I may have missed out on Bitcoin but that's OK because I've positioned myself for what I believe is a coming bull run in precious metals. Just a couple of years ago, a little gold mining company, K92 Mining went public. Their shares started at 35 cents (CDN) and over the next several months in 2016, the shares went to over $2.20 each. That's amounts to about 600% increase in a very short period of time.
2017 on the other hand, saw record shorts against gold and silver which pushed the metals down in price and took mining stocks down with it. K92's shares were smashed all the way down to the 40 cent range and is currently at about 45 cents a share. That's about 80% drop from its 2016 high.
But what makes K92 so attractive? It's not quite in full production yet and its share price has collapsed to near its IPO starting price. What makes this little gold mining company so attractive is the story of how they got their hands on the property (which is located in Papua New Guinea, a very safe region).
The story goes like this. Barrick Gold, the largest gold miner in the world, purchased the property in 2007 for $141.5 Million and injected another $140 Million in infrastructure, drilling and upgrading to get the mine up and running. That's on top of the estimated $80 Million spent by the previous owner before that. Sum those numbers up and we get a total of $361 Million spent to get this mine up and running. That's a huge number and for those of you who understand the time and costs associated with getting a mine up and running, spending this kind of money is the norm in getting a mine to full production and can take anywhere from 10 to 20 years.
Fast forward 10 years. the financial crisis came and went and hit the precious metals miners hard. Gold went from a high of almost $2,000 in 2011 to a low of about $1050 in December, 2015. That's almost a 50% decline so you can imagine how hard the miners were hit. Barrick suffered Billion dollar losses. In an effort to restructure, Barrick decided to sell off some assets in order to keep its head above the water. It was decided to put the assets in Papua, New Guinea (known as Kainantu) up for sale... for just $2 Million.
Enter the K92 management team. This highly experienced team recognized the potential opportunity of this venture and purchased the property from Barrick in 2015 for just $2 Million. Keep in mind that previous owners had collectively spend over $360 Million getting the infrastructure ready. K92 swooped in and bought a functioning mine for pennies on the dollar. Pretty much all of the hard work was already completed
Production started in 2017 and the next two years will see a full ramp up to production of 100, 000+ ounces of gold per year over the operating life of the mine which will also produce silver and copper as bi-products. It takes a minimum of 10 years and up to 20 years to get a mine to full production. K92 will have achieved full production in 3 years without having to carry an enormous debt load that so many other mining companies have.
Adding to the excitement, K92 has permits totaling over 400 square kilometers and ongoing drill results continue to produce high quantities of gold, copper and silver which strongly suggests future expansion and extension of the operating life of the mine well beyond the presently stated 9 years.
So there you have it. K92 bought a gold mine for $2 Mil which at minimum, will produce a profit of at least half a billion dollars over the next 9 years using an estimated gold price of $1300 per ounce. Imagine what the profits will be if gold rises to $2,000 and beyond. Many experts believe gold will eventually rise in a similar fashion as did Bitcoin in 2017.
You know what they say... buy low and sell high! Right now, (as of December 17, 2017) K92 shares are at about 45 cents (CDN) a share compared to a high of over $2.20 in 2016. I bought another 1,000 shares last week for less than $500. This is a Christmas present to myself.
January is traditionally very good for gold. Just look at any online chart for the previous 4 years and compare December and January charts and see for yourself. I see gold doing very well in 2018. I don't have a crystal ball. I offer no guarantees. I can't see into the future but I sense a fantastic bargain here. If you want to see 100%, 200%, 300%, 400% and 500% gains over the next year or two with a very small investment, then I believe you found it right here.
K92 on the TSXV: KNT
References:
http://www.mining.com/web/the-gold-mine-barrick-may-regret-selling/