EVENT: CONTINUED CONFIRMATION OF RESOURCES AT EL
VALLE
Kinbauri (KNB-TSX.V) issued a press release yesterday afternoon
detailing the latest results from its infill program at El Valle. Since the
beginning of the drill program, consistency has been KNB’s game and
the company has continued to deliver, reporting strong intersections of
gold and copper in both Area 107 (A107) and Black Skarn North (BSN).
KNB topped it off with further confirmation of the westerly extension of
BSN, reporting a hole that extends the zone to the south. We continue
to believe that Kinbauri is undervalued and we reiterate our buy
recommendation and our 12 month price target of $2.25, which is
based on a 1.2X multiple of our NAV calculation.
GOLDEN RESULTS CONTINUE
The eight holes reported yesterday from A107 and BSN all intersected
notable grades of gold and copper mineralization. Six of the holes
were infill holes drilled at 25m centres in the central area of BSN.
These holes returned intersections with thicknesses and grades that
should support the bulk mining approach suggested by KNB. Hole
08KV1094 targeted the westerly extension of Black Skarn North,
providing further confirmation that the zone is likely to continue for
some distance to the south and as indicated in KNB’s last press release
(April 25,2008). Management previously indicated that this zone has
the potential to contribute an additional 500,000 oz to its books.
CASHED UP TO KEEP THE DRILLS TURNING
KNB also reported that it recently received a VAT (Value Added Tax)
refund of $1.6M from the Spanish government and is expecting $750K
from government subsidies as well as US$360K from sale of gold
residue recovered from the gravity circuit. With the closing of the
$7.5M NSR expected early next week and the recent $1M private
placement, KNB is cashed up to continue turning out great results.
CURRENT VALUATION NEEDS POLISHING
Within the next two and a half months KNB should have its drilling
complete and will be in the position to reevaluate its resource and
confirm what the results have been telling us during the current drill
program; the deposit is there, it appears to be consistent, the grades
and thicknesses seem to be economic, and its likely bigger than what
was on the books before. We maintain our view that KNB is
substantially undervalued at its current value. Not only is Kinbauri
trading at a substantial discount to its peers ($30/oz vs. ~$50/oz),
with over two million ounces on the books (1.7Moz at El Valle), access
to the underground, and all of the surface infrastructure required to
restart production, Kinbauri has a market capitalization that is roughly
equivalent to the salvage value of just its processing facilities. We
continue to reiterate that KNB’s discounted valuation is unjustified
given the quality and advanced nature of its assets. We believe KNB
has provided the market with more than adequate evidence to confirm
our view and would encourage investors to get off the sidelines and
build a position in KNB while it still remains substantially undervalued.
We reiterate our buy recommendation and our target price of $2.25,
which is based on a 1.2X multiple of NAV.
