Kent Exploration (KEX, TSX-V) is a tremendously well-managed junior exploration company that is so close, in our view, to reaching a new level in its development.
We first initiated coverage on Kent about three months ago at 16 cents. We have followed the company’s progress closely since then, and just recently we met with President/CEO Graeme O’Neill. We have an extremely high “comfort level” with Kent and it’s obvious to us that the share price, though it has risen since early October, has not caught up with the company’s improving and underlying fundamentals (current market cap is only $6.5 million based on the January 22 closing price of 19.5 cents).
Kent has three flagship properties and one of them has the potential of delivering a major surprise any day now: Nine shallow holes were drilled at Kent’s Flagstaff Mountain Property in northeastern Washington State last October. The aim of that program was to confirm impressive historical gold grades and widths encountered by CE Minerals (Combustion Engineering) when it was drilling for barite 30 years ago (one of their holes cut a stunning 1.3 ounces of gold per ton over 18 metres).
Considerable effort and geological skill went into determining CE’s precise drill hole locations, and Kent’s geological team felt very confident with its preparation and drill plan. Assay results were expected by around the end of December but nothing has yet been received. One possible explanation (strictly speculation on our part) is that some of these holes had to be re-assayed due to unusually high grades, a standard practice in the industry.
CE, which mined barite at Flagstaff between 1982 and 1984, was an industrial minerals company and didn’t have a whole lot of interest or expertise in the area of precious metals. Their primary goal, obviously, was the definition of a barite orebody. What’s interesting is that many of their holes along the east side of the barite deposit, in particular, contained significant and consistent gold values.
The geologic map for the area shows a fault along the east side of the barite deposit, and this fault is believed to be the controlling factor in a quartz vein that has been traced for a considerable distance. A detailed September, 2008, report on the Flagstaff Property stated, “The current known strike length of the vein, from the prospect pit at the north end of the mine area to the intercept in CE Minerals drillhole 54E, is approximately 410 metres – certainly adequate strike length to develop a mineable orebody. The strike length of the vein remains open at both ends…the fact that the vein is of a mineable width (>1 metre in most exposures) is also a definite plus.”
There were also several CE gold intercepts that did not correlate with the vein trace (secondary mineralized structures that will require further testing), and high grade silver values that were encountered on the south side of the barite deposit.
In total, CE assayed 924 samples for gold and silver with very significant results, indicating a real potential for the discovery of a gold/silver orebody.
In 2008, Kent Exploration’s consulting geologists completed a painstaking and detailed task of trying to extrapolate the exact locations of most of CE Minerals’ drill holes that encountered significant precious metal values, and to get a better overall understanding of the property’s structural controls in preparation for the drill program that took place late last October. This was an exhaustive and impressive effort.
Given the historical drill results from this property, and Kent’s efforts to try to accurately pinpoint those drill locations and gain a better overall understanding of the Flagstaff mineralized system, we believe there’s a very reasonable chance that at least some of the upcoming assay results could be very good, if not spectacular.
O’Neill is a man of integrity, a quality that unfortunately is too often missing in business these days including the mining industry. As soon as the drill program started last October, he created a “firewall” to prevent any leaks whatsoever (even to him) with regard to results. Rumors on Stockhouse recently that Kent was sitting on poor results from Flagstaff were utterly false.
Truth is, we can speculate all we want about what those holes in October may have encountered, but we won’t know for sure until the news hits the wire. We’re hopeful, though, and at 20 cents we believe the risk-reward ratio here is exceptional.
The best-case scenario is that Kent confirms CE’s historical drill results – the stock blasts off like a rocket to new all-time highs.
The worst-case scenario is that every hole drilled at Flagstaff last October turns up empty – in that case, though, Kent is still sitting on a substantial high-grade barite deposit at Flagstaff, for which there is a guaranteed buyer when production commences through a deal with Matovitch Mining Industries, and the company has outstanding gold prospects in New Zealand and Australia which are coming along very nicely.
“This is not a one-dimensional, one-trick pony,” O’Neill declared to us. “We have significant prospects that could bring extraordinary value.”
O’Neill, a native New Zealander who moved to British Colombia in 1971, is a sharp businessman who knows how to run a company. He is focused and results driven. He has the respect of his entire staff and over the last year has recruited some outstanding talent, from geologists to IR, to move this company forward. For someone who doesn’t have a geological background, he has an amazingly strong grasp of this industry. He’s heavily invested himself in Kent and has done an extraordinary job at managing the company’s assets (including its cash) and keeping share dilution to a minimum. This is an exceptionally well-run junior exploration company.
“Last year at this time when everyone was looking to survive, I felt my shareholders wanted more than survival,” O’Neill told us. “They wanted us to thrive and prosper.”
At BullMarketRun.com, we strongly believe Kent shareholders will thrive and prosper.
Part 2 of this article, later this week, will reveal what investors are missing in terms of valuation with Kent’s Alexander River Gold Property in New Zealand and its Gnaweeda joint venture with Teck in Australia.
