Kermode: Building Assets One Deal at a Time

Back in November, Kermode Resources, (KLM.V) put out a press release with the results of assays of gravity concentrate samples from its Silver Bell project east of Vernon, BC. The results are encouraging for two reasons: first, the gold and silver values are high enough to warrant more exploration, second, the process itself is innovative. As CEO Peter Bell puts it,

I am pleased with the preliminary results of this experiment…I would like to see Kermode attempt more of this kind of work, overall, because I believe that concentrate testing is an essential exploration activity that is often overlooked at early-stage projects.”

Bell is, of course, right. You can poke a lot of drill holes into the ground without having a clear idea of the metallurgy and, therefore potential recoveries, on a particular deposit. Running what Bell describes as an “experiment” where you actually produce and assay a concentrate can tell you if a particular deposit is worth drilling in the first place.

But Bell was just getting started.

Out of left field, on December 12, KLM press released first assays on grab samples from its Vigh graphite project in BC. Very promising with one running 13% carbon. But who knew KLM even had a graphite project?

Then, December 13, KLM released a conceptual estimate for the Tonya gold project in Nevada. Reasonable people might ask what the heck a “conceptual estimate” on a gold project even is? The answer is a rather detailed, 27 page, report prepared by Robert Carrington, Professional Geologist and Professional Engineering Geologist and a 43-101 Qualified Person. It reads very much like an abridged Technical Report and has the required caveats that there has been insufficient work to arrive at a 43-101 compliant Mineral Resource Estimate. It does, however, review all of the work done on the property to date and comes up with a ballpark estimate of the potential gold ounces. Conceptually, Tonya might contain between 700,000 and 7,000,000 ounces of gold.

Quite a range. That’s quite a range but a bit of work on the property will narrow that range and firm up the data underlying the “concept”. However, every project should probably begin with exactly this sort of professional “guess” based on all the available historical data. In fact, most do, but most juniors will not release the conceptual estimate, rather they will wait for a full scale “Technical Report”.

All this is on top of actual assays of samples taken from Kermode’s Santana project on Quadra Island released December 12. Excellent copper grades up to 14%, but also interesting gold and silver showings. (There is an Assessment Report on the Santana project which provides a wealth of historical information and was filed in November 2023 (PDF).

Quite a run of news for KLM.

There are moments when KLM looks more like a scientific exercise run amok than a promising micro-cap with a significant portfolio of highly prospective projects. Which is impressive given that KLM has acquired this portfolio with, effectively, no cash. Most of what little cash the company has had has gone to auditor’s fees and registration costs.

How is it done? Well, frankly, the old-fashioned way, with a lot of shares. Shares issued to gain options on properties, shares issued for work on those properties and shares for services for Bell and his CFO. “Fake it ‘til you make it” is one way of describing this sort of operation. And there’s nothing wrong with that if, eventually, you make it.

All it takes is one property advancing beyond the prospecting stage and all of a sudden the $0.02 shares (after a 10:1 rollback) are worth something.

Which is where Bell’s intelligence and knowledge take centre stage. There are thousands of little projects scattered across Canada and the US which might reward development. But which ones are worth pursuing?

Bell looks for two things: attractive projects which can be optioned for shares alone and projects where there is a prospector/geo willing to work on a shares for services basis. As I wrote in June,

This is pure bootstrap. Right now the company’s shares are worth next to nothing and there are a lot out.

Since I wrote that KLM has done its share rollback, dropped some projects and acquired options on a number of very prospective properties.  

It is, in fact, difficult to get your arms around all the projects KLM is involved with. There are a lot of them and a lot of the work being done is more in the nature of prospecting than press releasable exploration. While I would love to direct my readers to the Kermode Resources “Corporate Presentation”, Bell and the people he is working with really don’t do “corporate”. Instead, there is a firehose of videos and pictures from the field from places like Mount Sicker near Duncan and the Santana mineral claim group on Quadra Island. Plus, Bell posts a lot of original documentation and research to Google Drive and you can “do your own research” by the hour.

At some point, in the early Spring, I want to take a drive up to Duncan and visit KLM’s Mount Sicker project, ideally with both Peter Bell and Justin Deveault of 911 Exploration who is working the project. Mt. Sicker has been explored and mined for well over 100 years. The Lenora mine produced copper and gold prior to 1909. The area has been mapped and a geophysics study has been conducted, all of which are available to Kermode. If you have the time, watching Deveault’s Mt. Sicker prospecting videos is fascinating.

The grumpy old man side of me wants to sit Bell down and say, “For God’s sake, pick one project and do a workup that the average, retail, investor can understand.” No doubt he will; but for the time being the firehose approach seems to suit Bell and his collaborators.

I have lost money on my investment in KLM. A lot as a percentage but not very much in actual dollar terms. That’s the nature of hyper-speculative investment. (And as Peter points out, it is not a loss until you sell…which I am not.)

[Disclosure: Peter Bell is a friend. I own shares in Kermode Resources (KLM.V) and may buy more or sell some or all at any time. This is not investment advice. Do your own due diligence. Call Peter.]