February 26, 2019

Kintavar Exploration Inc (CVE:KTR) Stratiform Copper Deposit at Mitchi Property

Midas Letter
Midas Letter
Kintavar Exploration Inc (CVE:KTR) Stratiform Copper Deposit at Mitchi Property

Kintavar Exploration Inc (CVE:KTR) (FRA:58V) CEO Kiril Mugerman reviews the company’s 2018 drill results and explains Kintavar’s 2019 drill program. Mugerman highlights the advantages of the discovery’s huge stratiform sedimentary basin and illustrates how today’s advanced sorting technologies make mining this deposit a profitable endeavour.  Kintavar prioritizes projects with access to existing infrastructure, which helps make mining a medium-grade deposit profitable. Mugerman discusses the copper deficit and indicates the general consensus in the mining industry is that by 2021, existing reserves will be depleted.


Narrator: Kintavar Exploration Inc. is a natural resources corporation focused on the exploration and development of precious metals and base metal properties.

The company seeks to identify, investigate, evaluate and acquire under-explored properties located in both traditional and non-traditional geographically favourable environments.

Currently, the company’s focus is on two sectors: the Abitibi Gold District, and in the Grenville geological province of the Mitchi property.

Kintavar Exploration is listed on the TSX Venture and trades under the ticker symbol KTR-X.

[stock_chart symbol=”KTR:TSV” align=”left” range=”1M”]

James West:   I’m joined now by Kiril Mugerman; he is the CEO of Kintavar Exploration. Welcome back, Kiril.

Kiril Mugerman:    Hi James, how’s it going.

James West:   I’m doing really well, thanks. How have you been?

Kiril Mugerman:    Doing great. Nice to be back on the show.

James West:   Sure, you bet! Why don’t you walk me through what has developed for Kintavar since we last talked?

Kiril Mugerman:    Look, I think we’ve been here in September, and we were just finishing up our summer work. They published all those results, we were really happy from what we got during the summer, and then we moved into our Fall program. And we drilled, we divided the summer over kind of the entire property, which is a huge sedimentary package, but then what we did in November and December, we went straight for the guts; we went for the main area, which is our Sherlock area.

And right now we’ve been getting the results, we published the results for the eastern side, which was really good; it opened up the entire eastern side of the area. Hopefully we could add another, like, 200, 300 metres to the east, and now we are waiting for the final drill results for the west, which will be, I think, hopefully another 200, 300 metres to the west.

James West:   Okay.

Kiril Mugerman:    If that works, then from 500 metres where we are right now, long, we could probably be looking at a kilometre. If that’s a kilometre, you’re looking at a very large volume.

James West:   Right. Okay, so then, what is, what do you gotta do in order to get to –

Kiril Mugerman:    Next stage?

James West:   Yeah.

Kiril Mugerman:    Uh, look, I mean, I’d be honest: the Street is always asking the same question.

James West:   Sure.

Kiril Mugerman:    Well, your grade is not that great, right? So everybody’s looking, it’s like, okay, 100, 200, 250 metres of, let’s say, 0.25.

James West:   Yes.

Kiril Mugerman:    Well, I’ve got a porphyry here and there with the same grades and double the land, so why am I different from a porphyry? And in our opinion, in a porphyry you have this one big massive disadvantage where it’s one homogeneous drop and you’re going to have one big hole to mine the whole thing, right?

James West:   Yep.

Kiril Mugerman:    What you have in the stratiform sedimentary package, usually there would be one underground operation. Now, it got stacked like an accordion, and it’s an open pit, but it’s all still the same inter-bedded units.

James West:   Right.

Kiril Mugerman:    So in our corporate presentation, I believe it’s on Slide 11, you can see very nice example. So we got here a picture of four core boxes. It’s 16 metres. So usually, if this was a porphyry, it would be 16 metres of roughly the same grade that the entire drill hole is. But really, you are looking at 16 metres of interbedded units of, let’s say here, look, 3 metres of 0.16. Are you going to mine it? No. Then you got 3 metres of 0.7. Are you going to mine that? Yes. Then another 3 metres of 0.1. Are you going to mine it? Absolutely no. And then you’re going to 8 metres of 0.6, 0.7, 0.8.

So the beauty is in the stratiform copper deposit. What we are looking at, and what’s been the most exciting thing for us: today you have all those sorting technologies, which are much more advanced than they were 10 or 15 years ago. So this is looking so good for one of those applications.

