Kent Exploration Inc.
(TSX.V: KEX)
Graeme O’Neil, CEO
[display_podcast]
Kent Exploration Inc. is engaged in the acquisition, financing, and exploration of prospective mineral properties. The Company has exercised its option to acquire a 50% interest in a mining lease and has 50% of a 100% interest in the Ivanhoe Creek placer claims covering a bentonite deposit on the Ivanhoe Creek property located in Elko County, Nevada. The Ivanhoe Creek property consists of approximately 920 acres, and is situated in the Northern Nevada Rift area, approximately 48 miles northwest of Elko, Nevada. The Flagstaff property, consisting of 48 claims totaling approximately 960 acres. The Silver Hill property, consisting of five claims totaling approximately 1,000 acres, is accessible by forest service roads and is approximately 18 km east of Crawford Bay on Kootenay Lake, British Columbia. On September 8, 2008, the Company announced that it had staked 7 claims totaling approximately 1,300 ha in north-east Saskatchewan.
TRANSCRIPT
WSR: Good day from Wall Street. This is Juan Costello, Senior Analyst with the Wall Street Reporter. Joining us today is Graeme O’Neill, CEO of Kent Explorations. The company trades on the TSX Venture, and the ticker symbol is KEX. Kent Explorations is a mineral exploration company with properties across the Western US, Western Canada, New Zealand and Australia. Thanks for joining us today, Graeme.
Graeme O’Neill: Juan, you are quite welcome, and thanks for having me here.
WSR: Start off by talking to us about the completion of the Flagstaff drilling program?
Graeme O’Neill: Flagstaff is — many of our shareholders are aware — we bought this property into the company as a gold/silver prospect with a potential lead/zinc component to it as well. It was an actual mine, a barite mine, which was being mined by a company CE Minerals during the period ‘81 to ’84, they did a significant amount of drilling. And when they were drilling it out, they got indications that there were some significant gold values there. So, that’s why we got the property. Now, subsequent to that we put a couple of holes in — about six holes couple of years ago. We determined that the grades of the barite that they had determined were a little less than what we actually found, and that had to do because we did diamond drilling whereas they did rotary air blast. Our intervals were of much shorter length, so we were able to determine that the grades were consistent. But, we determined they were slightly higher than what they had shown. So, we had reasonable confidence that if that was the case, the gold and silver that they were reporting was more than likely of the same nature.
So, last year what we did is, we sent over a geologist and a surveyor, and we surveyed every single hole that reported gold and that was the colors of the holes. So, as we all know this last year, big downturn, money was tight. So, we were prepared to put our barite into production, which as you may know and which our shareholders certainly know, that we have received mine plan approval for them and we are ready to produce a minimum of 20,000 tons a year at a price of approximately $40 a ton, which incidentally now is $49 of ton, which will bring cash flow to the company. But anyway, we determined that, because we were permitted and ready to drill, the market was looking for drill-ready programs, they were looking for companies that were preferably going into production. So, we determined that we would drill that for the gold. So, subsequently about two and a half weeks ago, we indicated that we are going to be drilling and that had a fairly significant effect on our market, investor appetite for potential near-term results.
We determined that a 1,300 foot drill program would more than likely be beneficial to target some of the higher grade holes reported by CE Minerals. And that was put under the direction of one of the company’s consulting geologists, Clay Conway; he is a Ph.D. P.Geol and he was with the USGS, so a very, very confident man. My background of course is, we just explain him in operations, but once we get that part done and we hand it over to the geologists, it’s then in their hands and we put up a Chinese wall between them and us. So, there is no interference with the drill program. So, he conducted a nine-hole drill program that was going to be up to 12. We completed the program just as the snow was falling as our consulting geologists call it termination dust. So, we were fortunate to get to the end of the program without incurring additional expenses related to weather problems. So, now the core is being split and it will be submitted to Inspector at IPL Labs here in Richmond, BC and will be assayed by them. We don’t have a time frame for getting the assays back as I tell everyone who asks me, going to be wrong or some of them would say the results are good, bad and different and you hidden it. So, we never give any timing on things like that mainly because it’s outside of our control. But we’re quite pleased with the program, we got good drillers, we got excellent core recovery. So, we are looking forward for the results.
WSR: Bring us up to speed on some of your other key projects including the now 100% acquired Ivanhoe Creek property?
