Kincora Copper refines exploration targets on its Bronze Fox project in Mongolia

Jeremy: Mongolia could soon become one of the world’s biggest producers of copper and gold. One company hoping to be a beneficiary of the mineral rush is Kincora Copper, which is focused on the Bronze Fox copper gold deposit in the south east of the country. Sam Spring is president and chief executive, and he joins us now on the line.

Jeremy: I want to start, if I can, by taking a look at the resumption of the first phase of your Plan 2013 exploration activities. What have you done to date, and how are things going?

Sam Spring: We just resumed activities a couple of weeks ago. In late 2012, we got some quite promising results that I guess confirmed in advance significantly a number of the copper porphyry targets that were being identified.

The work programme that we’re undertaking this year is a multi staged programme. The first of which is really re-examining a lot of the good results we got last year, and try and home in and refine the targets for later on in the year.

Jeremy: What about the issues about security of tenure in the country? To what degree is this an issue, do you think?

Sam Spring: It is a big issue that has been brought to the forefront regarding Oyu Tolgoi and the investment agreement and negotiations between Turquoise Hills, Rio Tinto and the government. Which I guess has been a bit of a concern and raised a lot of press coverage.

The really positive thing is that it seems like all stakeholders have sorted out the major issues. Last week, we actually had statements coming from Turquoise Hills that the $4b project financing is expected to be closed at the end of June.

It will be the largest ever project financing in the mining industry. Really, to achieve that, you’ve obviously got to overcome any concerns regarding security of tenure. So that hopefully will be a major step forward for all parties in Mongolia.

Jeremy: I’m also interested in the number of the majors coming into Mongolia. The issue you’re talking about there, I know, is about Rio Tinto and the government, but are other large companies are coming in, seemingly?

Sam Spring: You’re starting to see that, despite concerns from the financial markets. You’re seeing a lot of the strategic groups being involved. Recently you had Teck Resources doing a deal with Erdene Resource Development (TSXV: ERD) for an early stage copper exploration project.

You had Anglo Americian, who appointed Graeme Hancock from Erdenes Tavan Tolgoi to set up their operations in Ulaanbaatar.

So, despite a few of these negative concerns, you’re seeing a lot of people setting up ground, and setting up offices.

Because while a number of concerns have emerged regarding policies and security of tenure, the rocks haven’t changed and the big picture is still very much intact.

Jeremy: At a time when investors aren’t taking on too much risk, how do you persuade investors that now is a good time to get into Mongolia, of all places?

Sam Spring: I guess when you have looked at the peer group and the relative valuation, it really does show the concerns that the market has had for Mongolia.

I think in the next month or so, you’ll see two big catalysts and milestones in OT securing the largest ever project financing in the mining industry and ramping up stage one production. Also, you’ll have the presidential election take place by the end of June.

Those two milestones will hopefully improve investor sentiment in the second half of the year in Mongolia, and with cheap relative valuations.

Bearing in mind the potential of Mongolia hasn’t changed, you won’t find too many other places in the world that you’ve got two greenfield copper construction projects within 150 kilometres of each other, that are being constructed within a three year time period in OT and Tsagaan Suvarga. So the big picture hasn’t changed.

Hopefully, that risk-reward scenario is what attracts investors back, but obviously, a couple of these milestones need to be achieved first.

Jeremy: Briefly, at the end, I just want to follow up on some news that we’ve seen recently from the company. This change in remuneration for directors, which is very interesting, and investors are going to want to know about. Give us some more detail about what it is you put together, and why you’ve done it.

Sam Spring: As a couple of Canadian shareholders have recently said to us, on the TSX-V particularly, one of the only transparent things you’re seeing inside is buying their own stock.

We’ve taken that feed back on board, and adjusted - as part of a comprehensive review of our strategy and administration charges - directors’ remuneration.

This policy is a commitment to buy a certain amount of stock on market. Hopefully, that’s a sign that the directors and the company very much believes in our strategy. The team that we’ve got in place, the project, and the attractive valuation that Kincora is.

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