Rich Rock, Kinross Back Quest For Colorado Treasure
LAKE CITY, Colorado — Ore shoots are this high-grade gold mine’s ATM machine.
Golden Wonder Mine in Colorado is preparing to scale its own Rocky Mountain high. An exploration pact just signed will see the world’s seventh-largest gold miner, Kinross Gold, search for precious metal along 28 claims adjacent to the producing mine. That’s unprecedented for the mine’s self-funding owner: publicly traded LKA Gold.
Kinross under the direction of leading executives at its Denver office, including the company’s USA president, Lauren Martin Roberts, will conduct exploration on LKA Gold claims. Those LKA claims are directly on line with Golden Wonder, North America’s richest underground gold mine.
If larger Kinross finds a deposit of anything greater than 50,000 ounces, a venture (65-35) with LKA is formed. Anything less than that will belong to LKA (LKAI is OTC ticker in the USA). Kinross executives in Denver initiated discussions with Golden Wonder’s LKA Gold.
The exploration pact — announced here — is a glimpse into 22-year-old Kinross Gold’s USA unit. Aside from securities filings and management discussions, the Toronto, Canada-based Kinross routinely declines to discuss or headline any of its worldwide exploration efforts. [See: Kinross pact]
This is a Colorado story I think will captivate a gold industry embittered by 5 years of falling prices and management disasters. Historians will love the 19th century lore as well.
LKA Gold‘s Golden Wonder Mine in modern times started as an earnest yet unfulfilled exploration project. That was 35 years ago as part of NASDAQ high-flier Lake City Mines. LKA Gold eventually took over the Colorado properties in and around outdoorsy Lake City. In year 2000, LKA hit a mother lode of gold at multi-level Golden Wonder Mine: a chunky feeder shoot that took six years to exhaust, or mine out. [Fact Sheet: please click here]
As I research and report this, an LKA Gold exploration crew is drilling. Three men are blasting away at high-grade gold veins in a quest for the next thick ore shoot. In the mix: a father-son team from the nearby town, a project geologist and outside consultants. All are working to repeat that 2000-2006 cash payout: another feeder shoot. The harvest from that ore: 133,000 ounces of gold with ore grades exceeding 16 ounces of gold per ton.
When that discovery happens, and I think it is inevitable based on geochemical and geophysical indications, let’s watch the digits on that ATM cash machine. [Get 2 to 4 TCR reports weekly — $139 a year]
TCR audience, Kye and Nanette Abraham run the financial and strategic sides of Golden Wonder Mine operator LKA Gold. The husband-wife team do that from a longtime family office in Gig Harbor, Washington.
The Abrahams are president and CFO, respectively, of publicly traded LKA Gold. They met in high school. The two started and still run a 30-year-old securities brokerage that is based in Washington state. [See: president’s letter to stakeholders]
Golden Wonder‘s mainstay is sulfide-laden rock pulled from gold-enriched veins on several levels of the 160-year-old mine. It’s 250 miles from Denver in southwestern Colorado. Regional mills pay market rates and more for the “super-sacks” of crushed vein material.
Some of the largest mine and mill operators in the western USA — Barrick, Teck, ASARCO, Freeport, Klondex Mines and Kinross— purchase, or have purchased, Golden Wonder’s rich rock for their own mill and smelter feeds.
“For $2,800, we ship 20 super-sacks at 2,200 pounds each on contracted rigs,” says Kye Abraham, 57. “It goes to Freeport McMoRan’s smelter in Arizona. It helps boost Kinross‘s blend at their mill in Republic (Washington). Klondex buys it for their Midas mill in Nevada.”
The vein material at times grades 400 grams per short-ton of gold. “It’s more like concentrate than crushed rock,” says Mike Schell, mine manager.
Mike Schell, his son, Tony Schell, age 41, and other muscle-bound miners are mostly from nearby Lake City and Montrose in southwestern Colorado. The team’s selective drilling and dynamiting of veins, some just 10 inches wide, are why LKA extracted 140,000 ounces of gold in one super-sized span of time. Average grade: about 11.5 ounces (358 grams) per short ton.
Underground & Over The Top
Take a step back. [In The Raw: TCR’s 2015 visit to Golden Wonder — photos]
North America‘s most profitable mines begin as underground affairs, high in gold grade and generally low in bombast. The best of the lot, in the USA and Canada, are or were run by penny-counting blue-collar families. This harkens even to Colorado’s Cripple Creek and its Independence Lode, which launched a gold rush in the 1890s.
Some 23 million ounces of gold came from that Colorado mining district, whose volcanic crust and telluride minerals are very similar to LKA’s Golden Wonder and surrounding claims.
In ways both common-sensical and romantic, LKA Gold’s Golden Wonder Mine and a few others (California, Colorado, Alaska, Yukon) are evolving traditions that started in the 1860s. In Golden Wonder’s case, the original “outcrop” discovered on now-named Cannibal’s Plateau graded more than 1,000 ounces of gold per ton in the late 19th century.
Those were the days when Alfred G. (The Cannibal) Packer was prospecting for gold in the Rocky Mountains and surviving on human flesh in a fierce winter of 1873. (The dining room-cafeteria at University of Colorado-Boulder bears Alfred’s name. He also went by “Alferd.”) This fleshy tale, and many others, still are heard at saloons and around the campfires of summer and winter fishers at nearby Lake San Cristobal.
Everything seems big here: the sky, the mountains, the ale houses, the gold, the town’s bank vault. Fly-fishing aficionados pluck 30-inch char and larger from summer streams and river tributaries.
In August 2014, LKA Gold attracted the attention of the Koskis. They’re a Sarasota, Florida, family that founded and still own more than 15 percent of $1 billion dollar publicly traded industrial equipment supplier, Sun Hydraulics. [See: Sun Hydraulics’ history and filings.]
The Koski Family Limited Partnership made a $1.8 million dollar investment, paying $1.5 million directly into LKA Gold for 6 million shares of common stock. Another $300,000 changed hands as part of an anti-dilution effort that netted the Koskis an additional 1.2 million shares.
In June 2015, last month, the family added another 1.5 million shares at 40 cents each.
LKA Gold’s market capitalization comes in right at $8 million at the current market price of 0.38 cents per share. As of this writing, there are no outstanding warrants available for conversion into common shares.
The Koskis’ LKAI (OTC ticker) holdings with those of the Abraham family and a longstanding partnership that Kye Abraham manages combine for almost 11.5 million of the outstanding 19.2 million shares of LKA Gold. That’s 59.98 percent of the total outstanding. Market pros reckon the “float” of available shares for trading is less than 4 million shares. [See: insider filings.]
This Rocky Mountain State‘s mine and surrounding property are likely to see several events that boost LKA Gold‘s stock-market worth. That includes Kinross Gold USA and its Republic operation in Washington state, or any larger producing gold miner with a regional smelter or mill, requesting more shipments of rock from LKA.