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Kincora Copper: THE INVESTMENT CASE

Will Kincora Copper be the next 10 bagger copper explorer?

Kincora Copper has a commanding position in one of the world's most promising emerging copper areas
Will Kincora Copper be the next 10 bagger copper explorer?
INVESTMENT OVERVIEW: KCC The Big Picture
The copper price is on the move

With a new vibrancy towards the resource sector obvious at the VRIC and Indaba conferences so far this year and copper firmly in a bull market it appears the worst of the previous 5-year down cycle is behind us. 

There are even signs of improving investor sentiment towards exploration with those who have lived through previously cycles remembering that the exploration sector provides highest outperformance in a new cycle.

Indeed, when you look at some of the new copper exploration plays that were busy during the downturn setting the foundation for the cycle to turn you can see why investors are looking for the next up and comer, potential 10 bagger plus.

SolGol, just 20 holes into drilling its greenfield Cascabel copper-gold porphyry project in Ecuador, has returned over 20 times to shareholders in the last year. It now has a £600 mln market cap, having raised US$54 mln in September last year with approaches from industry players such as Newcrest and BHP.

Cordoba Minerals’ share price has increased over 14 times since Robert Friedland’s High Powered Exploration’s (HPX) strategic investment in the post discovery San Matias project, and this is despite HPX now owning 65% at the asset level.

It is with this background in mind that we recently spoke to CEO of Kincora Copper (CVE:KCC), Sam Spring, for an update to see where he is at with Kincora’s exploration plans, given the drill season is coming around again soon after the harsh Mongolian winter.

Kincora too has been busy of late setting the foundations for an upswing in the cycle. Only in the last quarter its has announced an exceptional Tier 1 copper porphyry team, consolidated the dominant land position in the emerging gold-rich Southern Gobi copper belt and undertaken an opportunistic capital raising with a leading natural resource institution.

The region boasts Rio Tinto’s (LON:RIO) largest global expansion project, the Oyu Tolgoi mine, as a neighbour and is one of the most prospective remaining frontiers for copper exploration.

With its transaction with IBEX, a Friedland-controlled private entity, Kincora overtakes Rio Tinto controlled entities being the largest accumulator of new exploration ground in this belt during the downturn. .

“We’re pretty sure we’ll be drilling two targets this field season,” says Spring, “and these are two analogous to the nearby large scale copper mines in the belt, Oyu Tolgoi and Tsagaan Suvarga.”

Kincora’s wholly owned targets are Bayan Tal and East Tsagaan Suvarga, the latter otherwise known as East TS.

Bayan Tal is a large scale target with confirmed Oyu Tolgoi (“OT”) style stratigraphy, the first target in the belt since OT with such attributes, and known mineralization on the margin of the interpreted system, including 18 metres at 0.66% copper equivalent (IBEX hole 6) and 0.75% copper equivalent (trench).

East TS is a brownfield open pit target being only 13km from the existing Tsagaan Suvarga open pit which has over 300 million tonnes atgreater than 0.5% copper, situated within the same intrusive system.

The geologists have just recommenced initial field works, looking to expand the target zone at East TS. Following this Spring is hoping to present work programs and “use of funds” proposals to the board in March.

That board is now slightly beefier and punchier than it was at the start of the year, following the appointment of two new directors: Luke Leslie as chairman, and John Holliday as non-executive technical director. The changes reflect Kincora’s two-pronged strategy of exploration and further expansion.

Leslie’s a specialist financier and deal maker, while Holliday is expert at the discovery and evaluation of concealed copper porphyries, particularly large ones like Cadia or Wafi-Golpu,  the kind Kincora is targeting and of the kind that made Oyu Tolgoi famous.

The company has just completed on a C$500,000 private placing it announced at the end of last year, so the funds are at least now in place for Spring to take his plans to the board.

 “Exploration creates a huge amount of wealth if you get it right,” says Spring. “We have been busy in a relatively short period creating the foundations for a big 2017, systematically advancing our new district scale multi-target, multi-stage pipeline up the value curve with two targets now to the point of drilling. These two targets have a lot of similar attributes to the two large-scale mines in our immediate belt.  Encouragement for our geological models this field season would likely being a major value add milestone, particularly in light of the share price performance of some other recent copper exploration plays..

However, unlike other recent copper success stories, like SolGold and Cordoba, Kincora has consolidated the dominant position in the belt, and now looking to make a discovery, or two given the scale of our portfolio. These other groups have made the discovery and are now looking at the next one and consolidating their respective districts.”  

.”The objective for this year is to find some copper, and support our analogies,” says Spring. “It’s time to get on with that.”

While the copper price is already up over 30% in recent months many are expecting further gains as the global market swings to a deficit for the first time since 2011, driven by sustained demand from China, the unknown Trump factor, new copper supply from the last cycle having peaked, continued supply disruption at the world’s two biggest copper mines and potentially flowon effects to other existing operations.

M&A through the downturn of the cycle and overweight exploration budgets reflect the industry’s bullish view of incentive and future pricing for copper.

It appears those few copper juniors with new real exploration plays are well positioned as investors refocus on the favourable structural outlook for copper.

With this in mind, Kincora is one to keep on the watch list as it looks to drill two targets that are analogies to the existing two large-scale mines in the world-class Southern Gobi copper belt.  

Exploration success could support it quickly moving into the leagues of SolGold or Cordoba. 

 

 

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