What EVERY investor should know about KATX!
I am writing this post as a completely non-bias overview of KAT Exploration. It is my intention to provide a complete overview of KATX in one big, easy to understand and comprehensive thread. The purpose of this is to provide long term investors of KATX and new investors alike a single place to find quality information on KATX. In this one post I am going to compile all of the known facts about this company as well as some of the current opinions and theories about KATX and their future. I will make it clear when I am talking about opinions as not to try to confuse anyone. This is not intended to be a complete history of KATX, only a complete overview of where the company is at now and what it has done in the recent past.
Disclosure At the time of writing this post I am currently invested in and hold shares of KATX.
Brief Summary of KATX, for a complete background on KATX please go to the I-Box page located here at the top of the message board.
KAT Exploration Inc.
is an exploration company based in Mount Pearl Newfoundland and was incorporated in December 02, 2005. The company has a variety of mineral properties consisting of Gold, Copper and Silver.
Key Company Information
KATX is a Mine Exploration Company that currently fully owns 5 property's in Newfoundland, and has rights to a 6th property and is under contract to fully acquire that one as well.
Out of these 6, the two most important and promising ones short term are their Handcamp high quality gold property and their Rusty Ridge high grade copper property.
KATX is run by CEO Ken Stead and his brother Timothy Stead. Both brothers own a controlling interest in the company eliminating the possibility of a hostile take over from a 3rd party.
KATX currently has 289 million shares outstanding. This has been a solid number and very low considering the type of company KATX is. The CEO has not issued anymore shares for well over 6 months now and has no plans to do so in the future as well.
Right now the company's main focus for 2010 is their high quality Handcamp gold property. They are only weeks away from announcing possible financing for test drilling on this property and might even be announcing a Joint Venture with a mining company to begin work promptly on mining once the test drills are completed.
Mr. Stead is a co-founder of Kat Exploration Inc., and has been president since the company's incorporation in December of 2005. Mr. Stead worked directly in the mining industry from the early to late 70's, where he first started with the Iron Ore Company Of Canada and worked for Noranda at their Nanasivik mine in Stratacona Sound, northern Baffin Island. In the early 80's, Mr. Stead worked in the oil fields of Alberta, afterwards returning to Newfoundland where he set up his own construction company from 1985 to 1995. In 1997, Mr Stead became a co-founder of Cornerstone Resources Inc., a junior mining company now trading on the TSX-V (CGP) until he resigned in 2004. Over the past nine years Mr. Stead has been actively working in a Sedimentary-Hosted Stratiform Copper environment and will continue to make this one of the company's priorities.
Ken Stead is one of the most open and honest CEOs out there. He has made it his goal to preserve and increase share holder value. He has put his money where his mouth is by using his own personal capital to fund projects for the company instead of diluting the common shares, something very few CEOs would be willing to do. He responds to phone calls and emails very quickly, and has answered all questions he is legally allowed to answer. He is a very straight shooter and does not keep anything from the investors.
Handcamp Gold Property
This is KATX's flagship property and main focus for 2010 and beyond. The "Handcamp" is located approximately 33km north of Badger, central Newfoundland and 10km northeast of the old abandoned "Gullbridge" copper mine. Abandoned logging roads run through the property allowing for excellent accessibility and mobility of heavy equipment.
What makes this property so special isn't the fact that it's a gold property, but the type of gold property that it is. Handcamp is a very special and unique type of gold deposit known as a "Volcanogenic massive sulfide" (VMS) deposit. Making this property even more special is the fact that this isn't just any type of "VMS" deposit, but it's a "Felsic" VMS deposit. World wide there is only something like 800 of these VMS deposits. They are known for their high tonnage, high quality gold deposits. Of these VMS, the best quality, highest producing gold deposits are the "Felsic" VMS deposits. Right now, out of the 40 VMS deposit sites in Newfoundland, KATX's Handcamp site is rated the highest gold grade with a 13.4 rating. It is the highest grade VMS gold site in all of Newfoundland according to the USGS.
Handcamps special and rare nature has already been validated and backed up by a series of surface rock and soil samples that were processed at a lab. Rock samples were collected over the prospected areas with numerous samples showing very significant mineral content with some gold numbers as high as 158g/t Au, 94g/t Au, 82g/t Au, along with excellent Zn, CU, Ag numbers.
Not only are these gold numbers FAR higher than any of the surrounding mining sites owned by other companies, these numbers are ONLY from surface rocks. Felsic VMS deposits are not the type of deposits that have most of their gold in the surface layers, but instead, most the gold deposits are deeper in the ground. To find these levels of gold in just the surface rocks would imply that there should be FAR more in deeper deposits.
How does Handcamp compare to other near by sites?
