Review of KXL Vancouver Conference

Good to see a number of us were there. I got to meet a number of members of the great KXL team and was very happy to meet the very presidential Bill Chornobay and the helpful and well-informed Eryn Lackie. Bill is very appreciative of us long-term investors, as “retail” is essentially what sets the SP (the institutions buy and then put it in a drawer, so to speak). Most of the info here is from Brian Maher’s afternoon talk. A nearly identical presentation had occurred at the AGM. KXL reads our Agoracom posts and they love to put a face to our handle.

Overall, even in the face of opposition on the issue, Maher was very clear and firm that the focus is on discovering the extent of the various goldbearing systems, as opposed to the idea of going overly into detail on the veins we know. There is no need for a 43-101 for a major to make a bid for KXL, and KXL’s exploration money is much better spent making sure that an outside bidder doesn’t scoop “goldmines” (so to speak) that KXL might be sitting on without even knowing it. The point is to avoid spending a lot of critical-path time and money on just a few trees and missing seeing the overall forest. In a way, the clock is ticking too, in that KXL is in a bit of a race to discover what they have before there is too much outside acquisition pressure. There is also the cyclical curve of the commodities and exploration stocks to consider.

Brian made the very good point that there are a great number of targets of high interest indicated by geomag plus past data (and which are being repeatedly confirmed), and it is entirely possible that one of the other target areas could be of even greater quality than what is being worked on at Hercules. For all we know, Hercules could turn out to be a sideshow. That also speaks to why the drilling is at 50 m intervals, as opposed to 25 or 15.

The type of system at Hercules is, I was told, eminently mineable, based on Brian’s very pertinent experience in running a mine, in that the concentration is more than adequate, the veins are easily accessed from one another, and the rock is strong and of high structural quality. Long hole stoping would likely be used. The widths of the veins discovered so far, ranging from about 0.9 to 11m but generally 2 to 2.5m, are definitely economic even with standard grades, and moreso at the high grades being discovered.

The team at KXL have experience with the good and the bad at other companies, and you can sense that they are happier than kids in a candystore - this is a once in a lifetime opportunity for them. The land package is not only huge, but of high quality in that historical data plus the new geomag show strong suggestions of more systems to be confirmed. As to Hercules itself, it is becoming pretty clear now that there is a mineable resource - the questions now are 1) how much and 2) how many others like it are there. The sampling and assay work is being done to a high standard, so that management can speak from a position of confidence and negotiations can proceed without too much difficulty when the time comes.

I heard Maher say 21 geologists are working for KXL. The camp is buzzing, full of mostly KXL people but also (I believe it was) Sage and Alto people as well as drillers. I asked about having 10 drills, and Brian said that with 10 drills the geologists couldn’t keep up with core analysis and KXL would end up wasting money and time. As an engineer I know from experience that throwing more people at a project doesn’t necessarily make it go faster - often it bogs down instead!

Parallel veins with good grades (there I am reading between the lines) are popping up everywhere KXL covers some diagonal space by deep-drilling. The whole area appears to be a deck of gold-bearing cards laid up at a 75 degree angle from the horizontal. The veins explored so far appear to be a tiny portion of the overall honeycomb, meatball or spaghettiball, whatever you want to call it based on the geomag pix.

The 6th drill is only briefly on loan from Sage because they got ahead of their geologists and couldn’t use it, but our “5th” is down just now so only 5 drills are turning. Basically the story is 5 drills. KXL has been drilling Cote Archie with Alto and results should be out in roughly 2-3 months. Maher compared the exploration effort in size to the McFauld’s Lake activity, and said he thinks of the KXL land package as a pristine, unexplored Val D’or. An inspiring vision.

The upcoming NR is being taken as a serious effort, so as to make a sensible and understandable interpretation of the assay, drill, sampling and stripping data. KXL is aware that in the past other companies have seriously undersold themselves by failing to tell a clear story even when they have excellent results. For example, Brian likes to check his writing by having a non-technical person e.g. in accounting read it, and asks “does this make sense to you? What does it mean to you?”. The whole point is to put out a solid, professional release, and this is particularly important as KXL picks up analysts and are rated by Morningstar and FP.

As to SP, of course all the team were very circumspect, as they legally should be. The impression I got was that the rah-rah day-trader excitement we saw last Fall should be forgotten. There is such a huge potential that exploring it, even at breakneck speed, will take e.g. 3-4 years (my guess, not theirs). I gained the impression that the expectation is $3.50 -$4.50 range for this Summer/Fall and slowly building from there, but of course, who can predict the future - we don’t know yet what the cores will show and what the markets will be up to.

Virginia is indeed a reasonable model for what we might expect at the corporate level, although our package may be much larger than what they sold. I stopped by the Virginia booth and got a brief review. Without having rechecked it myself, I was told that from our stage of exploration, Virginia’s SP built up from the $3 level to roughly $17, the core of their discoveries were acquired by Goldcorp (2006) and the stock split about 4 or 5 ways (I didn’t check this). The stock of the spun-off new Virginia exploration effort has risen a little bit from there to the $5-$6 level. If our multiple prospects pan out, we may of course have a much more dramatic story.

I have my own guesstimate timeline, and I list it here in brief form, in reverse order:

2012-2010 - A major bids for 2 or 3 of our 4 solidly-explored and defined project-regions, for maybe $30-$80 a share. There is no 43-101. The remainder of KXL continues on exploring.

2010/09 - Hercules and one other region have been fully defined, and 3rd and 4th regions are being explored in earnest. Continued purchase of land and resources. Sleeping Giant and Uranium plays explored seriously, with a possible spinoff of a part parcel.

2009 - Hercules working towards being well defined, and a 2nd prospect e.g. East Leitch or whatever is chosen is also receiving a major drilling program. Uranium at early work stage. Stock price in $5+ range.

2008 - 2 or 3 Major NRs, so as to put together a truly coherent story on what the drill results mean. Fall - Uranium, first work, and exploration of new Hercules veins. Continued drilling through Winter.

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Okay, that’s more than enough for now. Too bad I couldn’t kibbitz with a few other Agora KXL schlongs. I was the tall guy at the front in the afternoon presentation, in black slacks and a tshirt, grey hair. Oh well, next time.

I also dropped by the Agoracom booth, and they were enthusiastic and very much welcomed our suggestions. I gained the impressions that they are also doing very well, thank you.

By the way, Agora posters might consider watching their dress code. We are often up so late (mea culpa) that KXL figures we are typing away in our pajamas or less - not the right corporate image, you know.

Oh, and I saw Upchuck outside, but he couldn’t talk, as his behind was being severely bitten at the time by a little French poodle by the name of Fifi.