2018 could be a huge year for Kerr Mines (TSX: KER) (OTC: KERMF) as gold ticks up and Kerr discovers big gold on proven reserves. Investors could be watching a perfect storm come together. The 3 catalysis I can see are, one gold prices are up, two the company has tons of cash on hand and three drill results are extremely positive. KER is trading at $0.25 ca. with plenty of support at these levels.
Fundamental Research Corp. has a BUY rating of $0.69 ca. on Kerr Mines
I believe we could see the stock price start trending up with the uptick in gold prices. Kerr Mines has closed more than $14 million in financing which gives them sufficient funds to go to work and work they will…
With drills turning at Copperstone Mine in Arizona, Kerr Mines should keep the newswires cranking in 2018.
The commodities markets, and the gold market in particular, are both showing early-year strength. Companies with compelling projects and active work programs should deliver powerful leverage on these trends.
Kerr Mines (TSX: KER) (OTC: KERMF) offers exactly that type of leverage. If you’re looking for a speculative investment with the potential to multiply your money in the commodities bull market still to come, Kerr Mines is a company you simply have to consider.
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Here’s What KER/KERMF Has Been Up To…
Claudio Ciavarella, Kerr’s Chief Executive Officer, was quoted in the Company’s 12-14-17 release as saying, “the Company’s first phase of exploration has been successful” and investors should look for an “updated resource and Pre-feasibility Study in Q1 2018”.
Since last July when KER/KERMF announced the closing of its first tranche of financing, the price of gold has gone from $1227 to $1332 at the close of trading Friday, Feb 2, 2018. That’s a substantial increase. Indeed, and the current trading range is right in sync with analysts’ consensus for 2018. That Outlook is for gold to continue gaining on an annualized basis well into 2019 where the average range is near $1400. That would add as much as $200 an ounce to the gross production price Kerr Mines could expect by the time their Copperstone Mine in Northern Arizona goes into full production. So, it’s no wonder their latest round of financing was over-subscribed. INVESTORS THINK ITS CHEAP STOCK!
In mid-January of this year, Kerr Mines announced that its mineralized zone was extended a whopping 255%! With strong support in the mid $0.20s and that is key point of contention, or in simple terms, it sets a buy opportunity moving forward with strong upside – especially when KER/KERMF updates its property’s report and pre-feasibility study. We see KER/KERMF as a potential double-bagger – or even more.
Let’s add something to that… all that glitters IS gold. Meaning, the Copperstone Mine is in Northern Arizona where precious metals are not suspended in rocks, but free, visible to the naked eye. What that means is ITS CHEAP TO MINE BY COMPARISON.
Let’s add some more! Gold prices have gone up $100 an ounce and the pundits believe there’s at least another $100 gain ahead – right about the time Kerr Mines’ Copperstone project goes into production. WHAM… a strong likelihood that KER/KERMF share price will climb, thus our outlook for a double-bagger or more.
Let’s take something else into consideration. With Kerr Mines explosive increase in its mineralized zone, its very likely that the resource will be extended even more. My mind reels from the [possibility] ore body’s extension – and potential increase in grade!!! A DOUBLE-BAGGER? Ha! Perhaps twice that, eh? Don’t laugh, our calls on other companies have been quite accurate over the past year and this company is proving itself to be in league with our overall outlook.
Remember [above] the CEO was quoted as saying Phase One exploration increased mineral expansion 255%. PHASE ONE! What about PHASE TWO!?!
SPROTT GOT A HOLE IN ONE WITH THIS ONE
If you follow Sprott’s investments, you would say that he is in KER/KERMF deeper than most and I doubt that he’s sorry about it. Every mining company yearns for a celebrity-type investor in precious metals to put up cash. Unfortunately, most don’t meet Mr. Sprott’s rigorous examination. After all, Eric didn’t get rich wearing a blindfold. But in Kerr Mines case, he pulled out his pen and put his money on the table.
So, what does Sprott’s past investment have to do with our outlook on KER/KERMF? Plenty. Savvy mining investors succeed for a reason… they do their DD.
One Man’s Loss, Another’s Gain
Kerr Mines came along and bought the property shortly after the Copperstone mine fell into bankruptcy when American Bonanza went bust after spending oodles of cash driving tunnels and shafts. In all, $50 million had been spent on infrastructure, which includes a fully-permitted 450 tpd mill – which is operational.
The grade of gold ore comes in at an impressive 10 grams per ton. Its Phase One drilling program comprised 8000 meters. Phase Two is slated to begin in the spring with 15 to 20,000 meters planned. If Phase II is anything like the results of Phase I, LOOK OUT, THERE’S GONNA BE A BARN DANCE TONIGHT, YES SIREEE!
