I agree there is a high chance the mine life for this deposit to be extended with the exploration of these 2 zones. As they have stated, very little exploration has been done at Mineral Hill and high chances are these will add on to the resource.
KBL plans to mine the Pearse project at a rate of 120kt of ore (with a gold grade averaging 6g/t) per annum with a recovery rate of 85% giving an annual production estimate of 20.5koz of gold and 265koz of silver. I think the estimates are rather conservative looking at the recently concluded RC drilling. Just to recap, here are the recent drilling results:
14m @ 25.5g/t Au & 56g/t Ag (KMHRC111) 51m @ 9.8g/t Au & 72g/t Ag (KMHRC111) 25m @ 8.8g/t Au & 109g/t Ag(KMHRC112) 11m @ 8.8g/t Au & 160g/t Ag (KMHRC113) 23m @ 6.0g/t Au & 102g/t Ag (KMHRC114) 26m @ 6.4g/t Au & 74g/t Ag (KMHRC115)
If the average grade improves to 7gm, we can expect 23koz of gold with an 85% recovery. So far KBL management has been conservative and results have surprised on the upside and I would expect no different for this project.
And if the Pearse gold project's cash cost is somewhere around RCR's cash cost estimates, KBL is looking at a $1000/oz margin with today's gold prices. Multiply this with the gold oz produced, and KBL will look extremely under valued at today's price. It's no surprise MPS has a tp of $1.50 on KBL by end of 2012.
KBL Price at posting:
27.5¢ Sentiment: Buy Disclosure: Held