Here is a good comparison to how KATX's Handcamp property stacks up against a similar mining company. Anaconda Mining is located right down the road from Handcamp and currently is mining their Pine Cove gold property and has already brought gold to market from their site.
Anaconda has completed a NI 43-101 technical report on their Pine Cove site and has been actively mining it for the past 2 years.
Here are the results of Anaconda's test drill 43-101 report on their "Pine Cove" Gold property.
probable mineral reserves of 2,332,676 tonnes at 2.76 g/t
And now here's Handcamps results ONLY from surface samples.
158g/t Au, 94g/t Au, 82g/t Au
As you can see, KATX's Handcamp property is showing far more gold in just the surface rock than what Anaconda is getting from it's actual mining. This is one reason why people are so excited about KATX. We will still need to get the test results back from a test drill to confirm exactly what's in the ground though.
What's ahead for Handcamp and KATX
Here's what we know right now. Ken has been working on finding financing for the drill program for some time now. He announced last week (the 5th of jan) that they will be releasing more of the Handcamp sample results to the public as well as updating us on the status of financing. He gave a time line for these announcements of only a few weeks, so they are expected anytime now.
Right now, KATX needs financing for a drill program. Then they simply need to do the test drills and release a NI 43-101 report and partner up with a mining company to start mining the gold. That's it.
Ken has also been looking for a possible Joint Venture with a mining company to not only do the test drills, but also do the mining once all of the test drills are complete. His ideal plan for this was to sign a joint venture partnership FIRST, then start the test drills. The fact that he is about to update us on the status of financing leaves many people here to believe that they at the very least have acquired some type of financing, and that it is very possible they might have already signed a joint venture as well. These are just rumors as of now, but they are based in reality.
When they update us on the status of financing in a few weeks, if they have acquired some type of financing for test drills than that would be HUGE news for the company. That would mean they now have the capital to complete the last step before mining.
If the financing came because of a joint venture partnership with a well established mining company, then it would be even bigger news for the company.
If they already have financing in place, they could start the test drills soon and we could have results back via a NI 43-101 report as soon as early spring. If that report confirms what the surface samples have shown, then KATX would suddenly be worth a lot of money and be a very valuable company.
Estimation of Value
Now it's time to try and put everything thing is perspective and figure out what KATX is, and will be worth in the near future. I am going to do this from a few different angles to give a wider perspective on this.
Mine Exploration Companies are notorious for having to dilute their shares to pay their bills. Even the ones with great prospects usually have outstanding share counts well over 500 million. This is not the case with KATX and are CEO has done an amazing job of not diluting the common shares.
Here are the numbers for KATX as of December 2009:
Authorized Shares (AS) = 3,030,000,000 as of December 15, 2009
Outstanding Shares (OS) = 289,711,664 as of December 15, 2009
Float = 182,711,664 as of December 10, 2009
Note: 500,000,000 shares max available for common issuance
These are VERY low numbers for a Mine Exploration Company. I am going to compare these to a very similar Mine Exploration called US Gold (UXG). This company is almost identical to KATX in shares, size, and development. They currently are not mining yet but have completed test drills and filed IN 43-101s, something KATX is not far from doing. Right now the only real difference is that they have completed their test drills and published their results.
UXG currently has around 106 million shares outstanding (OS).
A little over a year ago they were where KATX is right now, about to get the results back from their test drills. At that time they were trading at around .30 a share. When those results hit, they with in a matter of weeks went from .30 to $1.20. A few months after that they were trading at $3 a share. This was all due to them getting their test drill results back and publishing the 43-101 technical report detailing the findings. That is what got the ball rolling.
Here is what UXGs report said about their property.
US GOLD CORPORATION (NYSE Amex: UXG)(TSX: UXG) is pleased to announce good exploration results from Nevada. The best results continue to come from West Pick, including 0.06 opt (2.05 gpt) gold over 75 ft (22.9 m) and 0.027 opt (0.94 gpt) gold over 180 ft (54.9 m)
These channels are present in the West Pick area where US Gold has encountered significant mineralization, including the best results announced earlier this year of 0.085 opt (2.9 gpt) gold over 150 ft (45.7 m) and 0.065 opt (2.24 gpt) gold over 120 ft
So as you can see, UXG's best gold results were 2.9 g/t.
Here's KATX's Handcamp results for comparison:
rock samples were collected over some of the prospected areas with numerous samples showing very encouraging mineral results, of 158g/t Au, 94g/t Au, 82g/t Au
Again, here is a company that has almost the same number of ountstanding shares as KATX, and only has completed their test drills and they are trading around $3 a share with a high of $3.50 after shooting up from .30 a few months before. Again, it is important to note that KATX's samples are ONLY surface samples. There is a good chance there might be even higher levels of gold the deeper they drill.
