Kainantu Resources (KRL) - Gold & Copper in Elephant Country?
Kainantu Resources is an Asia-Pacific focused gold mining company with two prospective gold projects, KRL South and KRL North, in a premier mining region - the high-grade Kainantu gold district of PNG. Both projects show potential to host high-grade epithermal and porphyry mineralization as seen elsewhere in the district. Kainantu Resources has an experienced board and management team with a proven track record of working together in the region; and an established in-country partner.
We had a chance to speak with Matthew Salthouse recently. He is the CEO of Kainantu Resources and shared some interesting developments at his company.
Kainantu Resources is a gold-focused Asia-Pacific mining company with current business activities in PNG. The firm has a highly experienced board and management team with a proven track record in the region. The company also has an established in-country partner. The company is publically traded on the CVE index with the ticker KRL and has 45,072,400 common shares extant.
Management And Direction
In addition to Salthouse, the management team at Kainantu includes Bart Lendrum, CFO; Giuseppe Perone, Corporate Secretary; and Graeme Fleming, Principal Geologist. The Company Board of Directors includes Marcus Engelbrecht, Geoff Lawrence, and David Loretto, as well as Matthew Salthouse.
Kainantu Resources is currently focused on exploring in the geologically favorable and precious-metal-rich Kainantu region of PNG.
The company has 2 main assets KRL North and KRL South. Both projects show tremendous potential for hosting high-grade ore-bearing epithermal and porphyry mineralization, as seen elsewhere in the district. Both are located close to K92 Mining’s producing gold mine, which is one of the highest-grade gold ore bodies in the world.
- KRL North. Proximal to K92’s production, this tenement consists of a geologic terrane that is highly indicative of commercial-grade ore: Mesozoic metamorphic basement overlain by Tertiary sedimentary and volcanic rocks later intruded by Mid- to Late Tertiary igneous units believed to be the source of the extensive precious-metal-bearing mineralization in the region.
- KRL South. This tenement is the principal focus of the company’s work so far. The deposits host various styles of mineralization including epithermal vein-style systems, multiple skarn deposits, and deeper alteration zones likely affiliated with ore-bearing porphyry.
Meet the CEO
Salthouse is based in Singapore and began his tenure with Kainantu late in 2020. Previously, he worked at Archipelago Resources, a London-listed gold producer. His main interest lies in the building and developing of a small company, and propelling it forward in the natural resources gold-mining space. He sees exactly that potential with Kainantu Resources. Currently he’s devoting 100% of his time, 7 days a week to the company.
Singapore and Hong Kong Markets
We asked the CEO about the Singapore and Hong Kong markets, specifically how friendly they are for raising cash in the mining sectors? He replied that there is investment in mining in both markets and that money is pretty easy to come by, although by and large it tends to get invested in the ASX exchange rather than the local exchanges. He also indicated that the Economic Development Board of Singapore (EDB) is eager to more broadly develop a mining culture there. Between the two, Singapore is his preferred market. The Hong Kong market has seen some recent value destruction given the affairs with China.
Kainantu Business Plan
We asked Salthouse to fill us in on his plan for Kainantu as he envisioned it from the very beginning. He told us that in 2018 he and a few other executives from Oceana Gold saw an opportunity to build a niche-sized, junior mining company in Southeast Asia. With his knowledge of that part of the world, he realized that he needed to focus on the following:
- Obtaining strong local partner,
- Picking up quality assets in proximity to existing successful mining operations, and
- Taking on and resolving social license issues.
They settled on PNG because of its great resource endowment. They had identified some interesting areas, despite the fact that PNG “Has had a chequered past for some miners”. They honed in on the Kainantu region, which is one of the premier regions in PNG for gold exploration.
As it stands today, Salthouse has taken that concept and created a company around it. He then listed the company to access the capital markets as a platform for growth and future expansion in the Asia Pacific region.
Specifically, Salthouse put together a CPC (Capital Pool Company) transaction in the Canadian market to help raise cash. He brought in a talented CFO and principal geologist. He also built a formidable geology team on seat in the country.
With the firm’s listing in Canada, they attracted about 65-70% of the current shareholders with the IPO. The remainder represents new entrants who decided to get involved with opportunity that the company offers.
Digging into KRL North and South
Both the KRL South and KRL North projects have had legacy social licensing issues in the past. But Salthouse was attracted to them for the simple reasoning that they are “blue chip assets” in a “blue chip jurisdiction”. The social legacy issues have been resolved by Kainantu as old clan leaders have gone and the projects now have the support of the local community, which is fundamental to any future progress.
We asked the CEO how he knew these were high-quality assets. He replied that the historical artisanal mining, abundance of scar mineralization and evidence for porphyry-epithermal systems are good evidence alone. But equally important, they now have a strongly supportive local community, which is critical to move forward in PNG.
Kainantu Resources has identified prospects and they are in the process of trenching at these prospects with the intention to delineate some drilling targets moving forward. That have sample at KRL South with 40g/t or 40.33 PPM from one of the identified prospects. More samples are being processed and results will be coming out in a couple of months.
We also asked if the tenements are so good, why hasn’t K92 picked them up? Salthouse ventured that the social license issue probably stymied earlier business deals at these locations.
Company Targets and Goals in 2021
Kainantu Resources’ overarching goal is to build a successful junior mining company in Asia-Pacific. The company’s targets and goals for 2021, consistent with that vision, are to develop a defined mineral resource for KRL North and South and also to establish an opportunity for accretive regional collaboration in PNG. As discussed, the firm is the early stages with trenching and prospect identification need now to delineate the size of the prize at Kainantu North and South. The company’s cash position is sufficient at this stage of the game to do this work, he said, having raised CAD $4.1M by the end of 2020.
As far as accretive activity goes, Salthouse said “I'd like to think that we can enter into a transaction which is accretive, which unlocks another valuable asset somewhere else in Papua New Guinea or somewhere else in the region as well, which I think shareholders would see is opening up another pathway for the company”. He indicated that they are in discussions with various parties on the transaction possibility side. Given that gold companies are a bit expensive at the moment, he felt that perhaps something might open up on the private side.
We also asked the obvious question: Are you planning on flipping the firm to K92? He reiterated to us “We want to build a company here. We want to build a successful junior mining house in Asia Pacific, and it takes time, but that’s what we're committed to do”. He did leave an out on the table, though, by saying that if people want to look at the company, then that is another story.
Finally, we spoke with Salthouse on the critical topic of ESG (Environment, Social and Corporate Governance). He brought us back, again, to the social side of that triad. He has several good people with a lot of Southeast Asia experience in place. Kainantu Resources takes the approach that the local community educates them, not the other way around, he said. It’s all about respect and jobs for the local people.