Barry FitzGerald: $10m NSW copper junior Kincora jacks up its odds with prospect generator model

The hardest part of the junior exploration game is funding. But Kincora Copper is showing how to multiply the cash you have to play with.

Kincora Copper is using the prospect generator model to access up to $110m of exploration funding for its projects. Pic: Supplied/Stockhead

“Garimpeiro” columnist Barry FitzGerald has covered the resources industry for 35 years. Now he’s sharing the benefits of his experience with Stockhead readers.

There are no sure things in the exploration game. But the more money spent on drilling well thought through targets worked up by exploration teams that know what they are doing, the luckier an explorer becomes.

The problem for ASX juniors is how to the fund metres-in-the-ground, particularly when the broader market is going through a risk-off phase as it is now because of President Trump’s tariff showdown.

Equity raisings can be done in such conditions. But they can be highly dilutive because the junior’s share price has tanked. And even then, the raisings are necessarily small and limited to one project.

There is a solution for quality juniors – the project generator model. It’s where the junior works up first order projects and then brings in a mid-tier or major mining company with deeper pockets to fund the exploration.

The junior is free-carried for the program and retains say 20-30% of the project to the point of a commercial discovery being declared. Alternatively, the incoming mid-tier/major can drop out if early work disappoints.

The project generator funding model is common in the Canadian market, not so in the Australian market.

A key reason for that is Canadian investors get behind the model when the exploration project has tier-1 potential, that is multi-billion dollar potential of which 20-30% is well worth having for a lightly capitalised junior.

In contrast, much of the exploration by ASX juniors is not for tier-1 targets. It is more about working over old ground where a new gold or base metals resource of small to medium size is considered the main prize.

A project generator to watch

All that brings Garimpeiro around to today’s interest – Kincora Copper (ASX:KCC), listed on the ASX and in Canada.

It has pivoted in recent times to the project generator model, which it has applied to its big ground position in the Macquarie Arc in central-west NSW – a region that has and will continue to uncover Tier 1 porphyry copper-gold deposits like Cadia (Newmont Corporation (ASX:NEM)) and Northparkes (Evolution Mining (ASX:EVN)).

Now get this. Tiny Kincora with its $10.1 million (3.5c a share) market cap has to date attracted more than $110m of potential exploration funding by others on its exploration projects and has some more advanced projects it is also looking to strike a deal on that just might take the total to more than $200m. That is a lot of metres in the ground.

Obviously some of the joint ventures will pull up short of the potential funding limits. But then again, one of them could yield a big discovery in which the exploration commitment by the incoming party quickly becomes irrelevant.

Kincora’s overall ambition is to be the operator so it can earn project management fees to cover its general company costs, and to have an annual exploration budget across the farm-ins in the porphyry portfolio of $10 million per annum.

The company’s success to date in pursuing the project generator model reflects a couple of things.

It was an early mover in the Macquarie Arc so it has a big slab of the best ground. Then there is the technical input from geoscience consultant John Holliday, best known for his leadership in the discovery of Cadia by Newcrest in the early 1990s, and geologist Peter Leaman, a former BHP Minerals veteran.

Big name partners

There is not enough space here to go through all of the projects Kincora has brought to life by bringing in funding under its project generator model. But it is worth mentioning the biggest of the lot is with the world’s fourth-biggest gold producer, the $US21 billion AngloGold Ashanti.

It has been expanded and now takes in a district scale portfolio of five projects covering over 2350km2 and a strike length of more than 100km. The string of prospects are in the northern reaches of the Junee-Narromine Belt, with the idea being to find tier-1 deposits like those to the south hidden under cover in the north.

Holliday and Leaman noted in the Kincora announcement on the expansion of the AngloGold Ashanti farm-in arrangement that the 100km of strike length was more than twice that of the emerging Vicuña district high in the Andes in Argentina, which is also an extension to a known world-class porphyry belt.

Vicuña is where BHP (ASX:BHP) and Canada’s Lundin last year teamed up to buy the Filo Del Sol discovery for C$4 billion, and announced a concurrent partnership on Lundin’s nearby Josemaria project. AngloGold Ashanti will be hoping for an Aussie version in central west NSW and little Kincora is along for the ride.

Newsflow will be particularly strong in the months and years ahead as Kincora’s portfolio of porphyry targets are tested with the drill bit, funded by others. Oh yeah, keep an eye as well on its Mongolian copper project and another copper-gold project back in NSW in the Cobar Basin.

The views, information, or opinions expressed in  this article are solely those of the columnist and do not represent the views of Stockhead. Stockhead does not provide, endorse or otherwise assume responsibility for any financial product advice contained in this article.

Originally published as Barry FitzGerald: $10m NSW copper junior Kincora jacks up its odds with prospect generator model