Title : Regarding Kuya Silver (from IKN577)
link : Regarding Kuya Silver (from IKN577)
Regarding Kuya Silver (from IKN577)
There's more to know, yesterday's was the simple first pass overview. This could be one to watch in 2021. The following one of the sections from IKN577, out this week:
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An outline on Kuya Silver
Kuya Silver is company this desk has been watching quietly ever since it competed the purchase of the Bethania silver mine from Minera IRL (hah!, there is no escape). It stayed as a private company after that, as even though Kuya was keen on listing as early as late 2018 the market was not responsive. Then things picked up before Kuya suffered a final Covid-19 delay, but last week the company broke cover and announced (26) it was moving public, by completing a reverse takeover (RTO) with Miramont Resources (MONT.cse). At the same time Kuya will raise its capex cash by selling $10m of scrips at $1.65 apiece (and at this stage, one must assume that funding will be fully taken). As a result, here’s how the NR last week explained the pro-forma structure (your author bold-types):
It is expected that upon closing of the Transaction, the Combined Company will issue from treasury 13,041,985 Shares to the Kuya Shareholders (not including the issuance of Shares pursuant to the Concurrent Financing), and that after such issuances, the Company will have approximately 18,619,308 issued and outstanding Shares on a non-diluted, post-Consolidation basis (not including the issuance of Shares pursuant to the Concurrent Financing). Based on the foregoing, following completion of the Transaction, the current shareholders of the Company will hold approximately 30% of the outstanding Shares and the Kuya Shareholders will hold approximately 70% of the outstanding Shares. The Shares issuable under the Transaction will be subject to the escrow requirements of the CSE and hold periods as required by applicable securities laws.
In other words, Kuya is valuing itself at C$30.7m out the gate, with around $20m of that asset value assumed in Bethania. As for the mine, it sits around 10km as the crow flies from the working Corihuarmi mine. It has been worked intermittently, with the last commercially profitable ore extracted in 2014 and the mine eventually put on care & maintenance in 2016. One of the issues at Bethania is its lack of processing facility, s the plan for Kuya to build a mill and produce conc instead of shipping elsewhere is a strong positive (not least for local job creation). It is a silver/lead/zinc underground mine that has to date produced at a low tonnage rate, but Kuya believes it can run at 350tpd and produce around 1.7m oz AgEq per year, the metals mix being around 60% straight silver and 40% the Pb and Zn by-products. As well as the lack of a mill, its obviously been cash starved over the years and as a result, Kuya also sees clear opportunity to increase the resource through exploration and bring what is known to better 43-101 standards.
So far so good, the $30m entry ticket looks a little rich, but coming in via MONT also means the Quinton Hennigh exposure machine (he’s less a geol, more a franchise) and there’s always a market for silver explorecos. The plan to throw money at a promising but unloved asset is a good one, if all goes to plan they could be producing in a year. Now for some more information you won’t get in a corporate presentation:
- They have the backing of the 20% minority owners of Bethania, the Soria López family from the nearby city of Huancayo. This is one of the well-to-do families in this small provincial city and their word will carry influence.
- Not a bad thing, because as well as any local social issues faced by Kuya at Bethania there is institutional opposition to mining in the Huancayo area led by the local Catholic Archbishop, a well-known and vociferous anti-mining campaigner. This doesn’t mean mining is impossible (e.g. MIRL’s nearby Corihuarmi falls under the same area of church influence and has continued producing with nary a pause), but it is a factor to consider.
- On this subject, I was not impressed this week when, on asking friends for information, was told that even though Kuya has been 80% owner of Bethania since 2018 they haven’t done anything in the way of baseline community outreach as yet. For example, the local school teacher in Bethania (and there’s only one school and it’s small) had not even heard of the name Kuya Silver even after being prompted with the names, or knew of any contact. His only comment was that in early 2020, pre-Covid, there were a couple of people doing clean-up work at the mine site.
Bottom line: We have this company on watching brief. One of the advantages of silver in 2020 is that through the IPO period, somebody else can blow their brains out on the stock before it finds its trading range as I’m not playing with silver right now. Also, with Hennigh and his band of pumpers in tow, expect this stock to get “success baked into the stock” at some point by some enthusiastic supporters (paid or otherwise). Once things have dies down and come 2021, we’ll know more about the reality of Bethania and, not least, whether the team has made contact with that school teacher and offered assistance.
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