Interview with Kainantu Resources
Interview Kainantu Resources: "We hold the key to growth in the Asia-Pacific region".
time to read: 10 minutes | The interview was conducted by Nico Popp on August 2nd, 2021 in Singapore (SGP).
CEO | Kainantu Resources
3 Phillip Street #19-01 Royal Group Building, 048693 Singapore (SGP)
+65 6920 2020
Table of contents:
General conditions in Papua New Guinea
news|financial: "You operate gold projects in Papua New Guinea and have already gained experience in Asia as a management team. What are the general conditions in Asia and Papua New Guinea in particular?"
"[...] We have a clear strategy for neutralizing sovereign risk in Papua New Guinea. [...]" Matthew Salthouse, CEO, Kainantu Resources
Papua New Guinea is a country with abundant natural resources and a rich cultural tapestry. Papua New Guinea mining laws and regulations have been based on Australia's system offering significant benefits and certainty over other nations in the region.
Many companies have come to Papua New Guinea to explore and mine the significant number of high-quality resources. The key differentiator between companies that succeed and those that fail is the ability to manage stakeholders relations at all levels, including local and national -government and provincial. In the region, a key motivating factor is providing local employment opportunities and practical benefits to the communities we work with.
Kainantu is also in an advantageous position at the national level. We have a long history of operating in the APAC region and have strong relationships with a trusted local partner in the country. We were also recognized with a letter of endorsement from the Papua New Guinea Mining Minister when we achieved our listing in 2020.
Mining is an integral part of the Papua New Guinea economy. We look forward to working with its people to explore and develop the Kainantu and May River regions. We have a clear strategy for neutralizing sovereign risk in Papua New Guinea.
Geology and by-products
news|financial: "You expect epithermal and porphyry mineralization at both KRL North and KRL South. What does that mean specifically in terms of mineability? Do you anticipate any by-products?"
We expect epithermal mineralization at KRL North, which sits in the Bilimoia mineral field. The Bilimoia mineral field, where K92 also operates, is part of the renowned Kainantu gold district. The field is characterized by extraordinary depth potential encompassing the epithermal through mesothermal down to the deeper porphyry environment. Gold recoveries tend to be high grade. In addition, several economic by-products, including silver, copper, and molybdenum, can be expected in varying concentrations at different depths.
At KRL South, we have observed probable epithermal, skarn and porphyry-style mineralization across the project location. Sitting approximately 30 km southwest of K92 and the Bilimoia mineral field, KRL South lies on the 25 km long Kainantu transfer structure, with a number of smaller cross structures also evident. All evidence suggests KRL South is similar to Bilimoia.
Our immediate approach is targeted to the Tirokave area, where we expect to see a concentration of relatively near-surface epithermal vein systems. There are also a number of regional prospects in KRL South that are interesting and require further investigation.
news|financial: "What exploration work have you already done, and what conclusions do you draw for upcoming work?"
"[...] We expect further progress to be reported in the coming months, having taken an additional 2,500 samples. [...]" Matthew Salthouse, CEO, Kainantu Resources
On May 5th, we announced an update to our exploration campaign in KRL South and defined three distinct gold prospects: the East Avaninofi prospect, Yaoro Ridge prospect and the Kerefa prospect. It was based on previous exploration work and our ridge-and-spur augur program in the Tirokave area of KRL South. All prospects display widespread epithermal mineralization and will remain a key focus for the Company. We expect further progress to be reported in the coming months, having taken an additional 2,500 samples. Field observation work is extremely encouraging and we are focused on defining clear drill targets at KRL South.
At the East Avaninofi prospect, we identified a high-grade 40g/t Au (gold) sample. We are currently conducting further intensive investigations at this prospect and will update stakeholders in the near future on the encouraging trends that are evident. Initial mapping work at KRL North is also positive, with signature features of the Bilimoia gold field evident at this tenement. While we will continue the methodology to build a body of data and confidence at both projects, our goal is to conduct targeted drilling and ultimately define an inferred gold resource for Kainantu.
Exciting projects in a world renowned gold mining district
news|financial: "The K92 mine is located between your two properties. How far is the mine from your properties, and how much gold is mined there?"
We are in close proximity to the K92 properties on both the North-East and South-West sides. KRL South is located approximately 30 km from the operating mine at K92. KRL North is situated on the Bilimoia mineral field, with the property directly bordering K92.
K92's Maniape and Arakompa prospects are 2-4 km away from KRL North and have had a total resource of 1.36 Moz identified with up to 9.0g/t Au. Their prospects appear on-trend with KRL North. In May 2020, K92 updated its resource to 1.1 Moz at 10.4g/t Au equivalent measured and indicated and 3.7 Moz at 9.0g/t Au equivalent. K92 is a fully operating mine with onside processing facilities, access to hydroelectric power and an operational airstrip. K92 is one of the highest-grade gold producers in the world.
Acquisition key to copper
news|financial: "You recently acquired the May River project, a property that promises copper as well as gold. What is special about May River?"
"[...] Our field work to date supports the historical view that the project is highly prospective for copper and gold. We expect to close these deals in the coming months for outcomes that will be value accretive for shareholders. [...]" Matthew Salthouse, CEO, Kainantu Resources
May River sits immediately adjacent to one of the world's largest undeveloped copper resources at Freida River. Consistent with our corporate strategy, we are committed to adding high-quality regional projects to the Company's portfolio. We are constantly on the lookout for opportunities that we believe will add value for our shareholders. We prefer early-stage opportunities that sit in close proximity to known blue-chip projects in premier mining districts.
