Patrick Smith of Jemini Capital initiated coverage on, a "high potential explorer with multimillion ounces of gold," with a Speculative Buy rating and a CA$0.35 per share target price, the financial firm reported in an August 15, 2022 research note. In comparison, Kainantu is currently trading at around CA$0.15 per share.
British Columbia-headquartered Kainantu is a "junior exploration company managed by top tier, former large cap executives, with significant land packages in the immediate vicinity (less than 2 kilometers) to several significant deposits and mines," Smith explained.
The firm reviewed Kainantu's assets, all in Papua New Guinea. The flagship projects are KRL North, spanning 460 square kilometers (460 sq km), and KRL South, named for their orientation with respect to K92 Mining's nearby Kainantu gold mine. All are in an area known for bearing major gold-copper deposits. A geophysical survey was done at KRL North earlier this summer.
"There is increased probability of a porphyry system at depth at KRL North, likely to be associated with a ring feature located on the southern border with K92 Mining," Smith noted.
Kainantu also owns the May River project, which it acquired in September 2021. Covering 1,697 sq km, it sits about 15 kilometers away from PanAust's Frieda River project, one of the world's largest undeveloped copper resources, according to Smith.
The Kili Teke project is Kainantu's most recent project acquisition (April 2022). It is located on the same copper-gold belt as several world-class deposits, including Porgera, with 10,400,000 ounces (10.4 Moz) of gold, and Ok Teki, with 3,800,000 tons of copper.
Kili Teke boasts an existing resource of more than 4 Moz of gold equivalent. The previous owner-operator, Harmony Gold, drilled 35,000 meters there, and the deposit remains open along strike, to the southeast, and at depth. At its current stage, Kili Teke needs an updated NI 43-101 resource estimate and a preliminary economic assessment.
Also, in its initiation report, Patrick Smith reviewed Kainantu's financial position and management team.
Kainantu had CA$2.07 million (CA$2.07M) in cash at the end of March 2022, and no long-term debt reported Jemini. In January of this year, the company held a private placement, which was heavily oversubscribed and upsized twice, which yielded CA$2.77M in gross proceeds.
"Insiders have participated in all rounds of financing, and management has stated they will continue to support the company through future rounds," Smith pointed out.
Management is led by CEO Matthew Salthouse, whose 25 years of experience in the natural resource sector included executive roles for OceanaGold, Archipelago Resources, and REA Holdings. He has helped develop and run gold mines throughout the Asia Pacific, including Didipio and Toka Tindung.
Marcus Engelbrecht, who has a 37-year-history in the mining industry, is Kainantu's chairman. His positions over the years include chief financial officer (CFO) for BHP Diamonds and Specialty Products, CFO/acting CEO of OceanaGold, and managing director of Archipelago.
Rounding out the Kainantu team are chartered accountant Bart Lendrum as CFO, mining engineer Graeme Duncan as a director, Papua New Guinea expert Geoff Lawrence as a director, and senior minerals exploration geologist Graeme Fleming as chief geologist.
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Disclosures For Jemini Capital, Kainantu Resources Inc., Aug. 17, 2022
Analyst Certification: Each authoring analyst of Jemini Capital whose name appears on the front page of this research hereby certifies that (i) the recommendations and opinions expressed in this research accurately reflect the authoring analyst's personal, independent and objective views about any and all of the designated investments or relevant issuers discussed herein that are within such authoring analyst's coverage universe and (ii) no part of the authoring analyst's compensation was, is, or will be, directly or indirectly, related to the specific recommendations or views expressed by the authoring analyst in the research, and (iii) to the best of the authoring analyst's knowledge, she/he is not in receipt of material non-public information about the issuer.
Analysts employed outside the US are not registered as research analysts with FINRA.
Sector Coverage: Individuals identified as "Sector Coverage" cover a subject company's industry in the identified jurisdiction but are not authoring analysts of the report.
Compensation Disclosure: Company covered in this research has paid Jemini Capital options and/or consulting fee directly for corporate access, marketing, investor relations.
InvestmentRecommendation: Date and time of first dissemination: Aug , 2022 7:00 ET Date and time of production: Aug , 2022.
Risks to achieving Target Price / Valuation: In addition to the usual risks to target prices associated with commodity pricing, exchange rates, and mineral exploration/development, we highlight the following:
Financing Risk – As a pre-cash flow development company, Kainantu is reliant on the capital markets to remain a going concern.
At present, the company has an estimated cash position of ~$2M CAD. We note that there is no guarantee that Company will be able to access capital markets in the future, as the result of potential changes in market sentiment/pricing and/or concerns involving project feasibility. As such, there is no guarantee that Kainantu will be able to secure the required funds to advance the Kili Tele, KRL South, KRL North and other project, this including, but not limited to, debt/equity financing and/or a strategic investment.
Shareholder Dilution –This valuation takes into account future dilution relating to both the acquisition of the Kili Teke project from Harmony Gold, including associated warrants and additional company level exploration and working capital related funds raising.
Development Risk – In our valuation of Kainantu, we utilized several assumptions in our estimation of both the capital and operating budget at Kili Teke. The forecasted economics for this project have the potential to incur higher development costs/overruns, procurement delays, permitting issues, and other associated factors that could adversely impact our valuation of Kainantu.
Operational Risk – Our forecasts are based upon technical data, guidance from the company and our own knowledge and experience with regard to the operation of individual mining projects. We note the potential for operational and financial performance to change rapidly due to weather-related issues, unexpected changes in minerology and general unforeseen operational difficulties.
Permitting/Regulatory Risk – While Kili Teke is an advanced stage development project, we highlight the potential for additional project consultation and/or technical studies to be required in association with ongoing project permitting. Material delays could affect the timing of future cash flows and, by extension, our project valuation. In addition, we note that changes to the current tax/royalty regime, and/or environmental regulations, also have the potential to negatively impact our valuation of the Company.