BIRMINGHAM, Ala. () -- On September 8, 2006, a press release issued by Kimber Resources [AMEX:KBX; TSX:KBR] reported a disagreement with director and significant shareholder, Jim Puplava, who intends to commence a proxy battle with the objective of replacing a majority of the Board of Directors and current management. The release stated there have been disagreements and counsel is being retained.
Mr. Puplava, President of Puplava Financial Services Inc., was elected to the Company's Board of Directors at the Extraordinary General Meeting held on May 28, 2004. He was granted 50,000 stock options at an exercise price of $1.77 pursuant to the Company's stock option plan
Kimber completed a brokered private placement with Puplava's firm on March 1, 2006. Details of this are as follows:
On March 1, 2006 the Company closed brokered and non-brokered private placements of a total of 7,047,500 common shares at a price of C$2.00 for gross proceeds of about C$14 million. No warrants were issued to investors or agents in connection with the offering.
Puplava Securities Inc. ("PSI") of San Diego, California acted as agent for the brokered private placement and Ms. Leanne Baker, Managing Director of Investor Resources LLC, acted as a consultant in the United States. The company paid cash commissions of 5.5% on the brokered placements. Puplava, a principal of PSI, did not acquire shares through the placement.
The non-brokered private placement was to institutional and accredited investors in Canada and offshore. Blackmont Capital Inc., Canaccord Capital Corp. and PSI received finder's fees of 5.5% of the proceeds raised on certain placements. The total commissions and finder's fees paid on the both brokered and nonbrokered placements was C$428,725.
Is Kimber worth fighting for? The following background information is provided by publicly filed financial documents.
Kimber Resources is a Canadian-based company listed on the Toronto Stock Exchange and the American Stock Exchange and is engaged in the development and exploration of mineral properties in Mexico, of which the most advanced project is the Monterde gold/silver property (the "Monterde Property"). The company's primary targets are open-pittable ore bodies, where gold and silver are amenable to extraction by heap leaching and possibly by conventional milling.
Kimber Resources current development policy allocates the greater part of its funds to development and exploration of the Carmen deposit which is the most advanced deposit on the Monterde Property. The objective of this policy is to advance the Carmen deposit towards prefeasibility status, and subsequently develop it into production. The company has expanded its focus to include exploration of areas outside the Carmen. With two excellent exploration targets, Carotare (33 holes) and El Orito Norte (2 holes), Kimber's objectives include a significant increase of gold-equivalent resource ounces.
There is no guarantee that any such objective can be achieved, but management believes there is significant potential for additional resources in the currently identified discovery areas of the Monterde Property. The company is also advancing the Carotare deposit and the El Orito Norte target, which are also located on the Monterde Property, while reviewing other properties in Mexico for possible acquisition.
What precious metals resources has Kimber discovered?
Company filings show inferred resources in table data. The Canadian Institute of Mining, Metallurgy and Petroleum CIM Standards on Mineral Resources and Reserves Definitions and Guidelines defined inferred mineral resources as:
"That part of a Mineral Resource for which quantity and grade or quality can be estimated on the basis of geological evidence and limited sampling and reasonably assumed, but not verified, geological and grade continuity. The estimate is based on limited information and sampling gathered through appropriate techniques from locations such as outcrops, trenches, pits, workings and drill holes. Due to the uncertainty which may attach to Inferred Mineral Resources, it cannot be assumed that all or any part of an Inferred Mineral Resource will be upgraded to an Indicated or Measured Mineral Resource as a result of continued exploration. Confidence in the estimate is insufficient to allow the meaningful application of technical and economic parametres or to enable an evaluation of economic viability worthy of public disclosure. Inferred Mineral Resources must be excluded from estimates forming the basis of feasibility or other economic studies."
The relationship between Measured, Indicated and Inferred Resources is shown by the table below:
Because of the inherent uncertainty of Inferred Resources estimates, these will be excluded from the data for this article.
Kimber Resources provided the following estimates from their Management's Discussion and Analysis Report for the nine months ended March 31, 2006 reflecting information through May 10, 2006.
Gross values for these estimates total about $973.9 million using the current closing December COMEX prices for gold of $593.50 per ounce and silver of $11.12 per ounce. Silver recovery has been variable according to the company and will be very difficult to quantify. Based on gold ounces alone, the gold resources have a gross value of $473.3 million.
Kimber hopes to use heap leaching to process the ore. The company's primary property is located in the Sierra Madre Mountains of southwestern Chihuahua State, approximately 75 kilometres northwest of the Glamis Gold [NYSE:GLG; TSX:GLG] El Sauzal Project, an open pit heap leach mine. Total operating costs per ounce at El Sauzal are $220 per the March 31, 2006 financial report. Using this as a rough comparison, gross profit per gold mined would be $373 an ounce. Based on gross profit for gold alone, Kimber's properties are worth roughly $297.5 million.
Kimber had current assets of $20.3 million and current liabilities of $1.4 million as of the company's latest unaudited financial report dated March 31, 2006. Taking the net of these of $18.9 million plus the projected gold gross profit of $297.5 million, a very conservative rough valuation of the company equals $316.5 million.
This valuation is without discounted cash flow assumptions or including the silver resources.
Kimber had 46,917,022 shares outstanding as of March 31, 2006. Taking the rough valuation of $316.5 million the company has a current value of $6.74 per share versus the current $2.05 price per share. Kimber shareholders should stay tuned for upcoming developments.