West Kirkland mulls options after landing Three Hills permit

VANCOUVER — West Kirkland Mining (TSXV: WKM; US-OTC: WKLDF) has come a long way over the past year at its Three Hills and Hasbrouck gold deposits in Nevada. And with a preliminary construction permit now in hand, it is ready to assess its development options for the twin projects.

Given the depressed gold price, however, the company says there could be more opportunities with acquisitions, where its social licensing and engineering expertise could generate share momentum and improve market valuation.

On Nov. 27 West Kirkland tabled a positive environmental assessment for an open-pit, heap-leach mine at Three Hills. This expedited the company’s path to production, whereas Hasbrouck could proceed under the typically longer environmental impact statement process.

In early June, West Kirkland published prefeasibility study results that envision a staged build, wherein Three Hills would see first gold production. The company’s plan involves an initial two years of operation at the site before Hasbrouck takes over for six years of mine life.

An adsorption-desorption-recovery (ADR) plant is planned at Three Hills for handling ore from both deposits. Loaded carbon from the Hasbrouck mine would be trucked 8 km north to Three Hills for gold recovery.

Initial capital expenses to build the starter mine and ADR plant are estimated at US$54 million. Further investment of US$83 million over the first two years of production would be needed to build the larger Hasbrouck operation. West Kirkland expects that US$43 million of this capital would come from Three Hills cash flow.

The combined operation would crank out 567,000 oz. gold over the mine life, at all-in sustaining costs of US$779 per oz.

Assuming a US$1,225 per oz. gold price, the mine plan features a US$75.3-million, after-tax net present value at a 5% discount rate, along with a 26% internal rate of return.

“It’s an interesting time in the gold space, where we’ve seen prices take another slide … it’s a question of what the best strategy will be, given the current market. From the company’s point of view, proceeding with development would be contingent on a more positive gold trend or sentiment,” chief operating officer Sandy McVey said during an interview.

“There are two things I view as positive for the project, outside of being in arguably the best jurisdiction in the world. First, it won’t cost us a lot of capital to get it going; and second, we’re looking at a tight timeline once we pull the trigger on production. There isn’t a lot of preparation in terms of construction or pre-stripping before we’re in business,” he added.

Given the struggling gold market, West Kirkland is considering its options, but it’s likely that the Three Hills–Hasbrouck plan will go on the back-burner until metal prices turn around.

In the meantime, the company hopes to apply its permitting experience to gold opportunities globally.

West Kirkland is helmed by president and CEO R. Michael Jones, who has a track record of value creation dating back to his work at West Timmins Mining, which was snapped up by Lake Shore Gold (TSX: LSG; NYSE-MKT: LSG) for $424 million in late 2009.

Jones’ other big play has been Platinum Group Metals (TSX: PTM; NYSE-MKT: PLG), which raised US$80 million in November to fund development at the Western Bushveld Joint Venture platinum mine in South Africa.

Meanwhile, West Kirkland raised $33 million in mid-2014 to buy Three Hills and Hasbrouck from Allied Nevada Gold, and made institutional and private equity contacts along the way.

Major shareholders include funds Sun Valley Gold and Liberty Metals and Mining, while West Kirkland could form a joint venture at Hasbrouck and Three Hills with Waterton Precious Metals Fund.

“We went from zero to 60 — or having nothing to something substantial — in around 18 months. Now we’d ideally like to move onto something even bigger,” McVey says. “We’ve earned the right to go to our shareholders and the market, and say: ‘We have advanced these projects, and we’re the right team to do it again.’”

An so begins West Kirkland’s search for its next project. McVey says the company’s current portfolio is strategically well-positioned to capture any margins from a gold-price recovery, but given the low valuations in the industry, it seems a prime time to be in the acquisition market.

The company’s shares  have traded within a 52-week range of 5¢ to 9¢, and closed at 5¢ per share at press time.

West Kirkland has $500,000 in cash and 294 million shares outstanding, for a $14.7-million market capitalization.