copperstone Zone produced over 500,000 ounces of gold between 1987 and 1993 when the pit reached economic limits at the time and when gold prices averaged under $400 /troy ounce. The down-dip extension of the Copperstone Zone, located primarily east of and below the bottom of the open pit, has a mineral resource of 313,000 ounces at 10.35 gram per tonne (0.302 ounce per ton) (measured + indicated), estimated in 2010.
“We are very excited to add the second surface drill to the first phase of this program. The program is advancing well on all fronts and we are expecting to announce the first batch of assay results in as little as four weeks from now. The underground and surface programs are the cornerstone for the forthcoming pre-feasibility study which is a key component to the strategy of advancing the Copperstone Mine project towards a production decision,” said Martin Kostuik , President Kerr Mines .
Billionaire Eric Sprott Builds Position In Gold Mine!
Now to its ore bodies.
There are 942,000 ton of Measured and Indicated gold ore with a grade of 10.3 grams per ton. That’s some high-grade gold!!! On the Inferred side, there are another 335,000 ton with a grade of 12.2 grams per ton. That’s in the soon-to-be further explored “South Zone”, which has GREAT POTENTIAL TO EXTEND THAT ORE BODY. But in the Proven and Probably category, Kerr Mines (TSX: KER) (OTC: KERMF) has 910,000 ton with an average grade of 8.8 grams per ton. So, what does that spell? MONEY, BABY… MONEY!!. Now you can see why the great Eric Sprott got his checkbook out and bought into the project.
The Value in Kerr Mines
There are many factors that determine the value of a mine. The grade of gold is obviously first in determining an investment into a gold stock like Kerr Mines. But with such HIGH GRADES of gold, from Proven, Measured and Indicated to Inferred, the numbers are OFF THE CHARTS.
So, is Kerr Mines a takeover target? Perhaps, but not from the likes of the majors, like Barrick Gold (NYSE: ABX), Newmont (NYSE: NEM), or GoldCorp (NYSE: GG). Why? Too small… but with Kerr permitted with a mill in place and the tunnels opened up to access the three zones previous not mined and the heavy hit Kerr Mines (TSX: KER) (OTC: KERMF) discovered in the South Zone, its most likely going to be in production next year. In fact, the feasibility study needed to go into production is expected in the fourth quarter of this year. So that tells us that Kerr Mines intends to go into production.
Grassy Mountain is a gold property just 70 miles from Boise Idaho that has about 420 claims and 250,000 ounces of reserves with a grade of 5.32 grams per ton. Its owned by Paramount Gold (NYSE: PZG), which acquired Grassy Mountain in an all-stock deal with a net present value of $107 million (based on $1300oz gold).
We’re comparing apples to oranges here, but both properties (Kerr Mines and Paramount Gold) have high-grade gold ore, though Kerr Mines (TSX: KER) (OTC: KERMF) is NEARLY DOUBLE THE GRADE – AND – HAS NEARLY FOUR TIMES AS MUCH GOLD ORE. So, what does that tell you?
We interviewed a seasoned Nevada geologist familiar with both properties to get his take on Kerr Mines, asking – “What’s it Worth” – and here’s what he had to say… “The property was a past producer and profitable, but there are a lot of considerations when trying to value the property.” His take was that “in a sale, it’d go for somewhere near $100 MILLION DOLLARS,” citing the Grassy Mountain sale we described, above, as a comparison.
Ok… let’s say the number is Sprott on. How do you interpret that in share value? There are approximately 190 million shares issued and outstanding and if you come away with a book value approach – assuming a sale for $100 million – then you’re looking at somewhere around $0.50 per share.
The pundits all say that gold (in 2018) is more likely going to trade in the $1300 range vs $1225 where it is currently, so if you up the commodity price you also up the gross return. Miners like to look at their properties in internal rates of return or net present value, but as Kerr Mines is listed on the Toronto Stock Exchange, an updated 43-101 Report would be in order before Kerr Mines (TSX: KER) (OTC: KERMF) releases that kind of information.