According to Raymond James Canada:

Kaminak Kick-Starting Coffee

Event

Kaminak announced the commencement of the 2013 exploration program on the Coffee Gold Project, Yukon. The company reports $16 mln in cash and plans to spend $11 mln on the Phase I exploration program.

Recommendation

Kaminak’s early start to the 2013 program is viewed as positive. The share price has been under pressure with decreased news flow through the winter and the new management team appear eager to resume exploration. We continue to recommend accumulating shares of Kaminak and maintain our Outperform rating and $3.10 target price.

Analysis

Field crews have been mobilized and drilling is expected to commence soon focussing on the 4 sq km Supremo/Latte/Double Double Area where 2.9 mln oz oxide/transitional gold mineralization has been identified. The drilling is to extend mineralization, obtain geotechnical data (for pit slope analysis) and generate metallurgical samples to augment the limited existing database. Existing column tests yielded 90.4% recovery with 83.2% over 15 days. In addition to drilling in the known resource area, holes are planned to followup geochemical anomalies.

Approximately 20% of the 150,000 acre property has been systematically explored and 10,000 additional soil samples are planned. Recall that the Coffee Deposits were discovered by testing soil geochemical anomalies which directly overlie the unglaciated bedrock. Drill results obtained from the Phase I program are expected to be included in an updated resource estimate and PEA.

We believe the early start to exploration focussing on the known areas of mineralization should lead to a quicker PEA. In addition, geochemical sampling and exploration drilling could lead to new discoveries and further enhance the value of the Coffee Property.

Valuation

Our $3.10 target price is based on a cash-adjusted 1.2x P/NAV multiple, based on our view of the risk associated with the Coffee Project, applied to our NAVPS estimate of C$2.78. KAM currently trades at 0.4x P/NAV vs. our gold developer/explorer average of 0.4x (at current spot prices, US$1,615/oz gold, KAM is trading at 0.2x and the NAVPS jumps 83% to $4.62). We believe KAM should trade at a premium given the high-quality, oxide ounces located in a stable jurisdiction. KAM currently has $16.0 mln in cash and no debt.