Stockhouse Ticker Trax is equity specific research (Canadian listed and market cap < $300 million) published every Monday to paid subscribers. Our free Friday column may feature companies previously featured to paid subscribers (with a minimum one month delay) or discuss topics of interest to the general investment community and relevant to overall portfolio management.

This week’s discussion topic

I.   Kiska Metals

Important note:

Kiska was originally featured to paid Ticker Trax subscribers mid-December at 28 cents and within a month we were up 50%. Shareholder impatience has forced the stock back down so I think it is a good candidate for free readers on Friday - I try to keep a minimum 30-day delay on anything originally sent to paid subscribers but if a stock has moved too high, it will not be featured for free on Fridays.

It is important to keep in mind that Kiska’s project location in Alaska means they cannot resume exploration until spring. This is purely a speculation on very cheap ounces and if we see a proper recovery in the junior gold sector, the overall valuations will move accordingly and money will migrate to undervalued ounces like Kiska.

An interesting observation

Kiska trades as the fourth-lowest valuation per ounce from our gold study updated last Friday. With the price of gold moving rapidly above $1700 this week (thanks to a commitment from the U.S. to keep rates near zero until 2012), I have seen money moving back into the juniors but not even close to the extent we are hoping for.

http://www.stockhouse.com/Columnists/2012/Jan/20/Junior-golds-valuation
-table-updated-Stockhouse-TT

The average valuation per ounce last week according to our table was $60.60 ($56.18 mid December) and this morning it is $64.49 – an increase of 6.5 percent. That number in itself is quite interesting as our gold study (see link above) is tracking the commodity price very closely. Last week gold was $1660 vs. $1734 today – an increase of 4.5 percent.

Because the valuations per ounce are so low from the damage caused in 2011, we are looking for a much larger jump than gains tracking the commodity. We want to see moves in the juniors, which will reflect not only the potential for a sector rally, but a reduction in the aversion to risk and movement into the higher risk, higher return small stocks in general.

It is fascinating to see how a basket of 60 small companies can track the commodity price so closely (commodity increase 4.5 percent, junior valuation increase 6.5 percent).

Kiska Metals (TSX: V.KSK, Stock Forum; 28 cents)
www.kiskametals.com 

Kiska has a 100% ownership in the Whistler property, located 150 kilometers Northwest of Anchorage, Alaska. The property hosts the Whistler Gold-Copper Deposit, a NI43-101 compliant 2.25 Moz Gold Eq indicated and 3.35 Moz Gold Eq inferred deposit. The work to date has outlined 1.3 million ounces gold indicated, 1.9 million ounces gold inferred, five million ounces silver indicated, eight million ounces silver inferred, 302 million pounds copper indicated, 467 million pounds copper inferred. The Whistler property spans 547 sq. kilometers and is within the same geological belt that hosts the world-class Pebble copper-gold porphyry deposit.

If you have reviewed the tables from the gold study mentioned above, you will see the low valuation Kiska has below 30 cents. This I would expect from a small deposit in a foreign country. Not from a company with $9 million in the bank and five million ounces gold equivalent (gold, silver, and copper) in Alaska.

December Presentation:

http://www.kiskametals.com/i/pdf
/120711KiskaMarketing.pdf  

Kiska has been under pressure with all the junior golds since the summer of 2011, but selling accelerated late November when its financials were filed. They burned through more cash than shareholders expected but were fortunately left with $9 million heading into winter.

The stock trades near the 52-week low through a combination of a weak market, tax loss planning, and a winter exploration shut-down.

My plan has been to find gold ounces as cheap as possible - but in stable countries so we are not worrying about issues occurring in South America.

Kiska’s gold ounces are down to approx. $10.76 if we ignore the value of any copper or silver. This assigns 80% of the underlying value to 1.3 million ounces measured and indicated and 20% to 1.9 million ounces inferred. If we take into account the "gold equivalent" ounces (which factor in the silver and copper), its total resources to date on the Whistler property in Alaska are 5.5 million ounces.