James West:   Okay. So when you say sorting technologies, you mean the ability to sort different types of ore according to mineral content?

Kiril Mugerman:    Exactly. So what they do is, in a mine, some of the operations that we visited and we looked at, what sorting technology does is, basically a unit sitting in between your main crusher and your grinder. So what it does, okay, breaks it into a couple of inches rocks. So two inch by two inch, for example. And it says, okay, well, that’s waste, and that’s mineralized. And then that’s it. Next thing you know, the waste goes to the waste pile.

James West:   Right.

In a gold mine, for example, if you have a sheer zone, then yeah, you go, okay, I’m just mining this, this is my waste, this is my strip ratio, here’s the math, done. Well here, I’m not going to do this simple math, because it’s going to get mined, but it’s going to go through the sorter. So the mill is actually going to be smaller than in a porphyry that will have the exact same grade over the exact same size.

James West:   Okay.

Kiril Mugerman:    So if, let’s play with some numbers. If you’ve got a mill of 100,000, 125,000 tonnes per day, for a typical porphyry, you’re looking at $1 billion, $2 billion, $3 billion CapEx, because you’re tailing facility is huge, your flotation plant is huge, and chances are, in the porphyry, you are in Chile or Peru somewhere, or in BC where some of the operations are not as easy.

I’m four hours north of Montreal. Everything is flat, I don’t have any issues with finding water, everything is there. So if suddenly you put a sorting facility and you’re only feeding this material of 0.6, 0.7, 0.8, 1 percent, into the mill, what happens next? You’re working, actually, with a small mill. So let’s say, 15,000 or 25,000 tonnes per day operation.

James West:   Right.

Kiril Mugerman:    Is your CapEx going to be over a billion? No. you can look at so many other companies that have 15,000 to 25,000 tonnes per day operation. Do they have it? Look at their CapEx, and you’ll be like, ah. Actually, at a small CapEx like this, with a simple minerology – so that’s what we’re doing now, we’re doing flotation work. We don’t even have the research, but we are doing flotation. Why? Because we want to demonstrate, for the size that we have, if it’s going to be three, four, five open pits, flotation, taking care of concentrate, is going to be good. No problem adding trace elements. If I can checkbox this, done.

James West:   Okay.

Kiril Mugerman:    Then the beneficiation work is actually going to be what will drive the economics, because everybody will tell you: James, they have a low grade. And it’s fine, I understand; the Street is trained to look at high-grade deposits. But we have a unique situation. We have a huge sedimentary basin that, if it was underground, if it was only one unit, would probably be like 10 metres. Like, look here: 8.5 metres at 0.66. That’s probably what it would be, underground.

James West:   Sure. How sensitive to the price of copper is your ability to proceed, finance, explore, and what does that do to how soon till you become a mine?

Kiril Mugerman:    Bit tough to say, because I didn’t complete my engineering study, right? If I had that number, I’d say, okay, let’s run it. Oh, okay, if my copper price goes to 3.50, I’m economical, and if it goes to 2.50, I’m not. I don’t have this magic number yet.

James West:   Okay.

Kiril Mugerman:    All I know is 3 is that psychological barrier for the copper market.

James West:   0.3?

Kiril Mugerman:    No, at $3.00 a pound. Sorry.

James West:   Oh, $3.00 a pound, okay, that’s right.

Kiril Mugerman:    Three dollars a pound copper projects are easier to finance.

James West:   Right.

Kiril Mugerman:    And below $3.00, everybody’s like, mmm. It’s almost like with gold, let’s say, $1,300. We’ve been waiting for $1,300 for how long? Suddenly we’re like, Oh my God, market is alive again.

James West:   That’s right, that’s right. Okay, so, tell me about what is going on in the copper market, because that’s interesting to me as well. I mean, we’ve got this situation where grades are deteriorating at the world’s largest primary suppliers; there’s no new supply of any size coming onstream anytime soon.

Kiril Mugerman:    Very little, yeah.

James West:   At what point do those converging lines cross and the price of copper spikes?

Kiril Mugerman:    Some of the analysts that we talk to, they are thinking, like, give it another two years and you’re just going to have such a huge deficit that it will drive the copper price. Will it actually go there? We don’t know, because you remember the famous zinc story: for the last 15 years they were saying we were running out of zinc, but it took 15 years to actually start running out of zinc. So now, zinc is, let’s say, pretty bad, and the same thing for copper. Copper is starting to hit those territories; every couple of years we have a deficit for a couple of years, and come back.