Graeme O’Neill: We had Ivanhoe Creek, that was a listing property actually and we actually didn’t earn in from Senator Minerals. Senator subsequently dropped their section of the property a couple of months ago and we determined that it was a still good property, still under-explored. So, we were quite fortunate that the — just because of these market conditions that we were able to acquire the rest of the property for a minimal cost to the company. And one of the things that I do is, I dig deep into these things, I would prefer to put money in the ground rather than putting money into other people’s pockets and that benefits everyone including our shareholders. Obviously, the carrying costs of properties can be quite prohibitive. And what we’ve been finding this last year is that those who’ve got prohibitive costs are into fairly significant trouble and we didn’t want to get like that.
We permit everything up a head. We want to have the flexibility. So, this property is about a couple of kilometers, maybe three, four kilometers from the Hollister Development of Great Basin Gold. That was originally an open pit that produced about 750,000 ounces of gold. Subsequently, they went down to ground there. They found that they more than likely had a mightiest target and the mightiest mine, which is Newmont’s lowest cost I believe North American operation and certainly one of their most profitable operations. It’s only about 12 miles to the northwest of our property and right in the middle of the Carlin Trend. So, with Great Basin finding exactly the same mineralization of depth, this is a very, very good rationale for us to follow up on that property. So, we’ve got a 43-101 Report down on it, it’s the technical report. We are upgrading that report, we expect that sometime maybe about the middle of November. So, that will give us an idea of what we are going to do first thing next year. We will not be doing any more drilling in North America this year. Weather conditions — we don’t like spending money fighting the weather. It’s counter-productive and it doesn’t give the shareholders much in the way of value. So, that one there is an ongoing. We’ll have it reviewed over time and we want to determine first thing in the spring when we get back on the property as to how we are going to proceed with it.
WSR: Your portfolio is made up of gold, silver, base metals and coal. So, talk about some of the market trends and how well you are positioning the company to capitalize on some of those trends.
Graeme O’Neill: The reason we got the coal was — mainly because our senior consulting geologist and a qualified person is Marvin Mitchell, and he spent a lot of time with Ranger Oil as Head of Coal Projects. He is one of the few coal exploration geologists around there, there are few in five between. So, we had some comfort that the properties we got over there are going to benefit us. However, the market as you know and everyone else knows during this crunch is not giving much credence to exploration in some of these products like coal. So, we’re permitted, we’re going to sit on that for at least a year. It doesn’t cost the company much to hold it. But there is no benefit in us going out and spending a significant amount of money drilling it at this point, because the market will not reward us for it.
I watch market trends very, very carefully. Of course, as we have always been a gold and silver, a precious metals exploration company, we have been mainly focusing on that; same with the zinc. We have good potential for zinc on our Flagstaff property as well as the zinc project over in Saskatchewan. Again, the market is not supporting exploration on that right now. So, it will be kind of productive again for us to be spending money looking for zinc on either of those two properties and expanding that when we would not get the benefit on our market cap.
But what I did this last year, when the market was under significant stress, I looked and saw that there were significant opportunities out there. So, I took advantage of them. In New Zealand, we picked up a gold property that was the subject of some exploration by the precursor to OceanaGold and that was Macraes Mining. And they determined that was an inferred resource of about 643,000 ounces of gold. We permitted to get access on to the property. We are planning to get there very, very quickly. It’s coming into the New Zealand summer, so access is going to be easier and being aware that of course we don’t like fighting the weather because it just adds significant costs. So, we hope to be on there as I say fairly quickly and we are planning forward for a drill program there. In our estimation, we can only do so much on a surface program. But we are doing mapping and putting everything into Map-Info and Arc-GIS so that we can accurately locate everything that has been done in prior operations. And a wise thing about New Zealand, it’s like the Saskatchewan, it’s open for business with people who are very professional. When you walk in they always say how can we help you, and frankly that is, to an exploration company, absolutely welcome news. It’s difficult enough in our business, fighting the weather and trying to divine what’s underneath without having a government that is not supportive of mining or exploration. The New Zealand government, Crown Minerals, the people there are as I say very professional to deal with and we are quite pleased to be operating down there.
WSR: Certainly, it’s a very important factor to have a good working relationship with the government as well as the citizens.
