Should Gold Mining Investors Consider Kilgore Minerals?
We wrote about Kilgore Minerals this past winter, because it holds prospective U. uranium properties. While studying the company, it became evident the company’s uranium would take a backseat to the company’s gold property in southern Idaho. We reviewed Robert Bishop’s commentary in his self-published Gold Mining Stock Report. Mr.
Bishop is highly regarded as an astute junior gold stock picker, and his analysis is quite thorough. There is little doubt Bishop holds high esteem for Kilgore Minerals’ Chief Executive Norman Burmeister. More importantly, the very successful Pinetree Capital (Toronto: PNP) has made a significant investment in Kilgore. Respectively, the Chief Executive and CFO, Sheldon Inwentash and Larry Goldberg, of both Pinetree Capital and heavily touted Mega Uranium (TSX: MGA), have personally invested in Kilgore Minerals. A recent Forbes magazine article took a swipe at both Mega Uranium and Pinetree Capital.
Actually, it was more of a head butt. Pinetree Capital is back to trading above C$17/share, up from a year ago when it traded for less than $3/share. So the Forbes article was a non-event for Pinetree Capital. And their holdings in Kilgore Minerals, which reportedly are estimated at between 10 and 20 percent of the company, were passed by without notice. Property History Kilgore’s Idaho gold property has been explored since the 1930’s, when a gold discovery was made by the Blue Ledge Co. Nearly 50 claims were staked in 1982 and leased to a Kennecott subsidiary in the mid 1980s. Seven holes were drilled. By 1990, Placer Dome acquired the property and drilled 39 holes, more than 21,000 feet of drilling. A Pegasus joint venture drilled another 23 holes, nearly 10,000 feet of drilling, by 1994. Echo Bay earned majority interest in the property, by 1996, after having spent $3.
5 million drilling 122 holes for more than 82,000 feet. In 1997, with the falling price of gold and troubles in the mining sector brought on by the Indonesia stock fraud, Bre-X Minerals, Echo Bay dropped its exploration ambitions on Kilgore – and shelved all of its exploration projects. In 1998, Latitude Minerals continued a modest exploration of a little more than 4,000 feet. Near the bottom of the gold bear market, Kilgore Gold (a wholly owned subsidiary of Kilgore Minerals) acquired 100 percent ownership of the property. A new round of preliminary exploration identified new gold targets. By 2004, Kilgore Gold expanded the company’s property holdings to 3,000 acres. Has this property been drilled like Swiss cheese or does Norman Burmeister know what he is doing? It’s had nearly 200 diamond and reverse circulation drill holes, totaling more than 126,000 feet of drilling. In an earlier interview with Burmeister, he told us, “I’m very excited about this project. It was a property that was very high on Echo Bay’s list.” Major companies have expended more than $8 million to define a modest, and possibly economic, resource.
At least three different entities have established resource estimates on the Kilgore gold property. In 1996, Placer Dome reported 14.1 million tons, grading 0.04 ounces/ton and with a cut-off grade of 0.015, for a deposit of 561,000 ounces of gold. A year later, Echo Bay released a sectional estimate report showing 18.7 million tons, grading 0.029, for a total of 534,959 ounces of gold. However, the only resource estimate approved by Canadian regulators (Kilgore trades on the Toronto Venture Exchange) is the Van Brunt/Rayner Technical Report, filed in October 2002, and which is compliant with National Instrument 43-101 (NI 43-101). This report showed about 7 million tons trading 0.
031, with a 0.01 cut-off grade, for an indicated resource of 218,000 ounces of gold. The report showed an inferred resource, adding another 269,000 ounces of gold. This is close enough to the Placer Dome and Echo Bay estimates, but it is unlikely to be mineable unless Kilgore finds more gold. During the 2004 drilling program, Norm Burmeister got the sniff of what might make this an attractive acquisition by a major gold company. “We are looking for a high grade feeder system,” Burmeister told us. In the previous drilling program, Burmeister got and encouraging intercept of 0.465 ounce per ton gold over 10 feet within a broader 170-foot zone of low-grade mineralization at 0.04 ounces per ton.