Bullion bulls invest in Kaminak Gold

A pooled investment fund associated with billionaire mining magnate Thomas Kaplan — an Oxford-educated historian, who spends much of his spare time trying to save the world’s big cats from extinction — has become the latest investor in Kaminak Gold (TSX: KAM; US-OTC: KMKGF).

Kaplan is a director of Electrum Strategic Opportunities Fund L.P., one of the investment arms of his privately held Electrum Group, a New York-based global natural resources investment management company.

The fund is joining Kaminak’s existing big shareholders, Ross Beaty and Zebra Holdings and Investments S.a.r.l. Luxembourg in a private placement that will give Electrum a 10.3% stake in the junior mining company.

Under a non-brokered private placement, Kaminak will issue 27.4 million shares to Electrum Strategic Opportunities Fund, Beaty and Zebra Holdings for $22.5 million, which the junior will use to advance its high-grade Coffee gold project in the Yukon.

Beaty’s latest investment in the company will keep his pro rata stake at 7.3%, he says, noting in an email to The Northern Miner that he likes “the project, the stage it’s at and the company management.”

“I also like gold,” he continued, “and have invested in a number of similar companies lately. I don’t know when the gold price will rise — and in fact it could fall much lower — but if it does it won’t be for long, and I expect to see much higher gold prices by the end of the decade.”

Eira Thomas, Kaminak’s president and CEO, said in a press release that the funds “will ensure that our Coffee gold project stays on the fast track right through to construction — targeted for 2018 — in support of Kaminak’s larger goal of becoming a Yukon gold producer by 2019.”

Investors who follow the money in the gold sector will know of Kaplan as the chairman and chief investment officer of the New York-based Electrum Group. Over the years, investment funds associated with Kaplan’s Electrum Group have built strategic stakes in gold mining companies, including Gabriel Resources (TSX: GBU; US-OTC: GBRRF) and NovaGold Resources (TSX: NG; NYSE-MKT: NG), where Kaplan serves as chairman of the board. Other historic investments include stakes in Sunshine Silver Mines, Moto Goldmines, Mantra Mining and Tintina Gold.

“I’ve reached a point where I feel the only asset I have confidence in is gold,” Kaplan told The Wall Street Journal in a 2010 interview at the Manhattan headquarters of his family office, Tigris Financial Group.

The billionaire has also made astute investments in the oil and gas business. In 2003, he founded Leor Exploration & Production LLC — a natural gas exploration and development company with wells in Texas — which he sold in 2007 to EnCana Oil & Gas USA Inc., a subsidiary of Encana Corp., for $2.6 billion.

In 2006, Kaplan branched out into philanthropy, co-founding Panthera Corp., a nonprofit organization dedicated to saving wild cats and protecting them from human and environmental threats. The group’s conservation efforts focus on panthers, jaguars, pumas, lions, leopards and cheetahs.

Kaplan’s Electrum Strategic Opportunities Fund was incorporated in the Cayman Islands earlier this year. Kaplan is listed as a director, according to a form D-filed with the U.S. Securities and Exchange Commission. The minimum investment allowed in the fund is US$5 million.

As part of the private placement in Kaminak, Electrum Strategic Opportunities Fund will have the right to nominate one person to the company’s board of directors, and has the right to participate in any future proposed equity offering, so that it can keep its pro rata shareholding.

Kaminak describes Coffee as one of the highest-grade, undeveloped heap-leach projects in the world. The project has 10 known deposits, and the property has untested targets outside the resource.

A preliminary economic assessment of the project last year outlined a $330-million after-tax net present value at a 5% discount rate, and a 26% after-tax internal rate of return. The PEA was based on a US$1,250 per oz. gold price and a US95¢ Canadian dollar.

The study outlined a mining operation that would produce 167,000 oz. gold a year over an 11-year mine life at all-in-sustaining costs of US$687.50 per oz. Total capital costs are projected to run to $304.8 million, and the after-tax payback would come in just two years.

The PEA was based on indicated resources of 14 million tonnes grading 1.56 grams gold per tonne for 719,000 contained oz. gold, and inferred resources of 79 million tonnes grading 1.36 grams gold for 3.43 million contained oz. gold.

The company updated the resource estimate on Sept. 23, however, and now the project’s indicated resource stands at 52.4 million tonnes at an average grade of 1.68 grams gold per tonne for 2.82 million contained oz. gold, and inferred resources measure 42.7 million tonnes at a grade of 1.52 grams gold for 2.09 million contained oz. gold.

The estimate represents an 8% increase in the resource grade for Coffee’s indicated resources and a 12% increase in the grade of the project’s inferred resource.

In March, the company approved a $21-million feasibility study of the project, 130 km south of Dawson City. The study is on track for completion in early 2016.