Kincora considers Mongolian portfolio divestment amid offers

Kincora Copper (ASX:KCC) has completed an externally led strategic review of its Mongolian project portfolio that was launched in June 2023 after receiving several ‘confidential and incomplete’ offers.

Having pivoted its focus to New South Wales in 2019/2020, Kincora has concluded the review and is fielding an offer that includes the receipt of a non-refundable deposit to enable final due diligence and definitive legal agreements.

Kincora says the unsolicited offer for its wholly owned Mongolian porphyry projects and subsidiaries ‘contemplates a part cash, part scrip divestment with share consideration providing an upside on exploration success from a planned 2024 drilling program’.

After receiving the initial unsolicited enquiries, Kincora appointed Cerberus Advisory to assist with the strategic review.

In a management’s discussion and analysis report released today (15 November 2023) for the 9-month period to 30 September, Kincora updates the market on the potential divestment, as well as progress that has been made across its entire portfolio.

Its portfolio includes district-scale landholdings and scaleable drill-ready targets in both Australia and Mongolia’s leading porphyry belts, the Macquarie Arc and Southern Gobi respectively.

‘Favourable’ conclusion expected

During and subsequent to quarter-end, the company concluded 2023 field season activities in Mongolia, which focused on advancing targets at the Bronze Fox, Tourmaline Hills, and Shuteen North intrusive complexes at the Bronze Fox project. 

Kincora Copper President and Chief Executive Officer (CEO) Sam Spring and Chairman Cameron McRae both expect to shortly announce a ‘favourable’ conclusion to its strategic review.

Following conflicting rulings in the lower levels of the Mongolian courts relating to a tax dispute with the Mongolian Tax Authority (MTA), involving a prior tax assessment and payment in 2016 that was relied upon to close a merger transaction, Kincora’s appeal to the Supreme Court was accepted and its case heard in May 2023. 

The Supreme Court referred the dispute back to the first level of the Mongolian judicial system with a review ongoing of the reassessment by a panel of independent experts.

In March this year, Kincora noted that its subsidiary Golden Grouse IBEX LLC (GGI) began preparing to appeal to the Mongolian Supreme Court to continue the defend against a 2021 retrospective tax assessment.

In January 2021, Golden Grouse received a retrospective Tax Act for 2.7 billion MNT, about US$800,000 from the Mongolian Tax Authority (MTA). 

The Reassessed Tax Act is comprised of 4 items, of which Kincora strongly refutes the merits of 3 including the very vast majority of the liability sought relating to the 2016 merger with IBEX (the agreed liability owed is less than the deposit lodged by Kincora to pursue the ongoing Mongolian legal defence process). 

Kincora says the Reassessed Tax Act is contrary to 4 independent Mongolian expert legal opinions, including those of new potential investors and they’re due diligence processes, as well as a recent Mongolian judicial precedent regarding the tax treatment of a merger transaction.  

Kincora has sought to defend its position and the original 2016 tax act relied upon.

Streamlining its focus

Meanwhile, the company today reports that now the strategic review is complete, it can start streamlining its focus towards its core New South Wales project portfolio. 

As of 30 September, Kincora had about $2.2 million in working capital and just over $2 million cash at hand. During the preceding 9-month period, the company also received a $127,850 NSW government grant.

During the past quarter Kincora executed an agreement and received shareholder approvals to acquire RareX’s carried 35% asset level interests in the Trundle, Fairholme, Jemalong, Cundumbul, and Condobolin licenses. This now sees the company secure a 100% ownership across the projects it has exposure to in News South Wales.

The conclusion of the transaction will enable Kincora to bring in potential asset partners. Kincora notes all projects have designed drilling programs offering ‘company-making’ upside supported by strong technical merits.

Kincora meanwhile has also completed maiden drilling programs at the Condobolin and Nevertire projects, which tested new geological concepts at existing ‘high-grade’ and shallow gold-base metal targets at the Meritilga, Phoenix, and Tilga prospects. 

Post quarter-end, as previously announced, the company was notified by its exploration alliance partner, Earth AI, of plans to begin drilling up to three 600m deep holes in the current quarter at Cundumbul. The program is testing anomalous copper geochemistry associated with outcropping hydrothermal breccias and skarns. 

Cundumbul is located in the central Molong volcanic belt of the Macquarie Arc, some 30km south of Alkane’s Boda-Kaiser porphyry project.

An expansive operational update of Kincora’s work over the past 9 months is also reported in today’s announcement.

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Images: Kincora Copper
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Written By Adam Orlando Editor-in-Chief Adam Orlando has more than 20 years’ experience in the media having held senior roles at various publications, including as Asia-Pacific Sector Head (Mining) at global newswire Acuris (formerly Mergermarket). Orlando has worked in newsrooms around the world including Hong Kong, Singapore, London, and Sydney.