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KGL Resources To Pocket $15M Cash From Gold Project Sale

KGL Resources' (ASX: KGL) shares are expected to firm at the open of trade today, with its already strong cash position set to swell after executing a binding sale agreement to sell the Murchison Gold Project for a total cash consideration of $15 million.

Completion of the transaction is conditional on obtaining approval from the Foreign Investment Review Board and several other conditions which are normal for a transaction of this type.

The transaction is expected to be completed in early February 2014, with funds to be allocated to the exploration and development of the Jervois copper project in the Northern Territory.

Recently at Jervois KGL intersected massive and semi-massive sulphides.

The sulphides were intersected at the Marshall-Reward deposit in KJCD045, an 8 metre wide zone of massive and semi-massive sulphide containing visible copper, lead and zinc sulphide mineralisation.

The importance of the intersection is that it is located just 90 metres north along strike and 50 metres down dip from KJCD048, which supports the continuation of the resource at depth.

Analysis

KGL's cash position is the envy of many explorers, with the company having $10.6 million in cash at the end of September 2013, with estimated cash flows for the December quarter being $3.5 million.

Based on this alone, the company would have over $7 million in cash at the end of 2013.

Add to this the $15 million from the sale of the Murchison Gold Project, then the company's cash balance would swell to $22 million.

KGL currently has a market cap. of just $12 million, therefore the company is trading well under cash backing.

Proactive Investors maintains a share price target of $0.13 to $0.15 for KGL Resources in the next 6 to 9 months, which was first applied in November 2013.

Jervois

At Jervois, the recent original assay method for KJCD048 could only read up to a maximum of 20% lead, and the nine samples re-assayed that were previously reported as >20% returned lead grades ranging from 20.6% lead up to 35.10% lead.

This lifted the lead grade of the 18 metre interval from a previously reported 15.66% lead up to 19.63% lead, and as a result the Copper Equivalent grade increased to 11.3% from 10.3%.

Details of KJCD045

In hole KJCD045 the massive galena mineralisation has a very sharp contact at the hanging wall and appears to replace a limestone unit within mudstones, siltstones and schists.

It appears to be a distinct style of mineralisation adjacent to the more common Marshall-Reward style copper mineralisation that was intersected higher up in the hole. The limestone has been altered to a carbonate-magnetite rock containing sphalerite and pyrite.

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