The US-based Koski family office has this week revealed it has invested in a gold mine in Colorado becoming the second largest family investor to seek new reserves at the property.
The family office agreed to a $1.8 million (€1.35 million) financing deal with mining company LKA Gold to expand exploration at the company’s Golden Wonder Mine near Lake City, where only 10% of land has currently been explored.
Capital from the private placement, whereby Koski Family Limited Partnership bought 7.2 million common shares at 25 cents a pop, will allow LKA to accelerate its exploration at the mine, first discovered in 1880.
The family investment vehicle makes strategic investments and manages assets for the descendants of Sun Hydraulics’ founder Robert E Koski.
As part of the deal, LKA has bought back the rights of a third investor, Brannon Limited Partnership, to 4.2 million shares, and issued it instead with $300,000 cash and 650,000 shares. The remaining 3.55 million shares that Brannon Limited had the rights to will be cancelled.
LKA, controlled by the Abraham family, has held the Golden Wonder Mine since 1982, leasing it to various mining companies up until 2007. It is the mine’s biggest shareholder.
Since 2009, two years after the collapse of a planned joint venture with Canada’s Richmont Mines, LKA has extracted and shipped 30 bulk samples of crushed vein material containing over 4,200 ounces of gold with a net value of over $4.6 million.
An inustry source said the grade of the gold was “very high” but there were a few red flags.
“The company has no viable ore reserves yet is forecasting cash flows out to 2016. This is unusual and any company listed on the main mining exchanges would not be able to do this under the respective reporting codes."
According to a press release associated with the deal, investors are warned the company generates “substantial losses”, due to the fact more funding and exploration work is required, adding that there is no guarantee the company will be able to find a commercially viable ore reserve.
From 1998 to 2007, when Gold Wonder was leased to Au Mining, the mine was one of the highest-grade gold producers in North America with an average ore grade of 16.01 ounces per tonne over an eight-year period – 100 times greater than an average gold mine, according to LKA.
LKA president, Kye Abraham, said the company was pleased the Koski family had joined the project, and would be “ramping up operations immediately".
Koski Family Limited other investments include substantial equity interests in Sun Hydraulics, biopharmaceutical company Oragenics, software company nMetric and other private companies.