Investors are excited about Keras Resources (KRS:AIM) as it enhances near-term gold production potential in Australia. A new deal with KalNorth Gold Mines vastly increases the amount of gold in Keras’ mining pipeline and will therefore see the small cap generate more money and for a longer period, assuming we don't get another major slump in the gold price.

The latest agreement involves an option for Keras to mine the Lindsay’s Project in Western Australia. If the option is exercised, Keras will enter into a profit sharing partnership.

Lindsay’s Project contains 215,100 ounces of gold, grading an average 1.7 grams per tonne. Within this is an underground section at more than twice the average grade (4.2 grams per tonne) and containing 54,000 ounces of gold.

This is the third such agreement to be made by Keras in recent months. In February 2016 it struck a deal with Kalgoorlie Mining Associates for a similar profit share on the Wycheproof Gold Desposit in Western Australia. That contains 6,974 ounce of gold at a grade of 2.87 grams per tonne which represent very good grades for an open pit deposit.

Kerras abandoned its iron exploration strategy last year (when called Ferrex) amid poor commodity prices. Its decision to switch to gold was well timed, given the rally in the precious metal price so far in 2016.

It bought a private company called Chaffers which had a five-year profit sharing agreement with Norton Goldfields to mine various deposits in Australia. Production initially targeted 20,000 to 30,000 ounces per year.

It plans to run the various operations in parallel via contract mining, the first starting in the second quarter of 2016.

Shares in Keras have done very well since its new strategy was announced in November 2015, rising 96% to 0.929p.

KRS - Comparison Line Chart (Actual Values) (2)


This article has been updated to clarify production start dates.

Issue Date: 14 Mar 2016