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Discovery Investing: Eskay Rift

Michael Berry
0 Comments|August 21, 2006

Massive sulphide ore body could be found soon

Massive sulphide ore body could be found soon

It is raining here. It rains a great deal here. I am told there are only about 20 days per year of total sun. This is the Eskay Rift. It hosts several world class massive sulphide deposits.

I am, this morning, sitting at a computer in the Kenrich Eskay (TSX: V.KRE, BullBoards) mining camp. This is land where the warmer, moisture-laden Pacific winds hit the glaciers of northern British Columbia and Alaska. The camp sits nestled in a valley surrounded by 14,000 foot mountains. We flew from Vancouver to Terrace, B.C. and then rode a helicopter in from Terrace. On the way we flew by the Anyox Pendant, over the Grand Duke mine and even around the famous Eskay gold and silver mine of Murray Pezim lineage. As you fly in from Terrace you notice old mine adits everywhere. This was obviously a mining district in the waning part of the 19th century. We flew over Hyder Alaska (where you can be “Hyderized” with 100% proof alcohol). I was told that it snows so much here that keeping the roads open can make the difference between an economic and non-economic mine. The snow is wet and heavy and 50 to 100 feet can accumulate each year.

Streams and rivers run quickly and cold off the glaciers. McGuigan notes that since he first came here to do his discovery geology in 1979, the glaciers have lost 600 feet of thickness. A great deal of high-grade gold and silver was taken from them by the early prospectors. There are several world-class mines in the Rift, which includes Kenrich’s Coastal Copper property. I plan to see that today – if we can get out. Others include the grand Duke Mine, the Hidden Creek Mine, the Bonanza Mine and of course the famous Eskay mine. Barrick’s (TSX: T.ABX, BullBoards) Eskay is the fifth largest silver mine in the world.

Kenrich has already discovered three small massive sulphide (VMS) ore bodies on its properties (25,190 acres owned 100%). So, the VMS is here. The “tiger team” that Paul McGuigan has assembled is more important. His field chief is Shawn McKinley who is a key member. These are incredibly capable and hard working team players. McGuigan has established a fully equipped camp with almost all the amenities. He is shown examining the latest drill core from yesterday’s drilling. It is not only the current drilling success at the company’s Corey property that interests me, however. It is also the properties that the company has in the famous Anyox Pendant. Kenrich calls this property, the Coastal Copper property.

It hosts the Double Ed massive sulphide. I have included a number of drill intercepts from a company press release earlier this week (August 15). As you can see these first drill holes have intersected significant copper grades over quite wide intervals. For example, hole DE06-08 intercepted 3.02% copper over 18 meters. Three percent copper yields over $180 per tonne rock at current market prices for copper. Previous drilling by Cominco had outlined two million tonnes of 1.3% copper and 0.6% zinc. The value of this rock today would be $96 per tonne. The Hidden Creek and Bonanza mines historically produced 22 million tones of copper, zinc and silver. Kenrich does not own these mines. However, their Double Ed properties abut them.

Kenrich is, in my opinion, a company with a price floor under the shares. The upside from its Coastal Copper property is significant. However, McGuigan’s team is extraordinarily well organized. They have been exploring the Corey property (close to the Barrick Eskay mine) for four full seasons, though McGuigan has been in the area sicne 1979. Each year they make more discoveries, understand the geology better, and move close to locating an economic massive sulphide deposit.

August 15th Drill Results From Kenrich Eskay’s Double Ed
Coastal Copper Massive Sulphide

Yesterday I saw the massive sulphide drill intercept from the Cumberland prospect. It contained 14 grams of gold / tonne and 17% zinc according to McKinley. In my opinion, they are getting very close to finding the massive sulphide ore body on the Corey property that they believe is in place. Please have a look- it is a classic Discovery Investment with a positive reward to risk tradeoff.

Michael Berry owns options and is a paid consultant to Kenrich Eskay.

Michael Berry has been a portfolio manager for both Heartland Advisors and Kemper Scudder, where he successfully managed small and mid-cap value portfolios. He was a professor of investments at the Colgate Darden Graduate School of Business Administration at the University of Virginia and has also held the Wheat First Endowed Chair at James Madison University. Dr. Berry is now a proponent of what he calls "discovery investing."

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