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TICKERS: KER; KERMF; 7AZ1

Gold in the Desert: High-Grade Project Nearing Fruition in Arizona

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Under the leadership of a new CEO, this miner expects to start producing gold in 2020.

Kerr's Copperstone project

Located in the fault- and gold-riddled desert lands between Phoenix and Death Valley, Kerr Mines Inc.'s (KER:TSX; KERMF:OTC; 7AZ1:FRA) Copperstone Mine is gearing up to recommence production in 2020, stated newly appointed CEO Giulio T. Bonifacio.

Because it is blessed with existing infrastructure—a mill, water, power, labs, repair shop, warehouses, offices, tailings pond and extensive underground development—reinvigorating Copperstone is a low capex project.

Copperstone's historically productive high-grade gold deposit was profitably mined as an open pit in 1987 by Cyprus Minerals Corporation. Within six remarkable years, Copperstone delivered more than 500,000 ounces gold from 5.6 million tons of ore grading at 0.089 ounces per ton (oz/t) gold (3.05 grams/tonne).

Copperstone's next owner, American Bonanza, further developed Copperstone with drilling, underground development at the base of the open pit, while also permitting the project. This was followed by the construction of a 600-ton-per-day flotation mill. The company extracted 16,900 ounces of riches from ore grading at 0.104 oz/t gold (3.57 grams/tonne) during 2012 before terminating operations in early 2013 as the gold market turned and Copperstone went temporarily fallow.

Copperstone and its adjacent property was subsequently acquired by Kerr Mines in 2014 at a discounted price that did not reflect the significant historical costs that approximated US$100 million, Bonifacio noted. Kerr Mine's wholly owned Copperstone project straddles 19.2 square miles (50 square kilometers) of surface area and mineral rights in La Paz County, Arizona. The Toronto-based company controls the property's 546 federal unpatented mining claims (10,920 acres) and two Arizona state mineral leases totaling 1,338 acres.

In late 2017, Kerr Mines completed a combined surface and underground drilling exploration program, adding 800 feet of additional underground access. Bonifacio stated the company plans to start mining and processing 600 tons of ore per day at Copperstone in 2020, pending advancing detailed engineering, minor permit modifications approval and finalizing terms of a current financing package with Sprott Resource Lending Corp.

Last year, Kerr Mines' Copperstone preliminary feasibility study calculated the underground Proven and Probable to hold 175,093 ounces at 6.79 g/t with a mine life of 4.5 years. In 2019, a further 15,000-meter drill program is targeted with the objective of extending the estimated life of the mine to 8–10 years based on extracting 320,000 ounces of gold, Bonifacio noted.

"To date we have only modestly tested the Copperstone project with exploration work covering approximately only 10% of the project," Bonifacio stated. "We see a pathway toward capturing multimillion-ounce potential with further drilling and testing several prospective targets that have been identified."

Kerr Mines' proposed mining method is a mechanized cut and fill using rock fill and cement rock fill. Cut and fill was chosen for its flexibility in handling the low vein dip angles. The project is designed to operate on two 10-hour shifts; the region has an ample supply of experienced workers and is mining friendly.

In an interview with Streetwise Reports, Bonifacio said, "There is a comfort zone involved, in that Copperstone has already produced more than a half million ounces. The grade is high for underground at plus six grams. Additionally, with several very prospective targets in hand and a land package that has been relatively underexplored, there is a strong likelihood that we are sitting on a million-ounce deposit and a pretty low cost to get at the deposit."

Bonifacio explained, "The US$100 million investment by Copperstone's previous owners in existing infrastructure is saving us tens of millions in capital expenses. And the mine has all of its major permits. I'm quite excited about the large land position that came with the acquisition, which we will explore and develop after Copperstone goes on line."

Bonifacio joined Kerr Mines in April from Nevada Copper, which he retired from in early 2018. Bonifacio told Streetwise Reports that he founded Nevada Copper in 2005 and directed efforts at every stage of the company's development, which included exploration, resource expansion, feasibility studies and the successful permitting of both the underground and open-pit deposits and construction at the company's Pumpkin Hollow project located in Nevada, which is scheduled to commence production in Q4 2019. Bonifacio is a Chartered Professional Accountant with 30 years of executive experience in operations, project finance, capital markets and mergers and acquisitions. Bonifacio has himself raised US$700 million in capital through equity and project debt financings; he has participated in more than US$1 billion worth of corporate transactions.