Graeme O’Neill: And then Australia, again, we were fortunate that when Teck was going through their significant difficulties that our technical team was attractive to them and they were looking to advance them and lead a project in Australia. And of course, their exploration budget like everyone else’s was cut and they were looking for someone to help advance the project. We were fortunate that they thought that our technical abilities were compatible with what they expect of exploration companies and we were able to strike a deal. So, I am very, very happy. These guys are very professional. They are a very historic company and long-lived, and this is an excellent project. It’s like the Kirkland Lake Gold Camp. These akin greenstone gold belts are like pearls on a string. So, if you find one deposit typically you will find another two or three along the same trend.
We did a 43-101 technical report a couple of months ago. The consulting geologists who did that, Gerry Ray, is a Ph.D. P.Geol. And, he was quite excited about it and he thought that the Meekatharra belt, which is about 20 kilometers away to the west of this exited exactly the same mineralization. This project has had 60,000 to 80,000 meters of drilling down on it. They’ve identified three significant zones or potential zones. One of them, the Turnberry, which is the most advanced, that’s where our first drill program is planned for. So, the highest grade they got there was 69 grams of ton over a meter and others were like four meters of 17 and three meters of 14, 13, 11 meters. I mean there are some fairly big intersections. So, we are planning a first phase drill program there, which will be about 1,500 meters and once that’s done we will then be able to assess where the next drill hole goes. The total program over this next little while is about $750,000 that’s for the next year, and that’s the minimum we will spend and most of it will be done on drilling.
One of the difficult things about Australia is that there is normally a fairly large amount of cover over the deposits, it’s very weathered, very eroded. So, you can’t see what’s on the ground like you can up in the Continental United States or Mexico with lots of sort of upthrust in mountains and stuff. So, we think it’s an absolutely excellent project. We believe there is same potential from newly announced deposits there as there is in the adjacent Meekatharra gold belt and I think they took about 3.5 million ounces out of that over the years. I think four mines, five mines and I think there was about eight or nine open pits in these number of mines. So, it’s a fairly substantial property, very similar as I say to the curtain like style deposits. They typically go down two kilometers and they are normally about two kilometers in length. So, we believe that there is a potential for a substantial deposits there, mineable deposits. Of course, drilling will only prove that up or disprove it as a case maybe. But, the early indication based upon prior drilling is something that’s significance there. That’s what we are going to be following up.
WSR: What would you say that makes Kent Explorations unique from some of the other players in your sector, is it your portfolio of properties?
Graeme O’Neill: It’s a number of things. The first is that we have spent this last year acquiring properties at minimal carrying cost of the company. We do have to spend money on the ground, but they are significant properties, each one of them; as an example, Flagstaff barite property. The agreement on that would give us approximately a million at today’s prices for their barite at a minimum of 20,000 tons a year, which is cash flow for a company, not many exploration companies have cash flow. So, we hope to be back on the ground there, first thing in the spring as soon as the snow goes, and start operations there on the barite. Means, we don’t have to go to the market for running the company.
We have three nice stable properties that we can operate pretty much all year around. In the summer months in North America, we can operate in either Nevada or Washington or often British Columbia, at our Silver Hill project, which I haven’t mentioned yet, but some of the samples we took last year were 5 kilograms of silver per ton. I mean that’s extraordinary and the average grade was about 950 grams or a little over a pound of silver a ton — actually, that’s nearly 2 pound of silver a ton.
New Zealand, we come into winter into the northern hemisphere. We are able to operate in the southern hemisphere in their summer. Two significant projects, one in New Zealand and one in Australia, which allow us to provide news to the market all year around. So, we’re not a one-trick pony. We plan things significantly in advance so that as I said we have flexibility and we have the ability to move from one project to another to advance in a timely manner. One of the difficulties is that if you are in the exploration business and you go and you conduct an exploration program, it takes two to three months of review and consultation with geologists and technical people etcetera to determine what the next phase is going to be. So, for many companies once that review process takes place, very little news comes out. That’s going on with as an example our Flagstaff property in Washington. We are already working on our next project in New Zealand and getting ready to drill that, and at the same time we are preparing for drilling on another property in Australia. When that’s all done, we will be back into the northern summer, back on the ground working on the next program here. So, it brings a lot of news. It makes a lot of things happen and gives shareholders confidence that we are advancing the interest of the shareholders on an ongoing basis.
WSR: In terms of investors, do you believe that your company’s investment story and upside potential is completely understood and appreciated?
