Categories: Mining Stocks
Topics: Copper Stocks

Kincora Copper (TSX-V: KCC)(OTC: BZDLF) CEO Sam Spring on Partner-Funded Growth, Copper-Gold-Rich Porphyries, and Why the Market Is Missing It

 

Gerardo Del Real: This is Gerardo Del Real with Resource Stock Digest. Joining me today is the president & CEO of Kincora Copper Ltd. (TSX-V: KCC)(OTC: BZDLF) — Mr. Sam Spring. Sam, I’m excited to have you on and excited to get our audience this story. How are you today?

Sam Spring: Very well, Gerardo. Great to have the opportunity.

Gerardo Del Real: Well, let's get right into it. Your homepage on the website makes it very clear: the ambition is to become the leading pure play porphyry explorer in Australia's foremost porphyry belt. 

Clearly, copper is on fire right now. Everyone I speak with says the structural deficits are likely to lead to much higher prices. Jurisdiction is becoming critical in terms of where projects are located and IF they get developed. And you happen to be in a top-notch jurisdiction, you have a top-notch team, and you have some phenomenal assets. 

I want to get to all of that. But before we get into all of that, I would love to ask you to share with us a little bit about your background.

Sam Spring: Sure, I've joined Kincora and have been searching for copper porphyries for about a decade now. And over that course of the journey, we've accumulated a really strong technical team. 

A couple of key figures are John Holliday and Peter Leaman who are very hands-on in driving our exploration strategy. They've been involved with tier-one discoveries; John with Cadia, which is the largest porphyry in Australia; Peter Leaman with Reko Diq in Pakistan is what he's best credited with. 

We've accumulated a really strong team and a really attractive land package in New South Wales where we've drilled over 30,000 meters since we entered the belt in the last couple of years. 

What we've done in the last 18 months is really pivot our funding model to a project generator structure to really give this big portfolio of projects the meters they deserve without blowing out our capital structure and while giving our shareholders a really attractive risk return profile.

Gerardo Del Real: Tell me a bit about the assets and how you were able to put together such a robust portfolio of assets because those are getting harder and harder to come by.

Sam Spring: They are. And within this district, the Macquarie Arc in central-west New South Wales, you've had over $16 billion worth of recent M&A for the producing mines. You've had a number of earn-in deals supporting over $385 million worth of partner-funded drilling from the majors with the juniors looking for that next generation of big porphyries. 

The nice thing about this district is that they're gold-rich copper porphyries. Alkane Resources has made a good 14 million ounce gold-equivalent discovery at Boda-Kaiser. Evolutions expanded the resource by over 10 million ounces at its flagship Cowal project. It’s a very prospective region and it is being reflected by the investment within the region.

We were lucky in making our entry into the region in 2020-21. And a lot of that competitive advantage for the ground we've picked up and being able to source the deals and pegging that ground directly from the state has been driven by John Holliday, our technical director. He's really the foremost figure in this part of the world and still lives in the district having originated, managed, and led the discovery phase of Cadia. 

We're doing what juniors do well, which is being opportunistic, pegging ground, and we've been able to start finding partners in the last 18 months to realize the meters that these projects need.

Gerardo Del Real: Last time I looked, you had deals in place for 8 of the 12 porphyry projects. And I love that you brought up the fact that these are gold-rich copper porphyries. You have the right commodity mix, you have gold at near-record highs, you have copper headed that way, and you have deals on 8 out of your 12 projects. Is that accurate?

Sam Spring: We do. Since we've pivoted to the project generator model, we've done six deals that have unlocked over C$110 million of potential partner funding. I think the important point you've raised there is that there are more assets that we have where we are looking for partners, and those assets are more flagship advanced projects that are in existing brownfields settings. 

Trundle, for example, we’ve invested C$10 million worth of shareholder capital from the listed company level in that project. And that's one that we're in advanced conversations with potential partners for. Fairholme, which is adjacent to Cowal, is a 14 million ounce ore body and, we think, in the same structural trend that controls that large system.

We've found partners for those projects to-date. They're our earliest-stage prospects, and drilling is ramping up. Late last year, we had 7,000 meters of drilling ramping up over AUS$3.5 million worth of partner-funded exploration. Those activities and the management fees that we receive for two of those earn-in deals are increasing. 