Kerr Mines CEO told Stockhouse in an interview that the cost to put Copperstone into production would be about $30 million, considering the amount previously spent by American Bonanza. CHEAP! But readers should be a bit cautious about that number until KER/KERMF releases its pre-feasibility. After all, it might be less.
Copperstone consists of an 11,800-acre land package that historically produced 500,000 ounces of gold. The technical information has been prepared in accordance with the Canadian regulatory requirements set out in NI 43-101 and reviewed and approved by Michael R. Smith, Registered Geologist.
Now having lots of acreage doesn’t necessarily mean it’s all ripe with nuggets of gold just waiting to be picked up, but in Kerr Mines (TSX: KER) (OTC: KERMF) case, its damn near that rich – and WAY UNDERVALUED in share price, which we’ll explain further on.
The [property] is fully-permitted with extensive infrastructure in place, meaning Kerr Mines has a 450 ton-per-day mill already onsite and the tunnels going down to the high-grade gold ore are already there. Electricity and water are there too, so the cost to Kerr Mines(TSX: KER) (OTC: KERMF) is LOW< LOW<low to produce.
Now to its ore bodies.
There are 942,000 ton of Measured and Indicated gold ore with a grade of 10.3 grams per ton. That’s some high-grade gold!!! On the Inferred side, there are another 335,000 ton with a grade of 12.2 grams per ton. That’s in the soon-to-be further explored “South Zone”, which has GREAT POTENTIAL TO EXTEND THAT ORE BODY. But in the Proven and Probably category, Kerr Mines (TSX: KER) (OTC: KERMF) has 910,000 ton with an average grade of 8.8 grams per ton. So, what does that spell? MONEY, BABY…. MONEY!!. Now you can see why the great Eric Sprott got his checkbook out and bought into the project.
The Value in Kerr Mines
There are many factors that determine the value of a mine. The grade of gold is obviously first in determining an investment into a gold stock like Kerr Mines. But with such HIGH GRADES of gold, from Proven, Measured and Indicated to Inferred, the numbers are OFF THE CHARTS.
So, is Kerr Mines a takeover target? Perhaps, but not from the likes of the majors, like Barrick Gold (NYSE: ABX), Newmont (NYSE: NEM), or GoldCorp (NYSE: GG). Why? Too small… but with Kerr permitted with a mill in place and the tunnels opened up to access the three zones previous not mined and the heavy hit Kerr Mines (TSX: KER) (OTC:KERMF) discovered in the South Zone, its most likely going to be in production next year. In fact, the feasibility study needed to go into production is expected in the fourth quarter of this year. So that tells us that Kerr Mines intends to go into production.
On the OTC market, KERMF is trading at $0.24, $0.32 on the Toronto Stock Exchange (KER). KER traded as high as $0.41 ca in the last 52 weeks and from our standpoint its easily a DOUBLE BAGGER – and here’s why…
Grassy Mountain is a gold property just 70 miles from Boise Idaho that has about 420 claims and 250,000 ounces of reserves with a grade of 5.32 grams per ton. Its owned by Paramount Gold (NYSE: PZG), which acquired Grassy Mountain in an all-stock deal with a net present value of $107 million (based on $1300 oz gold).
We’re comparing apples to oranges here, but both properties (Kerr Mines and Paramount Gold) have high-grade gold ore, though Kerr Mines (TSX: KER) (OTC: KERMF) is NEARLY DOUBLE THE GRADE – AND – HAS NEARLY FOUR TIMES AS MUCH GOLD ORE. So, what does that tell you?
We interviewed a seasoned Nevada geologist familiar with both properties to get his take on Kerr Mines, asking – “What’s it Worth” – and here’s what he had to say… “The property was a past producer and profitable, but there are a lot of considerations when trying to value the property.” His take was that “in a sale, it’d go for somewhere near $100 MILLION DOLLARS,” citing the Grassy Mountain sale we described, above, as a comparison.
Ok… let’s say the number is Sprott on. How do you interpret that in share value? There are approximately 190 million shares issued and outstanding and if you come away with a book value approach – assuming a sale for $100 million – then you’re looking at somewhere around $0.50 per share.
The pundits all say that gold (in 2018) is more-likely going to trade in the $1300 range vs $1225 where it is currently, so if you up the commodity price you also up the gross return. Miners like to look at their properties in internal rates of return or net present value, but as Kerr Mines is listed on the Toronto Stock Exchange, an updated 43-101 Report would be in order before Kerr Mines (TSX: KER) (OTC: KERMF) releases that kind of information. So, we’ll say it for them in our parlance… IT’S A DOUBLE-BAGGER!!
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