Kincora Copper sees tide turning in Mongolia
Kincora Copper’s (CVE:KCC) rising share price suggests the market may be latching on to a potential shift in sentiment towards Mongolia.
The company behind Bronze Fox, a copper project just down the road from Rio Tinto’s giant Oyu Tolgoi mine, looks to have come a long way in the space of just two months.
In November, 106 exploration licences, including two of Kincora’s, were revoked following a criminal investigation into former government officials accused of illegally issuing the permits.
The move dealt investor confidence a blow, raising questions about Mongolia as a foreign investment hub; but crucially it left Bronze Fox, its flagship project, intact.
Encouraging comments from Mongolian officials however suggest a resolution to the licence dispute may be just round the corner. It is expected companies who were stripped of their assets will be able to reapply for them once a decision is reached.
The company has seen its share price double so far this year to 5 cents, helped by such comments and prospective new mining laws this year, suggesting faith in the Kincora story is returning.
While its share price has been on the rise, the market capitalisation is still less than C$10 million, leaving plenty of work to be done to convince punters Mongolia is a viable investment region and Kincora is the company to invest in.
In a recent interview with ‘Emerging Frontiers’, an investment website focused on emerging market such as Mongolia, Kincora’s chief executive Sam Spring said he believes Kincora is trading at around a 60% discount to its Mongolian peers.
“There is an argument, due to the age, level of activity and results to date at the Bronze Fox licence, that Kincora should trade at a premium,” he added.
In its latest exploration update, the firm said it expects to have generated targets for potential drilling at Bronze Fox shortly.
Recent results from two independent consultants have been particularly encouraging, it told investors.
“When we last issued options to management and the board we had no hesitation in our view that “par” was 10.5c, the last private placement price and well above the price at the time, and that no one internally should be rewarded/in-the-money until that floor was reached.
“That said, the share price is still a reasonable way away from that price but I know a few retail shareholders see that as an important level/signal and this is obviously something we as a company want to get back to sooner rather than later but for the right sustainable reasons.”
On the recent buying activity, Spring said: “To the best of my knowledge it would appear that in the last couple of weeks there has been both an element of new retail investors active in the market (helped by EBRD’s [European Bank for Reconstruction and Development] funding agreement for up to $10m with Altan Rio, another Mongolian copper exploration play) and some averaging down in existing shareholders’ entry price.”
Rio Tinto’s giant Oyu Tolgoi copper-gold project is also emerging from the extensive wrangles with the government that have dogged its development so far and is ramping up to full production – expected to be 160,000 tonnes of copper a day.
Talks over stage 2 financing are ongoing, but the initial signs are good, Spring argues.
Stage 2 financing for Oyu Tolgoi is “the largest and most needed catalyst” for a pick-up in foreign investment, according to Spring. Not only would it recapture the market’s attention, but it would prove the government is learning from its recent mistakes, he explains.
Springs says a Chinese buyout, a new discovery or the resolution of the revoked mining licences would also renew interest in the region.
“Those that have experienced previous similar cycles in Mongolia often comment that they see the current environment as a entering a good opportunity given most asset valuations are cheap, even on a risk adjusted basis, relative to other markets.”
Kincora is not the only resources firm to have benefited from the apparent shift in sentiment.
AIM-listed Petro Matad (LON:MATD), which is on the hunt for oil in Mongolia, is among London’s top performing stocks so far in 2014 as rumours of a farm-in deal with a Chinese state-owned group simmer.
The company behind Bronze Fox, a copper project just down the road from Rio Tinto’s giant Oyu Tolgoi mine, looks to have come a long way in the space of just two months.
In November, 106 exploration licences, including two of Kincora’s, were revoked following a criminal investigation into former government officials accused of illegally issuing the permits.
The move dealt investor confidence a blow, raising questions about Mongolia as a foreign investment hub; but crucially it left Bronze Fox, its flagship project, intact.
Encouraging comments from Mongolian officials however suggest a resolution to the licence dispute may be just round the corner. It is expected companies who were stripped of their assets will be able to reapply for them once a decision is reached.
The company has seen its share price double so far this year to 5 cents, helped by such comments and prospective new mining laws this year, suggesting faith in the Kincora story is returning.
While its share price has been on the rise, the market capitalisation is still less than C$10 million, leaving plenty of work to be done to convince punters Mongolia is a viable investment region and Kincora is the company to invest in.
In a recent interview with ‘Emerging Frontiers’, an investment website focused on emerging market such as Mongolia, Kincora’s chief executive Sam Spring said he believes Kincora is trading at around a 60% discount to its Mongolian peers.
“There is an argument, due to the age, level of activity and results to date at the Bronze Fox licence, that Kincora should trade at a premium,” he added.
In its latest exploration update, the firm said it expects to have generated targets for potential drilling at Bronze Fox shortly.
Recent results from two independent consultants have been particularly encouraging, it told investors.
“When we last issued options to management and the board we had no hesitation in our view that “par” was 10.5c, the last private placement price and well above the price at the time, and that no one internally should be rewarded/in-the-money until that floor was reached.
“That said, the share price is still a reasonable way away from that price but I know a few retail shareholders see that as an important level/signal and this is obviously something we as a company want to get back to sooner rather than later but for the right sustainable reasons.”
On the recent buying activity, Spring said: “To the best of my knowledge it would appear that in the last couple of weeks there has been both an element of new retail investors active in the market (helped by EBRD’s [European Bank for Reconstruction and Development] funding agreement for up to $10m with Altan Rio, another Mongolian copper exploration play) and some averaging down in existing shareholders’ entry price.”
Rio Tinto’s giant Oyu Tolgoi copper-gold project is also emerging from the extensive wrangles with the government that have dogged its development so far and is ramping up to full production – expected to be 160,000 tonnes of copper a day.
Talks over stage 2 financing are ongoing, but the initial signs are good, Spring argues.
Stage 2 financing for Oyu Tolgoi is “the largest and most needed catalyst” for a pick-up in foreign investment, according to Spring. Not only would it recapture the market’s attention, but it would prove the government is learning from its recent mistakes, he explains.
Springs says a Chinese buyout, a new discovery or the resolution of the revoked mining licences would also renew interest in the region.
“Those that have experienced previous similar cycles in Mongolia often comment that they see the current environment as a entering a good opportunity given most asset valuations are cheap, even on a risk adjusted basis, relative to other markets.”
Kincora is not the only resources firm to have benefited from the apparent shift in sentiment.
AIM-listed Petro Matad (LON:MATD), which is on the hunt for oil in Mongolia, is among London’s top performing stocks so far in 2014 as rumours of a farm-in deal with a Chinese state-owned group simmer.
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