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Alaska Gold Revisited

Bob Moriarty
Jul 28, 2010

I’ve been gone for a month and seen some wonderful companies and projects. I’ll be writing about them all week since I have to leave for another trip on the weekend.

The day I was coming home, Barbara called and emailed me five times to make sure I was awake. I grinned as I thought of how excited she was to see me.

Then I thought about the $99 Singer sewing machine I was bringing down with me and realized that maybe I wasn’t #1 on the Hit Parade. She has wanted a sewing machine for years and none met her [very old-fashioned] rigid requirements other than a new [repro] Singer. She found a Chinese made machine on eBay for $99.

It’s remarkable that they can produce and sell such a machine at a profit. The original Singer machines cost $100 back in 1860. That’s when gold was $20.54 an ounce. So the Chinese can produce a machine for 1/10th of an ounce of gold that once cost 5 ounces of gold. That’s remarkable.

But they need a source of gold, we all do. And a couple of weeks ago I was standing on 5.75 million ounces of gold and gold equivalent at the Whistler deposit in Alaska, northwest of Anchorage about 100 miles.

I ran into the nice people at Kiska (KSK-V) last March at the PDAC and wrote about them here. The stock was $.85 a share then and is $.82 now.

The Whistler property was originally found in 1986 by Cominco Alaska who later dropped it. It was picked up by Kent Turner and optioned to Kennecott. Rio Tinto bought out Kennecott and Rio optioned the project to what is now called Kiska Metals. The Whistler portion of the overall project has 30 million tones of .87 g/t Au, 2.46 g/t Ag and .24% Cu in the indicated category with an additional 134 million tones at .64 g/t Au, 2.18 g/t Ag and .20% Cu in the inferred category. In my view, in Alaska way out in the hinterlands, those grades aren’t going to be economic.

For Whistler to be economic, Kiska needs to add a lot of tonnage. Power is an issue but that may be solved as Novagold advances Donlin Creek to the west and runs power near where Kiska is located.

But having a 5.75 million ounce resource, even if uneconomic today, tends to give investors higher confidence in the project. That will tend to put a floor under the shares.

Kiska under the leadership of Jason Weber as President and CEO is in the midst of a major drill program on a series of porphyry targets on the 527 square km property. They have completed 23 holes, spending over $8.5 million for their earn-in.

Rio Tinto has a back-in right to the property to regain 60% of the project by repaying KSK 200% of what they have spent on exploration and advancing the project to production. So in either case, KSK wins. But Rio is a copper company and this is a gold project with some silver and copper values. In my view and that of KSK, when the 90-day period that Rio has to make up their minds, the property will be Kiska’s with a 2% NSR to Rio.

Kiska has to provide a report to Rio, probably in August and that will trigger the 90-day period for Rio to make a decision. That decision will remove a lot of investor unease about the project and probably help the stock.

Like all big projects, the Whistler project has issues. There is a power issue, there is a grade and tonnage issue and there is a technical issue of iron pyrites and acid rock. All these issues are real and are being addressed. I was very impressed by the technical data supporting the new drill areas and I think the company will be a success.

Kiska is an advertiser and we are biased. The stock is a lottery ticket on gold and I think that’s the best sort of lottery ticket to own. All of the people we talked to were easy to understand and I encourage all potential investors to feel free to contact management or the technical team with more questions. Drill results will be coming out for months and I think there will be some barn burners in there.

Kiska Metals Corp
KSK-V Cdn$.80 (Jul 27)
66.5 million shares
Kiska Metals website


Bob Moriarty
President: 321gold

321gold Ltd