The Long Case for Kimber Resources
Posted on Jun 11th, 2007 with stocks: KBX
gold.seekingalpha.com
Greg Silberman submits: Kimber Resources (KBX) is an undervalued gold stock with properties in the historic Sierra Madre Gold Belt in Mexico.
Fundamentals:
Kimber Resources is a development and exploration company in the Chihuahua State of Mexico. Properties are located in the heart of the Sierra Madre Gold Belt, an historic gold district.
Kimber’s flagship is the Monterde gold-silver property 260 kilometers southwest of the city of Chihuahua. It is host to the Carmen, Carotare and Veta Minitas deposits. Total resource at Monterde is ~2m M&I gold equivalent ounces (64% gold and 36% silver). At a market cap of C$70m, that equates to $35/equivalent oz in the ground – which is reasonable as far as Mexican exploration companies go. Here is a good guide to see how different companies rank by ounces per market cap.
Kimber is in a good neighborhood with exciting mid-tier producers all around including Minefinder’s (MFN) Dolores Project; Alamos Gold’s (AGI) Mulatos Project; Gammon Lake’s (GRS) Ocamppo and Palmarejo's (PJO) Palermo project.
The share structure is pretty tight, with 49,219,920 shares issued and 51,748,620 outstanding on a fully diluted basis. Most options are priced north of $2 and are currently out of the money. Insiders hold 17% if the company.
The Scoop:
There has been a fierce proxy fight going on for control of the future direction of the company. A group of shareholders felt that CEO Robert Longe was not bringing the company along quick enough to BFS and production. The shareholders have so far settled for placing key members on the board, but Robert will be replaced before long.
In addition, the company announced poor drilling results at Monterde at the end of 2006 and dropped the bombshell that cut-off grades may cause difficulties when converting resources to reserves.
All of this has served to keep the stock relatively cheap. The company has a good board, no debt and great properties (which should turn out to be economical). Insiders know it and have been buying hand over fist – the latest on-market purchase being $36,000 by newly appointed director Leanne Baker.
Kimber will work through their problems in due course and it is very attractively valued at this level.
Technical Analysis:
Kimber (weekly) testing strong support @ C$1.50
Kimber had a fantastic run from 2003 to 2004 - a 10-bagger (up over 10x).
As you would expect, those gains take time to digest.
In fact, it took 2 years for the price to marginally exceed its 2004 highs but that ended up being a double top and paved the way for yet more weakness.
C$1.50 has acted as solid support over the last 3 ½ years. And that’s where we join the stock today.
Remember, even though the stock has been correcting for 3+ years, the company has continued exploring and defining up ounces – moving from indicated and inferred resource of under 1 million ounces to over 2m by the end of 2006.
The daily chart, shown below, indicates a double bottom is in place with the necessary technical divergences. KBR is setting up for a low risk/reward trade.
Money Management:
Kimber is a small junior with a market cap of CAD$71m.
Average daily volume is ~45k shares or roughly C$67k/day; individual investors should have no problem with liquidity. |
