Kaminak Gold (OTCPK:KMKGF) just announced strong results from its phase one exploration program and that it has commenced its phase two program at its flagship Coffee Project in the Yukon. The highlight of the exploration results was a 28 meter drill hole with 3.55 grams of gold per tonne. For a surface deposit, this is extremely high grade, and 28 meters is quite long, and it suggests that there could be additional resources not in the initial estimate.
Investors will recall that I was hesitant to put money to work in Kaminak towards the end of June as I felt that the company's Coffee Project PEA wasn't using conservative enough assumptions, and when these assumptions were stress-tested, the project's economics turned out to be much weaker than they looked at first. Despite this the company received financing for a feasibility study and the stock rose significantly.
The stock has since corrected, and we have this positive development showing that the company is finding more high grade gold, indicating that the Coffee Project has further potential to grow and to become an economical mine. However, investors should note a couple of things before buying the shares here. First, the gold price has come down while the stock is up, and I would rather take a position when the stock is out of favor. Second, Kaminak is a prospect generator, meaning that its focus isn't on constructing the Coffee Project but rather getting it ready for a larger company to do so. We don't yet know how the company is going to monetize this asset as projects in the Yukon come with additional risk while Kaminak has not made any deals for major projects. With that being said the Yukon region is under-explored, and Kaminak along with some of its stronger peers are showing the world just how much gold there is. Exploration announcements such as the one from this morning evidence this. So I'm holding off on buying the shares for now, but the stock is on my radar as a compelling speculation play.
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