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Kincora Copper has what it takes for a strong re-rating - Ocean Equities

Ocean Equities considers Mongolia as one of the last regions where a junior can add a lot of value quickly, and believes Kincora Copper (CVE:KCC) has what it takes to see a strong re-rating in the near future.

In Ocean’s Mongolia Exploration Update out this week, analyst Christopher Welch identified Kincora as one of only a handful of advanced and aggressive exploration companies active in the country with flagship assets located in relatively favourable locations for project development.

Kincora’s flagship asset is the Bronze Fox deposit in the country, which is in the same geological neighbourhood as the giant Oyu Tolgoi mine, just over 100 miles to the north-east.

Oyu Tolgoi is the world’s largest undeveloped copper deposit, which also contains an estimated 46 million ounces of gold. It was discovered by Canada’s Ivanhoe Mines (TSE:IVN) and is being developed in partnership with Rio Tinto (LON:RIO).

The bigger picture is also very promising: Mongolia’s shift towards a market economy, the fast and efficient progress of its mining sector, the sustained rapid growth of its neighbour China and the emergence of a number of world-class projects with the majority of the country relatively underexplored has captured the market’s attention.

Mongolia is emerging as a premier resource investment destination and one of the world’s rapidly emerging new mining frontiers, analyst Welch believes.

This upsurge in interest has come largely on the back of Oyu Tolgoi as well as Tavan Tolgoi, a massive coal deposit, both located on northern China’s doorstep.

“Most of the country hasn’t been explored to a large degree; it is estimated that 75 per cent of Mongolia is only mapped to a scale of 1:200,000, and we consider it highly likely that further major discoveries will be made as exploration expenditure continues to increase, Welch said.

Kincora will shortly start its 2012 exploration programme with 16,000 metres of drilling planned - bringing total drilling on the Bronze Fox property to approximately 40,000 metres.

The work is aimed at defining lower grade open pit resources, further exploring high grade copper/porphyry stocks at depth and testing a number of gold targets for resource potential.

The analyst calls the current conceptual development models, particularly for at-surface oxide copper, encouraging, and believes that generating a revenue stream to re-invest in exploration would be an impressive transition given Kincora was only formed in mid-2011.

“We believe the transition from exploration to development and achievement of major identifiable de-risking milestones supports a significant potential re-rating in share price in the next 12-18 months,” Welch said.

In parallel to exploration and development of its flagship project, Kincora continues to target advanced copper-gold exploration projects to make the company a regional exploration and consolidation play in an underexplored and highly prospective copper belt.

The analyst expects a number of potential catalysts for the share price in the coming months, among them: further assay results from the 2011 season’s drilling and rock chip samples; further regional consolidation; the recommencement of drilling at Bronze Fox; the potential definition of a conceptual resource and exploration target at the West Kasulu prospect; and the expected appointment of external consultants to access the potential for a ‘starter’ lower grade oxide open pit.