But this is not all that KATX has to offer. As stated above, their main focus for 2010 is going to be Handcamp. But they have 2 other very very promising property's as well.
KATX Twi-Lite High Quality Gold Property
This property actually could turn out to be even bigger and better than Handcamp. Right now, the first results from there have shown even higher levels of surface gold than Handcamp.
Results from KATX Twi-Lite Property
The Discovery Prospect: Zone of quartz veining and associated silicification, high of 202 g/t Au (Visible Gold)
The Spring Pit prospect: bedded pyrite/mafic fault gouge (high of 14.9 g/t)
The 320 Vein: zone of quartz veining and quartz breccias (high of 16.6 g/t)
The Paddy's Pitt prospect: silicified and brecciated siltstone (high of 23.80 g/t)
KATX High Grade Copper Property Rusty Ridge
Coincidental magnetic Induced Polorization(IP) resistivity and soil geochemical anomalies suggest potential for a body of Iron Oxide +/- Base, Precious and Rare Earth type mineralization, similar in style and setting to the giant Olympic Dam deposit in Australia
Olympic Dam and related deposits all occur within continental rift sequence rocks adjacent to major structures. The Rusty Ridge is located within a continental extensional environment within peralkaline rocks emplaced adjacent to a regional fault system. The presence of a large magnetic body(can be viewed on Kat’s website)that appears to be intrusive into the overlying rock sequences that appear regionally altered, are variably pyretic and contain vein type fluorite mineralization and appears to suggest a magnetic origin for the mineralization
A completed 3D inversion modeling of the airborne magnetic data, (can be viewed on Kat’s website) show a discreet, strong magnetic anomaly underlying the Rusty Ridge area. Coincidental with this are moderate to strong IP chargeability anomalies that suggest a significant concentration of sulfides. Those large anomalies have been determined as future drill targets that Kat would hope to test mid 2010
So there you have it, KATX has 2 extremely promising and rare high quality gold property's that have already shown to date MUCH higher levels of gold than any of the surounding mining companies sites and much higher than similar Mine Exploration companies that are currently trading at around $3 a share. Also of important note, last time KATX had major news the stock pps went from .20 to $2 in 3 days. Back in Nov when the last bit of big news hit, the stock went up over 700% in a week. Since this KATX has only given back around 50% of it's gains before moving up on it's own again. KATX clearly can move on good news as it should and there appears to be more great news coming soon.
What KATX is worth
With the likely news of financing for test drills looking like it could be coming in a matter of weeks, this might be the last chance to get into KATX at these levels. If KATX does indead annouce they have financing in a few weeks when they release their status update, then that would surely cause this to shoot up. How high is a tough guess right now. If they annouced that they have signed a Joint Venture and that is how they acquired the financing, then that would be even bigger and cause KATX to shoot up much higher.
From this news alone KATX could go up .10 to .50 if not higher. The biggest news will be when ever they get their first results back from the test drills which could be as early as spring. If the results confrim what the surface samples have shown, then your looking at a company that could shoot up to $3 to $5 pretty fast. When you look longer term, and factor in that they have a very very promising copper property and another extremely promising gold property that might have even more gold in the ground than Handcamp, KATX could very realistically be in the $5 to $10 range a year or more out.
These are all of course rough guesses right now based on what this company has done in the past and what other, similar companies have done as well. No one knows for sure what this will do, but the chances of this going up a good bit are definitely there. Right now, KATX is very undervalued at it's current prices, and it's also cheap enough to make it a very attractive stock to hold for both short term and long term gains.
Summary of things to look for in 2010 from KATX
1. Any day now KATX is expected to release more lab results from it's high quality gold property Handcamp.
2. Within a few weeks KATX will be updating us on the status of financing. (it is expected that they have financing already but right now this is just a rumor)
3. Announcement of KATX entering into a joint venture with a mining company. (this could actually be announced with the financing updating coming in a few weeks or it could come at anytime after that update)
4. KATX announces that they have started the test drills on Handcamp. (depending on how the other things play out, this could come as early as Feb.)
5. KATX releases a NI 43-101 technical report on the test drill results from Handcamp. (this could come as soon as early spring)
6. KATX announces it has started mining operations on Handcamp. (this could happen as early as summer or early fall)
7. KATX announces it has entered into a joint venture partnership to do test drills on their Rusty Ridge copper property. (this could happen sometime mid 2010 or later)
Wanted to give a very special thank you to Birdmanbob4! You have done great DD here and I have used a good bit of your research in this thread, thanks again!
Also wanted to give a big thank you to Teedlum for suggesting we do one big thread with all the DD in it! Hopefully this will be able to better answer some of the questions we get around here on a day to day bases and be useful to new and old investors alike!
Also wanted to give a big thanks to everyone else that help make this possible, including everyone here on the board, most of who have chipped in one way or another. Thanks again!