Shares of Kaminak Gold (TSXV: KAM; US-OTC: KMKGF) surged nearly 33% to $1.05 after the company announced that Ross Beaty and Zebra Holdings (the trust of the late Adolf H. Lundin) are to become significant shareholders.
Beaty and Zebra Holdings and Investments S.a.r.l. Luxembourg have each agreed to make a $6.8-million investment in Kaminak through non-brokered private placements for a total investment of $13.5 million.
Once completed, each of the purchasers will own 9.98% of Kaminak’s outstanding shares on a partly diluted basis, assuming warrants are exercised.
Beaty and Zebra Holdings will each buy 8.45 million units at 80¢ per unit. Each unit will consist of a share and half a warrant. A full warrant allows the holder to buy another share for $1.20 within a year.
The investments will bring Kaminak’s total cash position to $26.5 million — enough to undertake a bankable feasibility study of its flagship Coffee gold project in the Yukon and advance the project towards a production decision.
“The bulk of the funds will be used for undertaking a bankable feasibility study, pending board approval,” Tony Reda, Kaminak’s vice-president of corporate development, confirmed in an email. “No formal decision has been made yet to proceed to feasibility. However, this was the missing piece of the puzzle. Right now, we are in the middle of a [phase-one] exploration program, and contingent upon results, we may deploy more capital towards exploration.”
In early June, Kaminak completed a preliminary economic assessment of the Coffee project that outlines an 11-year, open-pit and heap-leach project that would produce an average of 167,000 oz. gold a year over the life-of-mine at an all-in sustaining cash cost of US$688 per oz. gold.
The PEA estimates that at US$1,250 per oz. gold and a 5% discount rate, the Coffee project has a $330-million post-tax net present value and a 26.2% post-tax internal rate of return.
Initial capital costs including a 15% contingency are pegged at $305 million, with a 1.8-year pre-tax payback and two years post-tax.
David Sadowski of Raymond James in Vancouver said the Beaty and Zebra Holding investments are an important “stamp of approval,” and recommends that investors increase their positions in Kaminak “on a strong vote of confidence from two mining-savvy investors.”
The mining analyst writes in a research note that “Ross Beaty and Zebra Holdings are active long-term investors with track records in the mining industry. We view their investments as both a vote of confidence in the Coffee project and Kaminak’s management team, as well as a potential first step towards additional financial support in the future.”
Sadowski has a $1.90-per-share target price and notes that this year’s $5.5-million exploration program is ongoing at Coffee, and expects initial drill results from Macchiato, Cappuccino and other targets in the third quarter.
He also expects a feasibility study to be completed late next year and a two-year permitting process, with production starting as early as 2019.
At press time 3.2 million shares changed hands on the news, sending Kaminak’s share price to a 52-week high.
Over the last year, Kaminak’s shares have traded in a range of 45.5¢ to $1.05.
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