KORE Mining (KORE) – Californian Permitting Holding Back Sprott-Driven Gold Play?

Kore Mining Ltd
  • Shares Outstanding: 102M
  • Share price C$1.46 (17.07.2020)
  • Market Cap: C$149M

Interview with Scott Trebilcock, President & CEO of gold-explorer, KORE Mining (TSX-V: KORE)

The Californian permitting process has always been a major nuisance, but there have to be more reasons that KORE Mining isn’t gaining traction with the market than this.

KORE Mining is a gold explorer with four 100%-owned gold projects in California and British Columbia. 3 of these projects are being geared up for monetisation to fund the flagship project, the Imperial Project. It recently announced an encouraging PEA on Imperial. Moving forward, it intends to grow its gold resource base, creating accretive value for shareholders. A slant to this story that is likely to get the market’s attention is the share registry: strategic investors like Macquarie Bank and Eric Sprott (26%) are major shareholders, and the KORE Mining management team has lots of skin in the game, owning ~38% of the shares outstanding.

Matthew Gordon talks to Scott Trebilcock, July 2020

Let’s take a look at the PEA numbers for Imperial assuming a base case of US$1,450/oz gold:

Net Present Value (NPV5%)US$343M
Internal Rate of Return (IRR)44%
Payback (undiscounted)2.7 Years
LOM avg. Annual Cash Flow (after tax & capital)US$90
LOM Cumulative Cash Flow (undiscounted)US$580M
Mine Life8 Years
Average Annual Mining Rate43.4Mt pa
Average Annual Gold Production146,000oz pa
Total LOM Recovered Gold1.17Moz
Initial Capital Costs (CAPEX)US$143M

These are some pretty good numbers, and the market has responded: the share price is up more than 5X from the start of the year. Having said that, if the alleged stature of this resource is true, and the company can establish itself as a meaningful mid-tier player, KORE Mining still looks mightily undervalued with a market cap of just C$137M. The permitting concerns are clearly a major discount factor, though Sprott appears unconcerned. He is buying into the bullish idea of a potential wave of M&A as major gold miners look to expand by acquiring the minnows.

The price uptick gained momentum courtesy of some results coming out of one of KORE Mining’s BC assets: FG Gold. 11m at 10 g/t gold and 52.5m at 1.1 g/t gold are some of the highlights. The company recently closed the first tranche of a US$7.5 million financing with Eric Sprott, and it intends to use some of the proceeds to conduct a 5,000m drill program to ‘further delineate the existing resource and test on-strike and downdip extensions along a strike length of over 2km.’ However, Imperial will remain the “number 1” for the use of capital. Trebilcock wants to systemically move each project along the path of development, aiming for district-scale assets that are worth developing infrastructure for. The “side objective” is making new discoveries and adding ounces in the ground. KORE Mining is in no hurry to find a JV partner right now because it has access to the capital it needs. This can only be a good thing for the company’s optionality.

To push Imperial over the line, Trebilcock will follow the “do it right” path, regardless of the option he takes. A lot is happening on the ground in support of KORE Mining’s permitting process, including engagement with the local community and politically. It is something of an impasse, and investors will are likely to be concerned. In an attempt to provide assurances to the market, Trebilcock explains that the company’s strategy is a “coalition of support”; he aims to obtain a support letter from mayors and chambers of commerce that support the project. He appears to be hoping for a Republican win come November because of the continuity it will provide. He believes that if one is to disregard the rhetoric surrounding the Californian permitting process, it is exactly the same as obtaining a permit anywhere else in the world. KORE Mining simply needs public support. Could a desire to create jobs in the aftermath of COVID-19 help sentiment towards the Imperial Project?

Whilst the development of Imperial isn’t accelerating, and this might worry investors given the gold bull market is unlikely to last forever, exploration is accelerating, especially at FG Gold. Trebilcock thinks this will make the asset much more attractive for a major to take it out. He says you can’t accelerate growth at an asset level… do you agree? He’s aiming to have Imperial sold inside 3 years. Let’s see if he can deliver the growth that patient shareholders will demand.

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The share price is up, but it’s still substantially down on KORE’s peers. Marketing appears to be a real issue. Are investors buying into the business model of slow and steady growth through the drill bit within a portfolio body? Whilst Trebilcock says he and his management team will be working really hard to push the share price up, it remains to be seen whether investors will be confident that this can be achieved or not. The management team is clearly high-quality and has achieved all of its deliverables on a tight budget. However, there simply aren’t enough monetisation events right now. Would M&A be a route that could completely change the value proposition? The company will continue to look for acquisitions, “things around the edges,” but only those at a district-scale that can add to the portfolio in a cohesive fashion. He doesn’t see the company stepping into a whole new project in a whole new jurisdiction. Is this a mistake? Only time will tell.

KORE Mining has no fundraising planned for the near future. It continues to have dialogue with Equinox Gold about future possible deals.

There is a lot to like about this story, but at the end of the day, a company is only ever worth what the market values it as.

What did you make of KORE Mining and Scott Trebilcock?

Company Page: https://www.koremining.com/

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