Important of Jan 6th news with Brixton

Early in the month you will notice Kiska ran to 42 cents. Also take a look at Brixton Metals (TSX: V.BBB, Stock Forum; 18 cents), which gained 100% within days on huge volume. Brixton is an exploration partner with Kiska and they released drill results from a winter exploration program - one hole in particular produced exceptionally strong silver results (with very good grades of other metals).

http://brixtonmetals.com   http://brixtonmetals.com/thorn-property/

Traders latched onto the news in a big way and although its rally was short lived, it is important to keep this project in mind. It appears to have tremendous potential and they have a large land package. It is interesting to note that they have compared the geology to the hugely successful La Bodega in Colombia. La Bodega propelled Ventana from junior penny status to a $1.5 billion buyout in early 2011. Ventana made a lot of people very rich – including penny stock speculators. Brixton and Kiska have a long way to go before they have La Bodega potential, but the geology and important early drill results are a great start.

Kiska owns the original land package but has an option agreement with Brixton. Brixton can earn a 51-per-cent interest in the Thorn property by making cash and share payments and by financing $5-million in exploration by Dec. 31, 2014. Brixton can elect to earn up to 65 per cent by financing an additional $10-million in exploration. Kiska may elect to form a Joint Venture with Brixton at the 49/51 or 35/65 stage, or take dilution.

Drill results highlights (the silver grade –Ag- is notably rich):

Oban Breccia Zone hole THN11-60 intersected from surface 95.08m of 904 g/t AgEq (1.71 g/t Au, 628.30 g/t Ag, 0.12% Cu, 3.31% Pb and 2.39% Zn).

Including 25.56m of1,679 g/t AgEq (2.28 g/t Au, 1,300 g/t Ag, 0.22% Cu, 5.34% Pb and 2.51% Zn) and 9.25m of 3,646 g/t AgEq (3.04 g/t Au, 2,984 g/t Ag, 0.53% Cu, 11.65% Pb and 3.42% Zn).

Mr. Gary R. Thompson, Chairman & CEO stated, "We are extremely pleased to have discovered substantial near surface, high-grade mineralization at the largely untested Oban Breccia Zone, which is located in the heart of a 6 km mineralized corridor. Hole 60 significantly increases the potential of the property. This high-grade zone remains open at depth and on the eastern strike extensions." Mr. Thompson further added, "We believe that the Thorn project, subject to further drilling, has the potential to host a high unit value polymetallic mineral deposit." 

The 19,000-hectare Thorn Property is located in the Sutlahine River area of northwestern British Columbia, Canada. The Thorn project exploration is focused on a network of high sulphidation epithermal veins and breccia zones and shares many similarities with other high sulphidation epithermal gold, silver and copper deposits around the world, including La Bodega in Colombia, Lepanto in the Philippines and El Indio in Chile.

Conclusion

If a person has to ride out further price volatility and tuck Kiska away until next spring, these are some of the cheapest gold ounces we're going to find in a stable region. Even if someone ever took a run at them offering the equivalent of only $30 per ounce, we would see substantial gains from this level.

Gold prices should remain high in 2012 so all we need is a recovery in the sector. Junior gold stocks with large resources will be the first to bounce back. 

Kiska's project location in Alaska is a big bonus but the current problem is seasonal access and infrastructure. Even 150 km from Anchorage it can be remote.  My main concern is that they finance cheap by spring if the sector doesn't bounce back.

I am hopeful the price will not remain depressed too long, but excess shareholder dilution is not something we want to see. For now this is not a major concern.

2011-09-16 07:19 ET - In the News

The Globe and Mail reports in its Friday, Sept. 16, edition that Raymond James analyst Bart Jaworski rates Kiska Metals (53 cents) "strong buy" with a target price of $1.50. The Globe's Darcy Keith writes in the Eye On Equities column that the Raymond James stockpicker says Kiska Metals has released "encouraging" initial results from a drilling program at the Island Mountain area of its Whistler project in Alaska. Mr. Jaworski says, "We continue to recommend buying shares of KSK on our view of significant exploration upside and comfortable cash position."

Disclosure: Danny Deadlock owns 50,000 shares of Kiska Metals (TSX: V.KSK).