Like Kainantu, May River meets this criterion and already comprises 5 known prospects within 7 km of the Frieda River, all sitting on the Fiak fault. The historical drilling and proximity to the world-renowned Frieda River Project are the main draws of the property. Previous drilling showed 54m at 1.83g/t Au, 109m at 1.53g/t Au and 96m at 0.89g/t, as well as copper-in-soil anomalies of over 2,500 ppm in several areas.
The historical work gives us great confidence that May River is highly prospective for copper and gold. Epithermal mineralization is apparent relatively close to surface, in addition to porphyry potential.
While it was announced only recently, Kainantu has also done a significant amount of work in the background.
We conducted thorough field studies and numerous consultations with local communities and government bodies. Our field work to date supports the historical view that the project is highly prospective for copper and gold. We expect to close these deals in the coming months for outcomes that will be value accretive for shareholders. We look forward to continuing exploration of this region and bringing JORC compliant results forward.
Are gold-copper projects less risky?
news|financial: "While the gold price has developed somewhat hesitantly in recent months, the copper price has increased significantly. Are early-stage gold-copper projects less risky?"
"[...] Large copper credits can support the early-stage production planning for gold mines, especially if this provides material cash flows to fund development activities. [...]" Matthew Salthouse, CEO, Kainantu Resources
The appreciation of the copper price looks set to run for some time. The fundamentals of copper as a commodity have indicated ongoing supply-side constraints for some time, even before the current focus on the mineral as a key driver towards a more sustainable future. That makes May River an excellent project for Kainantu, providing us with exposure to copper. While gold stocks at the junior end have traded lower in recent months, all indications are for a rally later in the year. Gold prices should move higher both in the short and longer term.
As a general rule of thumb, the discovery of substantial quantities of by-products such as copper can significantly improve the economics of a project. It can offer greater revenue stability as the price sensitivity to one commodity is lowered. Large copper credits can support the early-stage production planning for gold mines, especially if this provides material cash flows to fund development activities. So there is a case to be made that gold-copper projects can be less risky.
However, all projects have unique opportunities and risks and involve different assumptions on capital allocation and targeted returns.
Whether it is gold or copper, the key to any successful mine at any stage is the prudent assessment then management of risk in the context of the project's unique features, taking into account both opportunities and risks.
That said, we remain bullish on gold and believe in the long-term factors driving price appreciation in the gold market. Gold has historically been seen as an inflation hedge, and as economies return to a post-covid 'normal', we are already starting to see inflationary pressures return. We expect to see a resurgence in support for gold.
What can investors expect?
news|financial: "What milestones should shareholders mark for the coming months?"
Moving into the coming months, we expect to see further developments and announcements as a significant number of our field work samples from KRL South are processed. We anticipate positive news flow from KLR South and KRL North over the next month or so. Further information will follow as assay results become available. In addition, we will also update the market on the outcome of the May River Study.
Lab results are slower than we would like due to COVID. It is an issue that many smaller exploration companies are facing. We are now seeing a steady flow of data which will provide the basis to update the market and support our decisions to refine our program for the second half of 2021.
We look forward to providing ongoing positive news as the year progresses.
Develop yourself instead of selling
news|financial: "You want to become a young production company; other developers are just waiting for the right acquisition offer. Why did you choose this approach, and what qualifies your team to do so?"
"[...] Having held senior roles at OceanaGold, Archipelago Resources and other successful mining companies in the region, our senior management team has a wealth of experience developing projects from exploration targets to full-scale producing mines in the Asia-Pacific Region and, most importantly, working together doing so. [...]" Matthew Salthouse, CEO, Kainantu Resources
Our core focus is on building and growing our Company as a quality junior miner in the Asia-Pacific region, leveraging our excellent projects in the Kainantu region. We aim to build a portfolio of quality projects and partner with other successful operators in the region. We are focused on building a high-quality junior company rather than on a specific project or preparing for a takeover bid. We take this approach to aim for success, and it means we are in a position to drive our own strategy instead of being reliant on someone else to evaluate our projects.
Unlike some other juniors, who, as you mentioned, are exclusively focused on the discovery and subsequent sale of projects, we take a longer-term view while always aiming to provide a value accretive platform for our shareholders. Having held senior roles at OceanaGold, Archipelago Resources and other successful mining companies in the region, our senior management team has a wealth of experience developing projects from exploration targets to full-scale producing mines in the Asia-Pacific Region and, most importantly, working together doing so. Our experience ties in well with our strategic focus and direction.
Sustainability and return on investment
news|financial: "You are committed to sustainable management and operations. Why do you believe that this will ultimately also benefit the shareholders?"
"[...] At both Kainantu and May River, we have selected properties where we believe we can contribute to the local community; and where Warden's hearings made it clear to us that the community strongly supported Kainantu working in the locations to advance mining projects [...]" Matthew Salthouse, CEO, Kainantu Resources
This is a great question. More and more companies are beginning to realize that operating a company with strong ESG fundamentals does not have to come at the expense of investor returns. We believe that the benefits far outweigh the costs by taking the time and employing resources to establish and maintain your social license. The safety of our employees, relationships with local people and environmental factors are our top priorities.
For example, securing new leases, mining applications and other processes are often contingent on the approval of local communities. By providing employment and added benefits, you reduce the need to hire security and fly-in-fly-out workers, ultimately reducing the costs of progressing our projects.
At both Kainantu and May River, we have selected properties where we believe we can contribute to the local community; and where Warden's hearings made it clear to us that the community strongly supported Kainantu working in the locations to advance mining projects and bring economic development to the region.
news|financial: "Thank you very much for talking to us."