Kilo juggles projects on several fronts

 In late January Kilo Goldmines (KGL-V) announced that its iron ore joint-venture project with Rio Tinto (RIO-N, RIO-L) in the Democratic Republic of the Congo has the potential to host direct shipping ore. In the same announcement the junior confirmed that it had been selected as the preferred bidder for concession block A of the Hajigak iron ore deposit in central Afghanistan, about 130 km west of Kabul.

The news flow from Kilo’s offices in Toronto and Kinshasa has continued unabated since then with the release on Feb. 21 of more high-grade drill intercepts from the company’s Adumbi gold deposit in northeastern DRC’s Orientale province, about 40 km south of its Asonga joint-venture iron ore project.

“We’re not well known,” says Kilo’s president and chief executive Alex van Hoeken, who took the helm in September 2011. “But we have completely changed the board, strengthened management and we’re going to turn it around. The share price took a real nosedive last year but since Christmas it’s been climbing back again. I think it’s an undervalued story that has a lot of upside potential and if you take a closer look at it you’ll see why.”

Kilo’s flagship asset is the Adumbi deposit, which contains inferred resources at a 0.50 gram gold per tonne cut-off grade of 46.3 million tonnes grading 1.37 grams gold per tonne for 2.03 million ounces of contained gold. The resource estimate released in March last year was based on 25 drill holes collared on section lines at about 80-metre intervals, as well as data from four adits and twelve trenches.

Highlights from the most recent assay results from Adumbi include 3.31 grams gold per tonne over 30.50 metres in drill hole 44; 3.09 grams gold over 33.68 metres in hole 49; 2.02 grams gold over 27.40 metres in hole 39; and 15.25 grams gold over 2.50 metres in hole 47.

The drill holes intersected steep northerly dipping sheared units of banded iron formation with interbedded meta-sedimentary rocks. Historical mining focused on exploiting gold from a shear zone quartz vein over a strike length of nearly 2 kilometres.

Kilo plans to release an updated resource estimate before the end of the first quarter.

The deposit starts at surface on a 130-metre hill and the company believes it is open-pittable. “Adumbi is a big mountain so it will have a very low stripping ratio in its early mine life and I would assume over its entire mine life,” Van Hoeken says.

The initial resource estimate encompasses a strike length of 1.2 kilometres that appears to be hosted within a regional lineament in excess of 5 kilometres in length along which artisanal mining occurs, the company says on its website.

This year Kilo has restarted soil sampling and trenching work at Adumbi and plans to resume drilling late in the first quarter. It will also carry out a high-resolution airborne magnetic and radiometric survey over the entire deposit early in the second quarter.

Adumbi lies in one of eight exploitation permits Kilo has in the DRC that make up its Somituri project. Kilo expects to explore all seven of the other exploitation permits to generate additional drill targets. The eight Somituri exploitation licenses are valid until 2039 and are held by KGL Somituri Sprl, in which Kilo holds a 75% stake.

Van Hoeken says instead of concentrating on Adumbi’s two million ounce resource, as previous management did, he will concentrate on the other prospects within a five km radius of the Adumbi deposit to find additional resources and expand the company’s global resource. “The previous management has always known about the other prospects but I’m just putting more emphasis on them,” he explains in a telephone interview.

This year van Hoeken will drill 13,000 metres. A few holes will be punched into Adumbi but the lion’s share will be drilled on other prospects close by. He also plans to start exploring one of the other seven concessions, about 30 km west of Adumbi.

The Dutch mining engineer who has been active in the gold, diamond and copper sectors of the DRC for the last twelve years after stints in copper and gold exploration in mining ventures in Indonesia, Mexico and Oman, says he has what it takes to turn Kilo around.

“A lot of people had written off the company until I took it over,” van Hoeken says. “They saw the share price falling and wondered what was happening. I’m not slamming previous management, that’s just a fact.”

Van Hoeken says the biggest challenges he faces in the DRC are finding the right people and setting up the right logistical support structure, not political risk.

“We don’t have a joint venture with the state so there are no real issues with that,” he explains. “If you have a joint venture with the state then it’s someone else you have to deal with and a state’s objective is not always the same as the objective of a private company.”

In terms of its iron ore property to the north, van Hoeken says Rio Tinto approached Kilo after it identified the area to be prospective for large iron ore deposits in an area of greenstone belts hosting significant banded iron ore formations. “They thought we would be a suitable partner and approached our company and eventually a deal was made.”

On Jan. 25 Kilo announced “encouraging” results from the Asonga prospect. Assays from five diamond drill holes drilled by Rio Tinto Mining and Exploration included 73.41 metres grading 66.6% iron in hole 12; 25.57 metres of 66.69% iron in hole 13; 64.95 metres of 64.11% iron in hole 14; 45.75 metres of 63.73% iron in hole 15 and 21.5 metres of 67.76% iron in hole 16.

The drill pattern tested the continuity of iron formations over a wide area centred on Mt. Asonga with drill hole spacing varying from about 750 metres to 3,000 metres over a strike length of between 4.5 km and about 500 metres across strike. Drilling will continue this year.

As for its bid for Block A of the Hajigak iron ore project in Afghanistan, van Hoeken says Kilo is part of a consortium that includes British financier David Buckle, who is active in the resource industry and holds a stake in Kilo.

“We prepared an offer and we were selected based on our proposal and that means we now have the right to negotiate a definitive contract,” he says. “I cannot say more than that because we are still in negotiations and there is a media blackout. But they chose us to develop one block and chose an Indian consortium for the other three blocks.”

If a definitive contract is signed van Hoeken says the first step will be to verify the historic data left from previous German and Russian exploration on the property. “They were there in the 1960s and not much work has been done there since,” he says. “They did some drilling and they drilled some adits so there’s a lot of data we have to verify to make a compliant resource.”

At presstime in Toronto Kilo was trading at 25¢ per share within a 52-week range of 12¢-50¢. The junior explorer has about 217 million shares, fully diluted.