Bonifacio has put his money where his mouth is, too. Kerr Mines has completed a non-brokered private placement offering of 3,350,000 shares at a price of CA$0.14 per unit for gross proceeds of CA$469,000. Bonifacio personally subscribed for 3 million shares; Peter Damouni, a Kerr director, subscribed for 350,000.

Retail investors currently hold only about a third of Kerr's shares with directors, insiders and family funds and offices holding the rest.

Bonifacio said, "We've got the budget on hand to continue the study work, and we are looking at lenders and our current financing package with Sprott Resource Lending to advance the project fully into production. We are also very excited about the drilling results to date so we ideally would like to further advance our drilling efforts with an aggressive targeted success driven drill program." Bonifacio went on to state, "We also have the best in class mining professionals to further advance Copperstone, which is critical to our future success."

Is now the right time?

"There are very few already built-out, ready-to-go projects like Copperstone. That is what sets us apart from the crowd," Bonifacio observed. "A bump in the gold prices is inevitable, it is a law of the market—that is why I put so much of my own skin in the game!"

Mining investment experts are cheering for Bonifacio and Copperstone. Technical analyst Clive Maund, analyst Siddharth Rajeev with Fundamental Research and industry observer Jeff Nielson all view Kerr Mines as a worthy investment that has the potential to glow with even a modest uptick in gold prices.

The nine-member board of directors of Kerr Mines is loaded not just with mining operations experts with the background to bring Copperstone to fruition, but also with several heavy weight capitalists.

Chairman Fahad Al Tamimi is a Saudi-based businessman with global investment activities. Previously, he was president and CEO of SaudConsult, the largest engineering firm in Saudi Arabia, responsible for many large infrastructure and construction projects in the country.

Executive vice-chairman Claudio Ciavarella, who has advanced Copperstone since its acquisition, is a CPA and private business owner who operates international businesses in construction and manufacturing.

Direct investor and board member Peter Damouni has over 18 years of experience in investment banking and capital markets, with expertise in mining and oil and gas. Damouni has worked on and led equity and debt financings valued over $5 billion.

Director Ayman Arekathas over 35 years of strong banking, finance, investment and business management experience working with Chase Manhattan Bank, Merrill Lynch, Deutsche Bank, Investor, Abraaj Capital and Tamimi investments.

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Disclosure:
1) Peter Byrne compiled this article for Streetwise Reports LLC and provides services to Streetwise Reports as an independent contractor. He or members of his household own securities of the following companies mentioned in the article: None. He or members of his household are paid by the following companies mentioned in this article: None.
2) The following companies mentioned in this article are billboard sponsors of Streetwise Reports: Kerr Mines. Click here for important disclosures about sponsor fees. As of the date of this article, an affiliate of Streetwise Reports has a consulting relationship with Kerr Mines. Please click here for more information.
3) Comments and opinions expressed are those of the specific experts and not of Streetwise Reports or its officers. The information provided above is for informational purposes only and is not a recommendation to buy or sell any security.
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5) From time to time, Streetwise Reports LLC and its directors, officers, employees or members of their families, as well as persons interviewed for articles and interviews on the site, may have a long or short position in securities mentioned. Directors, officers, employees or members of their immediate families are prohibited from making purchases and/or sales of those securities in the open market or otherwise from the time of the interview or the decision to write an article, until one week after the publication of the interview or article. As of the date of this article, officers and/or employees of Streetwise Reports LLC (including members of their household) own securities of Kerr Mines, a company mentioned in this article.

Additional Disclosures

Clive Maund does not own shares of Kerr Mines and he or his company has not been paid by Kerr Mines.

Fundamental Research Corp: FRC and the Analyst do not own shares of the subject company. Fees were paid by KER to FRC. The purpose of the fee is to subsidize the high costs of research and monitoring. FRC takes steps to ensure independence including setting fees in advance and utilizing analysts who must abide by CFA Institute Code of Ethics and Standards of Professional Conduct. Additionally, analysts may not trade in any security under coverage. Our full editorial control of all research, timing of release of the reports, and release of liability for negative reports are protected contractually. To further ensure independence, KER has agreed to a minimum coverage term including an initial report and three updates. Coverage cannot be unilaterally terminated.

Jeff Nielson may or may not own securities of Kerr Mines.




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