New Gold Junior Boasts Strong Investment Drivers

As the depressed conditions persist in the gold sector, a new sentiment is gaining traction with experienced gold mining investors: it’s beginning to look a lot like [the year] 2000. For newer mining investors, a brief history lesson is in order.

Throughout the 1990’s, precious metals markets went through an historic price trough. The price of gold descended to below US$300 per pounce. The price of silver plummeted to (in real dollars) a 600-year low. During this period, gold-bashing bankers and anti-gold media pundits were frequently heard to remark:

Gold is a barbarous relic.

Then the new millennium clicked over. Gold began the longest and strongest bull-market run of any sector this century – with the exception of silver. The gold-bashers were exposed as charlatans. The price of gold ended up soaring by more than a factor of six, aided significantly by unprecedented gold-buying by the world’s central banks.

Flash forward to 2018. The gold sector has suffered through depressed conditions that are only reminiscent of one other period: the 1990’s. Mine production is falling for the gold industry. Mine reserves for the senior gold producers are lower today than they were pre-2000.

In short, while the gold-bashers are once again loud (and obnoxious), conditions are at least as supportive for the Next Gold Rally today as they were in the year 2000.

Buying bullion is an option that is always open to investors looking to position themselves for this upcoming rally. However, for investors wanting to maximize their upside potential, gold mining companies provide natural leverage on the price of gold (like any commodity producer). For bargain-hungry investors, one Company that bears a close look is Kore Mining Ltd. (TSX: V.KORE, OTCQB: ERHAF, Forum).

Why KORE?

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To begin with, this is a new mining entity, completing its RTO on October 31, 2018 via a combination with Eureka Resources Inc. As always, this means an opportunity for new investors to enter on the ground floor. But while this is a new public listing, this is not a new company.

Kore Mining brings to the table a portfolio of prospective gold projects, including three that are already at an advanced stage of development. Combined, these projects have global resources of approximately 5 million ounces Au.

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Those are two reasons that, by themselves, will motivate many investors to take a closer look. Fueling investor appetite further is the location of one of these multi-million ounce resources: only 10 miles away from an existing 135,000 ounce per year gold producer whose resource is nearing the end of its mine life. More on this later.

The Company’s operations are split between two jurisdictions. KORE’s Imperial and Long Valley Projects are located in California. Its FG and Gold Creek Projects are situated in British Columbia. Both California and B.C. have long histories in gold mining.

In terms of the Big Picture, Kore Mining has three projects with either NI 43-101 compliant or historic resources. Its aggregate total of ~ 5 million ounces of gold is roughly evenly split between the Measured & Indicated categories (2.5+ million ounces) and Inferred resources (2.4+ million ounces).

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Here it is important to delve briefly into the underlying geology. Experienced mining investors will note that these are lower grade gold projects, in relative terms. The catch is that these Projects are hosted in mining-friendly geology, with mineralization near the surface. Put another way, some of the world’s most robust gold mining operations boast similar grades and geology – but the ease of production makes such deposits commercially viable.

In California, both the Imperial and Long Valley resources are hosted in “deeply oxidized epithermal systems with broad disseminated zones”. Dumbing it down, this near-surface gold mineralization can be processed with (at most) a primary crusher and then simple heap-leaching.

What this means in economic terms is that the cap-ex to put such projects into production is extremely modest because minimal infrastructure and equipment is required. Similarly, op-ex costs are also significantly reduced because of the simplified extraction and processing. For this reason, gold grades above 0.5 g/t Au are generally considered to be commercially viable with heap leaching – even at a relatively low price of gold.

Imperial Project

While both the Imperial and Long Valley deposits are amenable to production, the primary investor focus will be on the Imperial Project – for several reasons.

• (historic) 2.17 million ounces Au in combined resources (Indicated and Inferred)
• (historic) PEA completed in 2012
• Near-surface oxide resource, suitable for heap leaching
• Extensive studies including metallurgy, pit and heap leach design
• 10 miles from Mesquite Mine operations

This is where the Kore story gets especially interesting. The Mesquite Mine is a lower grade, open pit, heap leach gold mining operation. The current resources for this mining operation are sufficient for roughly 4 more years of mine life at its current production rate: approximately 135,000 ounces per year, with throughput of ~54,500 tpd’s.

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On October 30, 2018; the Mesquite Mine was acquired by Equinox Gold Corp. Equinox is a mid-tier gold producer with a market cap of $500 million – even in the current, depressed conditions. Mining investors doing their due diligence on Equinox will see that this mining company has stated that “potential exists to extend the mine life with resource conversion and exploration success”.

