The following is a Stockhouse Q&A interview with Kombat Copper Inc. (TSX: V.KBT, Stock Forum) CEO Bill Nielsen.
What is the elevator investment pitch for Kombat Copper?
The Company’s key asset is a former producing copper mine in politically stable Namibia, which has produced 12.5 million tonnes of 2.6% copper. There is ample evidence that we can get the mine back on stream and maintain production levels for many years to come. We do have infrastructure in place and a mill that requires some refurbishment, and a shaft that is in very good condition. We have our mining permits and could be back in production in two years.
What are your production targets at this stage?
Initially the mine could produce 13 million pounds of copper (at 2.6% copper), accelerating to 33 million pounds. The Company is anticipating by-product production of 145,000 ounces of silver, ramping up to 350,000 ounces. The silver will be very important to cash flow.
This material will be produced in a concentrate that can be shipped by rail to a nearby smelter, owned by Dundee Precious Metals Inc. (TSX: T.DPM, Stock Forum) or shipped to a port at Walvis Bay on the Atlantic Coast.
What sets Kombat Copper apart from the competition?
We have our mine permits and access to all the information from past production.
How much cash does the Company have right now?
We have about $1.2 million right now and the ability to bring in another $8.5 million, if the share price goes up and warrants are exercised at trigger prices ranging from 15 cents to 30 cents. We anticipate that the news flow will accelerate our share price and those warrants will be exercised.
What are the Company’s key strategic goals?
A key goal is to increase our resource and reserve base, a critical step in completing our preliminary economic assessment. We hope that this will attract investor interest in the project. Obviously getting into production at a suitable rate and at a grade that makes sense is another goal.
We hope we can get back to 750 tons per day for a cost of about $60 million and then ramp up to 1,100 tons per day. To get the mine back to full mill capacity production of 1,100 tons per day would require something in the order of $90 to $100 million.
Who are the key players on the management team and what do they bring to the table in terms of helping the Company to reach its strategic goals?
Chairman Justin Reid is a capital markets executive with over 20 years of experience focused exclusively in the mineral resource space. He is very good in capital markets, and he is geologist by trade. So he knows both sides of the coin.
Chief Executive Officer Bill Nielsen is an accredited geologist with over 40 years of worldwide experience. From 2003 to 2008, Nielsen was vice-president, exploration with Nevsun Resources Ltd, where he played a significant role in the discovery of the Bisha gold-VMS deposit in Eritrea.
Director Mike Hoffman, a mining engineer with over 25 years of experience in mine operations.
Director James Xiang is the CEO of Jien International Investment Ltd., and a director and general manager of F&M & JJ Global Resource Fund.
What is your view on the outlook for the commodities that you are currently focused on?
We share the views expressed by Wood Mackenzie, an international consulting firm that provides research to commodities giants such as Glencore and Xstrata. They see supply shortfalls coming towards the end of this year and into 2016, a development that could accelerate the price of copper.
Keep in mind that grades at open pit and underground mines have been falling during the last 20 years. But the number of mines coming online is not increasing in any way shape or form. The ones that are coming on line tend to be smaller than existing copper mines.
The political situation countries like Zambia, where royalties payable to government have jumped by 20%, will spark a dramatic fall in the amount of copper production.
What is your view on the outlook for precious metals?
Ultimately I think we are seeing an increase in the price of precious metals. I wouldn’t be surprised to see them go in line with any increase in the price of copper.
What are the pros and cons of doing mine development in Namibia?
Namibia is one of the best jurisdictions in Africa for mining. The country is very mine-friendly. Its economy depends on mining. It boasts a skilled workforce, and good infrastructure. The tax structure is fair and equitable. There is a power shortage right now.
But that is expected to be rectified by 2018, which just happens to meet our timeline for production
We have copious amounts of water. Water from the mine is currently being pumped by the Namibian water authority for use by the country. The mine water is clean and is considered a valuable resource of Namibia. It could also be a valuable non-core asset for Kombat Copper, producing 1,000 cubic metres per hour on a steady basis. That’s a lot of water.
It sounds like your flagship property has an interesting history?
Copper was originally found there in the 1850s. A German company actually put it in production from 1911 to 1925, producing 5,000 tonnes of copper, grading 17% or 18%., as well as 5 ounces of silver per tonne. They ran into water and didn’t have the pumping capacity to resolve that. Goldfields came back in in 1962 and put it back into production until 1998 when it was transfered to a government entity. The mine continued to operate until 2005, when it was sold to AIM-listed Weatherly International Plc. It was shut down again in 2008 because of flooding and the global economic crisis. It has been on care and maintenance ever since.
Pan Terra Industries Inc. bought the property from another group which had acquired it from Weatherly in 2012. Pan Terra changed its name to Kombat Copper in April, 2013, but eventually ran out of money. That was before the existing management group gained control in November of 2013.
It was director Mike Hoffman who identified the project for Forbes & Manhattan, a Toronto-based private merchant bank with a focus on the resource sector.
What were your key accomplishments in 2014?
We kept the property on care and maintenance, put out an initial resource statement, and started a preliminary economic assessment. We also developed programs to move the project forward, including a plan to reprocess the tailings. We also kept the site in compliance with government regulations and thus were able to keep the licenses in good order.
We have established an underground resource of about 2 million tonnes, grading 2% copper. This is insufficient for long term mine planning. So we need to improve that.
What are the key goals for 2015?
If we can define 1.5 million tonnes on surface that could be mined by open pit, the capital cost of start-up would be significantly reduced, and our time frames are shortened a bit. That could allow us to get back underground and convert our inferred resources into proven reserves, and come up with a more distinct plan for underground mining.
Obviously we want to drill and to increase the resource base.
What kind of milestones can we look for that will indicate that you are achieving those goals?
We will announce the drill program on Thursday. We hope to increase the news flow over the next three or four months with assay results etc. that we will get our share price moving.
To do additional drilling we would need more funding that will come hopefully through the exercise of warrants. The aim is to increase our 43-101 compliant resources near surface.
Do you plan to tap the market for financing in the near future?
We have no plans to tap the market for additional financing.
Who are the biggest shareholders in the company?
The JJ Fund, which is a fund put together by a Chinese Group and Forbes Manhattan. It is the largest single shareholder with about 18%. Several individuals including John Chisolm and Duane Parnham hold a significant amount of shares. On February 20, Kombat announced that Parnham has resigned from the Board to pursue other business ventures that require his attention.
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