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AKIPRESS.COM - Kincora Copper hopes that a renewed sense of political stability in Mongolia will reinvigorate investor interest, and it recently doubled down on the country with a deal that gives it one of the largest land positions in the highly-prospective South Gobi region, reports The Northern Miner.
On May 25, the company announced an agreement with Robert Friedland’s High Power Exploration to consolidate over 1,500 sq km of exploration licenses along strike from Turquoise Hill and Rio Tinto's Oyu Tolgoi copper-gold mine. The transaction also gives Kincora access to HPX’s exploration expertise and one of the world’s largest “regional geological and geophysical databases.”
“I think the tough markets definitely helped get the consolidation over the line, so to speak, and the recent moves by the government regarding Oyu Tolgoi, and foreign investment generally, definitely improved investor perception of the country,” elaborated president and CEO Sam Spring. “It took some time for the government to work through the details, but the majority of these issues have been resolved regarding the mining law, and exploration licenses are being issued again for the first time in around five years.”
Under terms of the deal, Kincora will issue a total of 59 million shares and 29.5 million purchase warrants to HPX subsidiary High Power Ventures (HPV), which will end up owning around 12% of the company. Friedland’s involvement is obviously significant due to his role in the Oyu Tolgoi discovery, which fueled the rise of the first iteration of his initial Ivanhoe Mines vehicle.
Meanwhile, Kincora is also in the process of cleaning up its capital structure and balance sheet. In early June, the company announced a 10-to-1 share rollback and $4-million private placement. The first $2 million will consist of 5.3 million post-consolidated shares priced at 37.5¢ each.
The second element involves a debt conversion with China-based private equity outfit Origo Partners. Under terms of the arrangement, $2 million in outstanding notes will be converted into shares under the same terms as the private placement.
“We’ve essentially received support from our largest shareholder, who has allowed us to clean-up our balance sheet,” Spring said.
“When you take our recent moves in entirety we’re really trying to recapitalize and restructure to have a nice, clean corporate vehicle that has the right team and technology to get to work on this newly-consolidated and, quite frankly, exciting land package. For HPX, I think they value retaining exposure to these assets as well, so everyone keeps skin in the game,” he added.
The company reported that it has “firm commitments” to complete the financial requirements of the Origo loan note conversion, the private placement, and the merger with HPX.
Kincora’s next step is a desktop review of the new data acquired in the merger, which covers “at least” [six] advanced porphyry prospects and one epithermal gold target, including what it classifies as “the most significant untested complex in the [Oyu Tolgoi] belt.” HPX subsidiaries have spent over US$25 million on the portfolio since 2007.
Kincora spent the 2015 field season working on its Bronze Fox property, where hole F47 cut 18 metres of 0.6% copper equivalent from 29 metres depth. Previous drilling by Ivanhoe just to the east of this zone returned intersections of both high and lower grade gold and copper in a “favorable porphyry setting both due to depth of the system.”
“We did a nice drill program at Bronze in 2014 that hit a lot of smoke,” Spring continued. “We were limited at the time since one of our licenses was being reviewed, but last year we resolved that and then spent time reviewing the data and getting out in the field to go over the surface geology. We’ll be looking for something a bit closer to surface that could be de-risked more efficiently. We’ve been keen to get out there and do some trenching that would lead into that shallower drilling.”
Kincora has traded within a 52-week window of 1¢ and 5¢, and closed at 3.5¢ at the time of writing. The company maintains 314 million pre-consolidated shares outstanding for an $11 million press-time market capitalization, and is hoping to complete the private placement and equity re-structuring early in the third quarter. HPV has rights to maintain their ownership percentages through further capital raises.
“It really wasn’t so long ago that major miners and strategic groups were keen on getting a foothold in the South Gobi, and we were having a lot of conversations,” Spring concluded. “The rocks haven’t changed and now there really aren’t too many companies that have managed to survive the downturn. I think we’re beginning to see some positive momentum now, and there’s that potential for the South Gobi to really rival some of the major copper belts in South America.”