Clearly, you don’t make a cash payment of US$158 million to acquire a mine that is expected to close in roughly 4 years. But mining exploration is a speculative proposition. The question that potential KORE investors will be asking themselves is: what will Equinox do if it doesn’t identify additional gold resources for the Mesquite Mine?

The three-word answer would appear to be: “the Imperial Project”. Indeed, given the expense and speculative nature of mining exploration, that company may decide that buying additional resources to extend the mine life for Mesquite makes the most sense from an economic standpoint. If the management of Equinox hasn’t already introduced themselves to the KORE team, clearly it’s only a matter of time until these two neighbours exchange pleasantries.

Adrian Rothwell, the President and CEO of Kore Mining isn’t oblivious to the strong synergies that exist between these two projects. In speaking with Stockhouse Editorial, Rothwell indicated that KORE is open to discussions here. But the CEO has his own vision of the future of the Imperial Project – and Kore Mining itself.

As noted, Equinox sits with a $500 million market cap. KORE currently sports a market cap of less than $12 million (as of this writing). That’s a big jump. Is it a plausible future for this Company? Answering that question requires a closer look at Imperial and the remainder of the Kore Mining portfolio.

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Average grades at Mesquite are ~0.50 g/t Au. The grade for the Indicated resource at Imperial is roughly 20% better. The strip ratios for the two projects are virtually identical. Current gold recoveries at Mesquite average 64% (oxide and non-oxide).

At Imperial, which has only oxide mineralization, even with no crushing of the surface material, previous metallurgical work estimates recoveries of 78%. With full, two-stage crushing, recoveries of 83% can be generated (Glamis Gold, 1996 Feasibility Study).

On the surface, there is no reason why Imperial can’t (potentially) be at least as profitable as the Mesquite Mine – now the flagship mining operation for Equinox. There is additional exploration upside potential on Imperial’s 5,721-acre land package and all permitting is already in place.

As noted, Long Valley is similar to Imperial in geological terms, although some of the mineralization here is sulphide-based. A 2008 NI 43-101 PEA was completed by Royal Gold. The Long Valley resource has been updated by KORE and is now NI 43-101 compliant.

• 481,000 ounces Au Measured
• 766,00 ounces Au Indicated
• 486,000 ounces Au Inferred

This is a Project that has already exceeded the critical 1-million ounce threshold (with just its Measured & Indicated resources) necessary to generate real commercial potential. Grades are slightly better than at Imperial, and the strip ratio (for open pit mining) is a very low 1:1.

Further enhancing the commercial potential, the property hosts a “series of higher grade, near surface, oxide zones” that could be fast-tracked to production with a quicker capital payback and higher IRR. The Company is working to obtain its permitting here for additional mining operations.

British Columbia operations

KORE’s B.C. projects also warrant closer scrutiny. Like Imperial and Long Valley, the FG Project also boasts an existing resource (NI 43-101 compliant):

• Measured: 145,000 ounces Au @ 0.812 g/t Au
• Indicated: 376,000 ounces Au @ 0.755 g/t Au
• Inferred: 634,900 ounces Au @ 0.718 g/t Au

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With drill targets spread across a 4-kilometer strike length, plenty of potential exists to expand upon the 1+ million ounces in total resources. However, perhaps the real excitement for investors in terms of discovery potential is Gold Greek.

When KORE became the new operator at Gold Creek, one of the first things that management did was to conduct an extensive review of all exploration data on this Project, the first time that information had been compiled on Gold Creek in such depth. The result of that analysis is that management has formed a new geological model here.

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Based on that new model, the Company immediately brought in a drill rig to test this hypothesis and results are just being released. The solid numbers obtained in initial drilling (25.7 meters of 1.3 g/t Au and 11.1 meters of 2.0 g/t Au) certainly seem to validate this modeling.

This is a 9,673-hectare land package. Drill targets are spread across an 8.5-kilometer strike length, and with mineralization also open at depth there is abundant potential for additional mineralization and new gold discoveries here.

Perhaps even more importantly, Gold Creek is located in an established mining district, with several other substantial mining operations, including Spanish Mountain Gold’s huge Spanish Mountain Project:

• 3.88 million ounces Au (Measured & Indicated)
• 4.11 million ounces Au (Inferred)

Now is the time for mining investors to stake out positions ahead of the Next Rally for precious metals. In just the last stage of the previous gold bull market (2009 – 2011), “ten baggers” were registered virtually across the board for investors positioned ahead of that move.

With Kore Mining’s robust resources, exciting exploration potential, and tiny market cap, many investors will see KORE as a strong candidate to add to their mining portfolio.

www.koremining.com