We've done two deals with AngloGold Ashanti. And those activities are ramping up. Ultimately, we want to get to a business model where we have C$10 million a year of partner-funded exploration that we're getting a 10% management fee that's providing enough cash flow that our corporate costs are paid for and where we have an income stream. 

And effectively, for investors, we have leverage to multiple prospects being funded by these majors and an income stream, meaning there's no dilution at the listed company level.

Gerardo Del Real: You mentioned the C$110 million of potential partner funding. And, mind you, there are still projects where you're having negotiations and conversations to strike deals. Where's your market cap right now?

Sam Spring: Yeah, it's a good question, Gerardo. It's one that a number of people say, ‘Sam, your market cap is C$10 million. What's going on here?’ And I guess we’ve been working through a former larger shareholder overhang on the ASX that has weighed on things. But, really, we have to get out there and tell the story. 

For 12 to 18 months, we weren't drilling. And as an explorer, that's the key catalyst. And effectively, it's a new funding model. We have to get out there and reengage with the market and tell investors what we're doing and what we're looking to do.

I'd like to think we're in a unique situation at the moment where you've got catalysts coming from drilling that's ongoing. You've got catalysts from management fees increasing and ramping up and further deal flow. All of those things are a pretty unique combination. 

And what could we be worth? I'd make a strong argument that we have a very good direct peer valuation comp with Inflection Resources literally adjacent to us at one of our projects where we're drilling, which has the same partner in AngloGold Ashanti with a very similar earn-in deal. They're probably 12 months further ahead in terms of money going into the ground. 

But for that portfolio and the deal we've done with AngloGold Ashanti, it's a fantastic direct peer group example, and that's 3X our market cap just on that asset portfolio, excluding these other assets and other deals we're working on.

Gerardo Del Real: How's the treasury looking? I know that insider ownership is strong. I believe insiders own over 40% of the shares. Is that accurate?

Sam Spring: That’s correct. On the board, we have representatives from our two largest shareholders, and board and management are over 10% ourselves. It's a pretty tight register. We are ASX and TSX-V listed; probably 80% of the share capital being issued in the form of CDIs. 

Interestingly, since we've announced the second earn-in deal with AngloGold Ashanti, we've probably seen greater volume at a higher price being traded on the TSX-V. And I think, really, that’s, in part, recognition of that value disconnect with Inflection Resources and the project generator model probably being better understood in the North American marketplace. And that's a real opportunity for us to get out there and explain that business model.

Australians are very familiar with Greatland Gold’s Havieron copper-gold discovery in Western Australia where that prospect generator model saw a 20X return. Newcrest was funding that exploration and took a $50 million market cap to a $1.5 billion market cap through that exploration phase where shareholders weren't buying Greatland Gold because Newcrest was funding that. 

We have to get out there and tell the story and explain that it's scalable along with the key catalysts to bridge that value gap with ongoing drilling news flow coming from this shareholder overhang coming to a conclusion and the likely pop that we'll see when that's done. But really, that special situations type event of dealing what we think around more flagship and attractive de-risked projects.

Gerardo Del Real: You have a tiny, miniscule C$10 million market cap. You have a solid share structure. And you have partner-funded deals to the tune of over C$100 million dollars. What comes next, Sam?

Sam Spring: Trying to execute more deals, more drilling, more management fees, and getting that story out there and better understood in the marketplace. Hence, a great opportunity to start doing that with this interview and to be able to get that story out to a wider network and really reengage with the market knowing that this business model has got enough taste to it, enough critical mass, that it would be scalable. 

And if we can get to a scenario where there's C$10 million of partner-funded drilling per year and we have the self-funding business model where corporate costs are covered, we should certainly be a significant multiple from where we are today in terms of valuation.

Gerardo Del Real: Listen, I think there's a ton of upside. We have the copper and gold market that a lot of us have been awaiting for quite some time. You're in the right address. You have peer comps that justify three to five times your current market cap. And you're on the hunt for more deals. 

I'm looking forward to helping tell the story… and I’m looking forward to having you back on. Anything else to add to that, Sam?

Sam Spring: No, Gerardo; thank you for the opportunity. We just have to keep executing on this strategy and getting the story better understood.

Gerardo Del Real: Excellent. Looking forward to having you back on. Thank you for your time.

Sam Spring: Fantastic! Thank you for the opportunity.

Gerardo Del Real: Alright, cheers.

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