I put in a bid to buy more KXL today for the first time since early in the summer. I would have been an aggressive buyer all the way down during this sector-wide price correction but I have been losing money hand over fist and did not have the spare firepower to put to work. Now the share price has come to a level that is so compelling I am going to find the money from somewhere to be a buyer here.

The equation is very simple. I am guessing that KXL will have proven about half a million ounces of gold so far from all the work that has been done, if they went to the trouble of putting together a compliant resource estimate. IMO that is nothing, its jacks for openers. I would not even support the investment for a small mining op if that was all they are able to prove up.

Now if the market is willing to pay $200 per ounce of gold in the ground during the earlier phases of this cycle, I would think that about $100 per ounce is a reasonable multiple right now in a severe correction. Half a million ounces then is worth about $50 million in market cap.

I am guesssing that somewhere around $35-40 million is sitting in the bank for KXL. Combined with the value for the gold, we can estimate a "value" to support about $85 million in market cap. I have not done the math on the current share structure but I would estimate the company has a market cap of around $100 million. So in effect, I can buy shares today and get all the property holdings, and the additional potential for new gold discovery, plus the base metal and energy divisions, and the strong management team, etc.... and pay next to nothing in share premium.

That is what value investing is all about. People tend to look at what is going on today, and assume that it will continue indefinately into the future. So at the best times the stock is going wildly higher, and during the troughs, you cannot find a buyer with a microscope. Right now, KXL has come down to a level that the value is compelling. Sure, the stock could drop back to the 40 cent range and even trade for the value of the cash on the books. But I have held on for more than 2 years, and watched the stock recover and set new highs, so I am confident that the underlying value and potential will make it worth adding more shares now.

Thats all just my opinion. KXL is the ONLY junior that I am adding to right now that does not have positive cash flow from operations.

cheers!

mike