Mine visit
http://www.mexicomike.ca/php/phpBB2/viewtopic.php?t=11302Posted: Tue Jun 03, 2008 3:43 pm Post subject: Kinbauri mine visit
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Kinbauri mine visit........................... --
I am still in Northern Spain on the pilgrim´s Camino to Santiago Compostela. Only about 130 Km. to go. The walking has been beautiful and the weather ( aside from some mud ) very nice, mostly cool and breazy. Perfect walking weather. I am doing about 25 km. per day and carrying a pack about 20 lbs. Pretty sure I am getting too old for this but I am enjoying myself and it is good being away from the computer and the markets for a while.
We had a very good mine site tour of the Kinbauri project at El Valle and Carles. Along for the trip were my good friend Tim who went to Sweden to visit Gold Ore with me last Sept. and Ed ¨Stoneman¨ Stoner. We were also met by two investors from Sweden who I have known from Gold Ore and have at my recommendation become large shareholders in Kinbauri.
We really had a good time.
We were met at the hotel in Pravia, Asturias, Spain by the mine project manager Jean Bailly and the head geologist Santiago Gonzales. Both are very likeable, very knowledgeable guys. We were imeadiately impressed with Jean. He has been in the mining business all his life and has put 4 mines into production. At least 2 of those were done from scratch. One in Turkey and one in Vietnam. He has also worked extensively in Canada and was very familar with Metanor´s Bachelor Lake mine. Jean kind of reminds me of Metanor´s Jesse Morin. Just a world of experience. A little older than Jesse and just a tad more tanquil. Jean is for sure the right guy for this job.
We spent a lot of time talking about the overall macro picture for El Valle with Jean. I came away feeling very comfortable that this is a low risk proposition that it will get into production. Jean in answer to my question said he felt like there was a 90% plus probability the mine would be producing in 2010. The one big disappointment ( and the only one ) was that Jean feels the time line will be mid to late 2010 and not early 2010 as I had thought. Welcome to Jr. mining. The great news is the Jean with his vast experience feels like this is an incredible project with very little risk. Of all the mines he has brought into production this one is the the most straight forward and has the least risk. The mill is there, the ore body is there, the metalurgy is known, the permits are in place, the country is ¨safe¨and the local population is behind the project. It is just going to take time and money. We were given an in depth slide presentation on site ( about 30 min. drive from Pravia ) by Santiago concerning the geology and the known ore body and its possible ( probable ) extensions. Everyone in the company was very excited about the new vein and the ramifications if it ties in to the known ore body. This could be a real ¨game changer¨ and could increase the overall grade of the mill feed substantially.
We went underground via incline ramp in trucks and saw 2 different drilling stations. There is a lot of underground development in place. More than 3 km.
The mill super is a young man named Francisco who is very bright and should be up to the task. This will be his first job of this magnitude but he was helping run the mill before when Rio Narcea was in production. The mill is huge. It was designed to process the ore from the open pit at 2000 tons per day. It also ran underground ore for the last year or so of production at a much lower rate. The ore from underground is harder and some crushing capacity will have to be added at the front end of the circuit to get the capacity back to 2000 tons a day from the u/g. The SAG and ball mills are in good shape. This is the first mill I have ever been in with a copper circuit and it is a lot of machinery. They are currently sand blasting and painting and refurbishing machinery. This is going to be a lot of time and labor and money to get the mill up and running again. Somewhere around 3-4 million usd the refurb and add crushing capacity and will probably take 12-18 months. Nothing out of the ordinary just time and money.
The thing that realy struck me about this project is the value of the asset they have. The mill and the infrastructure and the 3+ Km. of underground development would cost 125+ million usd to recreate and would add several years to the time to production. Kinbauri is way ahead of the game in that everything is in place and the ore and milling are a know quantity. Like I said, this is just going to take time and money but it is pretty certain to be a large producting gold/copper mine. If so, the stock is very undervalued, IMO.
The uncertainty is in how the project will be financed. Dr. Vern Rampton is the CEO and in our conversations he has made it clear he hopes to avoid excesive dilution but of course that remanins to be seen. The current f/d share count is about 71 million and the economics of this mine work very well even if the share count were to double from here ( and I do not think it will ) At current gold and copper prices I think El Valle can free cash flow around 70 million usd per year. So that equates to about $1.00usd per f/d share. If the share count were to double that is still $.50usd cash flow per share for a share now selling at $.85cdn. As you can see there is substantial potential upside in this IF they can get it into production and gold/copper prices are anywhere close to today´s prices. If we get Jim Sinclair´s $1,650.00usd gold in 2011 this could easily be a 10-15 bagger.
They have a lot of development decisions to make. They can save $12.00usd per ton by sinking a shaft ( time and money ) and hoisting the ore directly to the mill. They are also looking at the possibility of crushing the ore underground and using a a 800 mt. conveyor to get the ore to surface. Lots of options but the take away was the have very competent people with tons of experience making the decisions.
We really pushed Jean on why the mine could not be brought into production sooner and he said he could do ¨if we wanted to kill the mine¨as Rio Narcea had done. The key is the underground development and having enough working faces to consistently feed the mill at 2000 tons a day. They are proving up the tons of mill feed and the new veins are going to be great for the overall profitability of the mine but all this takes time and Jean is doing it correctly and methodically. He is a true professional and just the guy you want doing this job.
There is more but I am tired and that´s the gist of it. A great project with, IMO, very low risk. When you see the asset they have you realize the barriers to entry in this business. It is just an enormous undertaking to get a mine of this size into production and they have a huge jump on it. Starting from scratch it would probably take 6+ years and 200+ million dollars. Kinbauri is probably less than 30 months and 30-40 million usd from having a world class producing gold/copper mine.
I plan on holding a very large core position in this one and will probably add as the story develops.
I will try to post some pictures when I get home in 10 days ( and some other comments about Carles and the rest of the area ). It was fascinating to see where the old Roman mines were in the area. Lots of history and a really beautiful part of the world.
As always do your own DD and do not take more risk than you are comfortable doing. This one is going to require real patience but if you have it, this is IMO, one of the best values in the Jr. gold mining world.
Good luck to everyone, Andrew
I am too tired to edit this so sorry for any mistakes.
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