Where Do I See Kentor Gold Going In 2012?

Kentor Gold is the stock that I believe offers the most potential (out of the three I hold) for 2012. I believe this is the case due to the strong news flow associated with the company’s projects and their move into “producer” status with their Burnakura project in the middle of the year.

In terms of specific things that I think will take place in the year I will be looking out for:

1.    Approval of the Andash project in the Kyrgyz Republic. Prior to the troubles surrounding the approval process at Andash KGL traded up in the high teens. On top of that they have also acquired the Australian Assets since then. So naturally, any approvals that allow Andash to move toward production could have a significant effect on the company’s share price.

2.    Updated Resource Statement and Pre-Feasibility at Jervois. Simon Milroy, the Managing Director and CEO of Kentor Gold, has mentioned in past announcements that Jervois has the potential to be larger than Andash. Early in the New Year we are expecting an updated resource statement which I believe has the potential to really excite the market. Later in the year we can also expect to see the Pre-Feasibility study.

3.    Potential acquisition of Atkash? When Andash was delayed Kentor Gold relinquished their option over the Atkash project, a small satellite project that is too small to be independently mined. If Andash is approved I would expect Kentor Gold to re-examine this project due to its higher grade and ability to improve the mine life/NPV of Andash.

4.    Burnakura moving into production. The feasibility for the Burnakura project is already overdue as the company has now decided to analyse an underground operation as well as the open cut mine first mentioned. This could have the potential to increase the grade of material mined and have a positive impact on this projects value in my opinion. Even though the feasibility study is delayed works at the mine are ongoing and production is scheduled to start in mid-2012 (i.e. no delay to production).

5.    The Geo-Thermal project. I have mentioned this numerous times on HotCopper and in my blog and it always fails to generate discussion. I realise it is a fairly “boring” project when we have so much else going on but I think this has the potential to surprise us all and deliver a nice little profit on the side.

6.    Further exploration at the Bashkol exploration project in the Kyrgyz Republic. Initial exploration work in the Bashkol licence area has indicated that there is significant potential there so I will be keeping a close eye out on any exploration data released throughout 2012.

On top of all that we will have ongoing drilling taking place at Burnakura, the proposed share consolidation on 10 Feb 2012 and hopefully an increase in the price of Gold. All of these items have the potential to substantially increase the value of Kentor Gold in my opinion and I will certainly be monitoring them all closely.

Another Reason Why Kentor Gold May Want to Consolidate

The other day I posted my thoughts on the proposed consolidation by Kentor Gold. Last night I was giving this issue some more consideration and came up with another reason why Kentor Gold may be interested in exploring this avenue.

It is to do with something I have spoken in the past and I still believe it is largely being overlooked by everyone (me included) as Andash, Burnakura and Jervois are all more exciting, but we must not forget about the Geo-thermal Project.

When I spoke to Simon (and if you read past announcements) this project will be spun out into a separate listed entity. At this stage Kentor Gold don't know whether they will retain a free carried stake (say 20%) or place shares will existing holders (say 1 share for every 10 you own post consolidation).

If they are considering the second option (i.e. placing shares with existing holders and then raising the rest via the IPO) then it is impossible to do this when the SP is at 10 cents or even 20 cents. Why? Because then the "Kentor Energy” shares would have to be placed to existing holders at 1 or 2 cents each (or the maths would be "odd"  and you would get 1 share for every 100 you own, which would create all kinds of issues with rounding up or rounding down).

A much more logical approach would be to consolidate the share price to $1 and spin out "Kentor Energy" in mid to late 2012 when the share price is hopefully at or around $2. Kentor Gold could then place 1 share for every 10 held to existing shareholders at 20 cents. The rest of the money would then be raised via an IPO.

After consolidation we will have 106,209,295 shares on issue. Even if we only get 1 "Kentor Energy" share for every "Kentor Gold" share this would equate to 10,620,929 "Kentor Energy" shares being placed with existing holders (total value of $2,124,185m @ 20c).

Kentor Energy can then raise another $10-$20m via IPO and we are done and dusted.