Graeme O’Neill: I don’t think it’s ever fully understood. Certainly, we had a lot of accumulation happening over this last three or four months. We were grinding in and out of $0.10 and it seemed to me sometimes that we would never get through that barrier. There were lot of people who either saw their liquidity and they thought here is a good advantage just to get out and get into cash not realizing that the people they were selling to were people that were going, if these people want to sell down here we are quite happy to take this stock. So, we had a number of people outside analysts looking at us and they are going there is some serious accumulation going on here. So, once that accumulation stops and that selling stops, this stock is going to move appreciably. And that triggered almost like an avalanche of buying. People all sort of saw what very few people have seen, they all of a sudden realized that we had significant projects. Then we announced our drilling program and of course that just had caused more of a stampede into our stock and people were suddenly starting to realize like why is this stock at $0.10 when they have all these properties and with significant upside. So, we have gone through, we have started to establish a new base here at about $0.19 or $0.20. But, this is just a start in my opinion. I have had people telling me that this stock is still severely undervalued at this price. No, of course I’m not objective on this. Obviously, I’m stock interested. So, but I have always believe we’ve been significantly undervalued myself and I think we have a long way to go to advance this. I mean all you need is one decent drill hole, and certainly we have the properties and the grades showing on the properties to report that one significant drill hole. And we are going to be conducting two drill programs over the wintertime, one in New Zealand subject to permitting costs and approvals from the regulatory authorities. But once we get on the ground and get those approvals, we are going to have those drills out and turning, and that will bring more results. Because we already know that there are significant grades there, there is no reason to disbelieve that there will be more to come.
In New Zealand, in reviewing the historic documentation about half a kilometer — three quarters a kilometer away from the historic workings and another water shed, there was a pan concentrate of 30 grams, I mean that’s nearly an ounce a ton. It was out of a creek, so it’s accumulated a little bit, but that tells us that the strike of 1.2 kilometers that was determined there was this 643,000 ounce inferred resource maybe extend to at least another kilometer. So, lots and lots of upside potential.
WSR: What other goals and objectives do the management and the company hope to accomplish over the next year? I know we covered a lot.
Graeme O’Neill: We are very aware of the costs of some of our property agreements. As an example, our property agreement with Teck commits us to spend 3 million dollars Australian over four years. So, that’s a significant fund commitment. And what we are proposing to do with that is as we go through the drilling to spin that off into a new company, so that the new company will be funding the exploration. And, that will actually be spun-off to the benefit of the shareholders. That’s our plan; we are going to call it Archean Star Resources. It’s going to be solely focused on the southern hemisphere and solely focused on gold. Aside from that, we are always looking for quality acquisitions that will help support the company and support the shareholders’ views that we are an ongoing and solidly reliable exploration company that they can put their money into and feel confident that there is a significant potential for gain.
WSR: Joining us today is Graeme O’Neill, CEO of Kent Explorations. The company trades on the TSX Venture, ticker symbol is KEX, and is currently trading at $0.19 a share. Before we conclude, just to kind of rehash everything, what are some of the key reasons why investors should consider Kent Exploration as a good long-term investment opportunity?
Graeme O’Neill: First, Flagstaff property in Washington; potential cash flow starting up next year, significant potential for a fairly good zinc deposit there, high-grade silver and gold have been identified, drill program just being completed. We will be looking at planning more operations in that this coming spring.
New Zealand; the Alexander River project, 643,000 ounce inferred resource of gold, and at today’s prices that’s about $643 million in the ground. Of course, we wouldn’t get that but it’s pretty exciting. You have got a company with that kind of inferred resource trading at $0.19, I think it’s cheap. And then, of course we have an agreement with Teck. The companies like Teck, the majors, do not likely join with junior exploration companies. They want them to be technically confident and have the ability to what the agreement says. So, that’s a significant feather in our cap. This project, Gnaweeda in Western Australia, is just a significant project. We are very, very pleased to be here, working with Teck on this one. So, these are the three majors. And then, aside from that we are in the Carlin Trend, down in Nevada. We coincidentally also have an Ivanhoe Creek property, a bentonite deposit, which we share 50% with Senator Minerals. There is approximately two million tons there, it’s near surface, we have very high grade and we’ve already received expressions of interest on that to take it off their hands. We have spent a lot of time putting quality projects in the company to benefit the shareholders. I think, right now, many shareholders have seen that. So, this is why in my estimation it’s a good investment to make.
WSR: We certainly do look forward to continuing to track the company’s growth and progress, as well as report on some of your upcoming projects and continuing projects. I’d like to thank you for taking the time to join us today and to update our investors. It’s always good to have you on.
Graeme O’Neill: Thanks very much, Juan. I appreciate that.