Deficit couple years, because every time the copper increases a little bit – high grading, some mines add extra production, a few brownfield deposits are opening up. So it’s rough, it’s hard to say. But the general consensus is, 2020, 2021, you’re going to hit an inflection point where you just have no replacement copper of significant capacity, and demand is just skyrocketing due to all the electrification of electric vehicles and demand for new construction. And it’s just going to take over.

Because we don’t really have a replacement for copper.

James West:   No, there’s nothing that replaces copper economically, at least.

Kiril Mugerman:    Exactly.

James West:   Interesting. So, do you think that now is a good time to be accumulating copper explorers like Kintavar?

Kiril Mugerman:    If you see the size potential. If the company was there during the bear market and they couldn’t do anything, and they already signed HAV where they sold half of the project for like, $10 million, $15 for exploration, I think it’s tough. So again, let’s say, we can’t control the situations and bear markets were tough for everybody for the last, I don’t know what, it’s been seven years now? Five? [laughter]

James West:   Sure, yes.

Kiril Mugerman:    But if you see the size potential, in my opinion, the size is the most important thing right now, because how many majors will get involved for a project for, with five, ten year mine life?

James West:   Right.

Kiril Mugerman:    In gold, we do have that mid-size gold producer, but in copper, it’s not that prevalent. I mean, like, Nevsun was kind of getting outside of the mid-size; Sargold and Bay Gold got bought out.

James West:   Okay, interesting. So we’re looking at the map here, of Quebec, and as you say, your project is just four hours of north of Montreal.

Kiril Mugerman:    Yep.

James West:   Which slide were you referring to earlier? It took me a minute to get this up, so we’re a little behind.

Kiril Mugerman:    Oh, on the sorting? That was like the Slide 11.

James West:   Slide 11. Let’s go there right away. There it is.

Kiril Mugerman:    Yeah, that one.

James West:   Okay. So now we’ve got something to look at.

Kiril Mugerman:    So you see, those are the grades that I was talking about.

James West:   So you’ve got 0.16 percent copper here, over 3.2 metres. That’s generally nothing that gets anybody excited.

Kiril Mugerman:    But then you go into 8 metres of 0.66.

James West:   Right.

Kiril Mugerman:    Boom.

James West:   Now you’re talking.

Kiril Mugerman:    Now you’re talking. 20 years ago, you couldn’t process that. But now there are so many more different things that are available, and we started doing a lot of that work already. And it’s a work in progress, send the materials and get the results, and then more material, get results. And by the time it’s all gonna be working, we’ll be able to say, Great! That’s how it works, and my 200 metres are actually going to be fed into the mill hopefully at Grade X.

James West:   Yes.

Kiril Mugerman:    The idea is, feed the mill with the highest grade possible. But it’s not by high-grading, it’s by sorting, because high-grading kills mines.

James West:   Okay. How does high-grading kill mines? Just out of curiosity.

Kiril Mugerman:    You’re really piquing my analyst side, eh? [laughter] Uh, if you high-grade a deposit, in simple terms, you basically went after the best areas and you either put in the waste pile some other material which usually you’d be processing, but now it’s already in the waste, and it’s, you’re not going to start, after that, going after the low-grade, because the low-grade might actually be too low.

So if it was mixed with the high-grade, it was a medium grade which you could process, but now you can’t.

James West:   I see what you’re –

Kiril Mugerman:    Or underground, you went after a high grade area and you shut off an area that could be have been developed under a normal condition, but now you’re like, Can I go there? No, you can’t, because of the –

James West:   – rock dumped on it, right. Okay, well, interesting. So now, you’re going to be presenting at the PDAC event in Toronto next week?

Kiril Mugerman:    Yeah, we’ll be at PDAC; we have Korshak for two days, Sunday and Monday. We get the actual main booth as well, so we’ll have core boxes everywhere so people can come and see this whole difference between 0.7 and 0.1, and why are you excited about 1 percent copper; like, you literally can see in some of my core boxes, 1 percent, 0.1; 1 percent, 0.1. [laughter]

James West:   Okay, cool. All right, well, that’s awesome. Let’s leave it there, Kiril. We’ll come back to you very soon again. Best of luck for the PDAC event.

Kiril Mugerman:    Excellent.

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