*** After reviewing the above figures 1 for 10 may be a bit low as it could leave us with only 10% of the Energy Company. In my opinion Kentor Gold will be aiming to give existing holders approximately 20% upside potential in this new company so the placement could easily be as low as 1 in 5 depending on the share price at the time.

*** Simon also mentioned at the Gold Symposium that news on the Geo-thermal project could drop at any time, so in my opinion it will be something that the company has to consider within the next 3 to 6 months.

As always please do your own research and consult a licenced financial above. The points I make above are pure speculation only.

Kentor Gold - September Quarterly Report

The other day Kentor Gold released their quarterly report along with MHM and OBJ. I have been so busy writing other posts and analysing the reports that I have not had a chance to post on Kentor Gold, until now.

The first paragraph really says it all in regard to the future potential of this company:

“Kentor Gold Limited advanced towards its goal of bringing three mines into production over the next three years”.

It is certainly an ambitious project but Kentor Gold has the cash ($40m), plus the debt facility ($50m) and can use the cash flow generated from Burnakura to help fund the second (Andash) and third (Jervois) mine.

I will breakdown my analysis and thoughts on the report under individual project headings.

Burnakura

During the quarter the program to restart production was commenced. This included recommissioning existing processing plant, the installation of additional plant, the completion of a feasibility study detailing mine planning and additional exploration drilling. Everything appears to be progressing nicely on this front and the power plant was also successfully restarted without any significant problems.

We can also expect assay results from a 60-hole air core drilling program that tested structural targets adjacent to the magnetic anomaly approximately 2 km north of the existing NOA open pits will be available early in the December Quarter (i.e. any week now). An 8,000 metre RC drilling program will also commence this month to infill and increase the confidence in the areas where production is planned to commence.

Jervois

Recent drilling campaigns have continued to produce high grade copper-silver results. And more importantly “high grade mineralisation is being extended to depths hundreds of metres below the current Resources”. We can expect an updated JORC resource sometime in the near future.

Andash

“Negotiations at community level continued during the quarter, aimed at achieving local approval for site access so that construction of the project can commence.

As soon as this occurs, geotechnical investigations will be completed and the 12-month construction program will proceed.”

The above statements continue to be very positive on the project. My confidence in Andash proceeding continues to increases and was aided by the positive election results which I posted on earlier today.

Bashkol Exploration Licence (Kentor Gold 80%)

This was a project that we had not heard much about lately. The report states that the exploration program for 2011 has been completed and results will be released to the market next quarter (i.e. any time now) as soon as the fire assay results have been received.

It will be interesting to see what happens with this exploration area. I doesn’t appear to be a key priority for management so it would not be unusual for this one to go on the backburner for a while, unless the results are truly great.

Geothermal Energy

The second forgotten project is the Kentor’s involvement in geothermal projects. Originally the company was looking at geothermal projects in Kyrgyzstan with the idea being to sell cheap/clean energy to China. This was then expanded to include other former soviet bloc countries.

Around the same time all this was happening, back in 2007, Simon Milroy joined the team and refocused the company. Prior to this it appears as though Kentor Gold had no clear strategy and was looking at anything and everything including Gold in Kyrgyzstan, Uranium in Australia and the above mentioned geothermal projects.

You can therefore understand my surprise when this popped up in the report, as I thought it had long been cut adrift. The report states that a review which stated two years ago found that Savo Islands in the Solomon Islands was the best project available and an application was lodged for a Geothermal Energy Licence. “It now appears that this licence is likely to be granted”.

The report then goes on to state that the application was made using a 100% owned subsidiary Kentor Energy.

I have reviewed the original announcements and my notes and at the time we were teeing something up with Panax. Whether this is still on the cards remains to be seen, however this project could deliver a little bit of extra cream for KGL shareholders.

The original announcements on the geothermal projects can be viewed here:

http://asx.com.au/asxpdf/20070411/pdf/311w7mgqb6pksn.pdf

http://asx.com.au/asxpdf/20070905/pdf/314d71bxgblglm.pdf 

You can also read up on Panax here:

 http://www.panaxgeothermal.com.au/