Kodiak Copper (TSXV: KDK) is having a good run. In the company’s annual investor letter published last month, Kodiak’s CEO Claudia Tornquist said that last year proved to be “truly momentous and transformational”, so much so in fact that she dubbed it their “year of discovery”.
The excitement is centred on the results of a drill programme at their flagship MPD project in southern British Columbia, where drilling throughout last year – despite the pandemic – found what could be a high-grade copper-gold porphyry system.
Transformative assay results
As Tornquist said: “The first assay results received in September were nothing short of transformative”, announcing results that were “one of the most impressive copper-gold intercepts from early-stage porphyry drilling in British Columbia.”
Tornquist adds that the newly discovered high-grade find is part of “a wider, significantly enriched copper-gold envelope, which has already been intersected by Kodiak over substantial drill widths and to a depth of over 800 metres.” More than 90% of this find remains unexplored by Kodiak, offering plenty of discovery potential.
Unsurprisingly, investors were quick to respond. A month later, in October, Kodiak was able to close a private placement of C$12.7m. One of the investors was Canada’s largest diversified resource company, Teck Resources (TSE:TECK), which invested C$8m for a 9.9% shareholding. Teck and Kodiak, along with other miners Copper Mountain, New Gold and Centerra, are all working the same world-class copper belt, the Quesnel Trough. Kodiak’s investment windfall came after it had sold off its non-core interest in the Trapper Project in August, to Brixton Metals (TXSV:BBB).
Still massive scope for exploration at the MPD
Exploration is focused on the newly discovered Gate Zone, one of several significant porphyry targets located at MPD. This year, Kodiak Copper is planning another drill programme, four times as large as last year’s, and fully funded by the company’s C$14m cash position. However, as Cormark Securities notes, the MPD project will likely require a number of drill campaigns, well beyond this year’s programme, to fully explore the Gate Zone and several other porphyry targets ahead of a construction decision. It is also worth noting that the company looks to be settling in for an extended period, as it is building a field office and technical facility in nearby Merritt as a base for operational support.
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The discoveries worked wonders on Kodiak’s share price and valuation. As news of the finds came out in September last year, the share price jumped from C$0.75 to C$3.17 in the month, before falling back into a lower trading band between C$1.33-C$1.80. Year to date, the share price has increased 363%, though from the trough that followed the heights of C$1.90 in March 2017 and C$1.58 in March 2018. Further drilling updates will likely reignite a rally in this mining stock, if last year’s findings are confirmed.
The current share price C$1.62 of (as at 18 February 2021), does not reflect Tornquist’s excitement. As Cormark Securities says in a 17 February note, “we would view current share price weakness as a buying opportunity,” setting a price target of C$3.00 per share.
Tornquist adds: “Against the backdrop of the strongest copper market in a decade, Kodiak is well positioned to make 2021 its most active and exciting year yet.” Cormark’s formal commodity price forecast includes long-term copper, gold and silver prices of US$3.25/lb, US$1,900/oz and US$24.00/oz, respectively.
It is also worth noting that Kodiak’s portfolio of exploration assets includes the Kahuna diamond project in Nunavut, in Arctic Canada, and the Mohave copper-molybdenum-silver porphyry project in Arizona, USA, a key part of their portfolio which they plan to explore this year as well.