As I mentioned in last week’s post on the price of Gold I have been researching a number of gold stocks over the last couple of months. This morning I picked up a parcel in Kentor Gold (ASX: KGL) at an average price of 0.10c. I originally had my order in at 0.105 however KGL opened sharply lower. This is a result of yesterday’s price action which saw the share price hit 0.115 in anticipation of the drilling results that were released this morning on one of the company’s projects (Jervois). It was classic price action of buying into the lead up of the announcement and selling into it upon its release.
I will provide a more detailed analysis of the company and my reasons for investing in KGL in the near future, however in summary:
The company was progressing with a gold mining project (Andash) in Kyrgyzstan, however with the political turmoil occurring in the country and the potential for delays with the project the company sought to diversify its holdings. On 1 April 2011 Kentor Gold announced an agreed takeover of Jinka Minerals. As a result of the takeover Kentor Gold acquired three projects: Burnakura (Gold), Gabanintha (Gold & Copper), Jevois (Base Metals).
All the projects have supported previous mining operations with Burnakura operating up until October 2009 when the operation was placed on care and maintenance pending the development of additional underground deposits. There is a ninety person camp, offices and workshop with the plant easily able to be bought back on line for minimal investment. As a result production is expected to recommence in June 2012 and the free cash flow generated from this mine will fund the company’s Gabanintha and Jervois projects.
Andash is also likely to get the go ahead once some local opposition to the project is overcome and provides further upside potential to the company’s share price.
As a result of the acquisition the balance of my portfolio (based on the original purchase price of each stock) has been adjusted to the following:
OBJ Limited: 25.66%
MHM Metals: 12.50%
Kentor Gold: 11.81%
Cash: 50.03%
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