Intl Northair Mines Ltd INNHF

Initial thoughts - Pan American Silver deal

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This Pan American/Kootenay deal has both positives and negatives, but it is probably net positive for both Pan American and Kootenay-Northair.

The key is the opportunity to retain 10% of profit distribution once the mines are in production.  It is officially 25%, but I am treating it as 10% due to the capital recovery aspect.  The deal calls for 60% of Kootenay`s 25% distribution to be retained by Pan American until Kootnay`s share of start up capex (or any exploration outside of the $8 million) has been recovered.  I envision that will take almost forever.  Or, at least, several years.

Nonetheless, the big benefit here is Kootenay-Northair should be able to generate 10% (+) profit distribution once the mines are in production.  This, being realizable, without having to contribute any further capital towards the project - no further exploration contribution and no start up capital contribution (other than the subsequent payback from mine profits, once mine is in production).

Essentially all Kootenay`s capital can now go towards La Cigarra (aside from the usually overhead costs, i.e. G&A, .......).  With Kootenay-Northair`s cash come April, of $2.5 million, plus this $2.0 Pan American subscription, there will be about $4.5 million to move La Cigarra more aggressively going forward.

La Cigarra is a gem.  Added benefit to have decent size cash to move it forward.  Countless number of high potential targets at La Cigarra.  The 3.8 km Ram Zone could be a (loaded) feeder zone on the property.  The 2 mines located about 20 km south/southeast of La Cigarra have prodcued 300 - 400 million silver ounces each (excluding gold and huge amounts of base metals).  The 2 mines are located along the same fault structure as La Cigarra.  With regards to silver, La Cigarra could eventually turn out to be a mini one of those mines or could even end up being an equal. 

I also expect that this deal will pave the way for acquisition of a more advanced silver projects by Kootenay-Northair.

Other thoughts:

* The deal with Pan American likely reduces project financing risks.  Pan American can either fund the project itself or will be well positioned to attract start up financing.

* I don`t like that $7 million of the $8 million cash (or Pan Am shares) is a lump sum payment at the back end (after 4 years).  I would have been much better if it was $2 million cash payment per year for 4 years (instead of $250K per year).

* I don`t know what Pan American`s early stage silver exploration properties are like.  We will get 2 of them as part of the deal.