Update: Kaminak Gold Commences Feasibility Study At Coffee Gold Project, Shares Still Undervalued

| About: Kaminak Gold (KMKGF)


Kaminak Gold recently announced a $13.5 million investment from Ross Beaty and Zebra Holdings.

The company approved a budget of $12 million for 2014, which includes the initiation of feasibility activities starting in Q3 2014.

An investment in Kaminak is attractive at current prices, and I think shares will continue to outperform.

The purpose of this article is to update readers on Kaminak Gold (OTCPK:KMKGF), which is developing the Coffee Gold Project in the Yukon, Canada.

In my initial article on June 29, I argued that Kaminak presents a compelling investment opportunity as the market was valuing the company at just $74 million at the time - although the company's Coffee project carries a net present value more than 7 times that figure.

Since then, a number of bullish developments have unfolded which I feel only strengthens the investment case.

Kaminak Announces $13.5 Million Investment by Ross Beaty

On July 14, Kaminak announced that it entered into an agreement with Ross Beaty and Zebra Holdings for an investment of $13.52 million by way of a non-brokered private placement. Both Ross Beaty and Zebra Holdings will own 9.98% of Kaminak's outstanding shares following the closing of the private placement, and Kaminak will have $27 million in cash.

Ross Beaty is a geologist and entrepreneur who is very well known in the precious metals industry, as he currently serves as the chairman of Pan American Silver Corp. (NASDAQ:PAAS) (a $2.3 billion precious metals producer) and Alterra Power Corp. (OTCPK:MGMXF). He's also founded, developed and divested a number of public mineral resource companies over the course of 38 years in the industry, according to TheAUReport.

Beaty is also past President of the Silver Institute, a Fellow of the Geological Association of Canada and the Canadian Institute of Mining, Metallurgy and Petroleum, and a recipient of the Institute's Past President Memorial Medal, according to his profile at Pan American Silver.

In my view, Beaty's investment in Kaminak is a major validation of the quality of the project and only strengthens the bullish case for Kaminak, since he is very well respected in the mining industry.

Feasibility Study Activities to Commence

On July 28, Kaminak announced that a feasibility study at the Coffee Gold Project has commenced. The decision to proceed with the study is due to a positive preliminary economic assessment, announced last month, which indicates that Coffee will be a high-margin, profitable gold mine with a net present value (5% discount) of $522 million and an internal rate of return of 32.8% before taxes and mining duties.

The company currently has $27 million in cash and the initial budget for the study is $12 million. With a current share price of $.90 and a market cap of $94 million, Kaminak has an enterprise value of roughly $67 million, which is actually lower since my first article was published.

In conclusion, I feel that the bullish case for Kaminak has only gotten stronger, and I look forward to seeing the company develop the Coffee project to a feasibility study and eventually towards production. I think shares present a compelling buy at current prices, and I intend to purchase shares within the next two weeks.

Disclosure: The author has no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. The author wrote this article themselves, and it expresses their own opinions. The author is not receiving compensation for it (other than from Seeking Alpha). The author has no business relationship with any company whose stock is mentioned in this article.

Editor's Note: This article covers one or more stocks trading at less than $1 per share and/or with less than a $100 million market cap. Please be aware of the risks associated with these stocks.