Disaster at Kimber Resources

Kimber came out with its newsletter for January yesterday, and unfortunately for Kimber shareholders it was a disaster. I've been out of Kimber for some time, but it still hurts because this is one I recommended to some friends. This is a company which has a good land package and has one proven deposit so it still has the potential to become a Minefinders or Gammon Lake type of investment, however, the recent news confirms that Kimber is still a very long way away from that.

Certainly, there were some warning signs along the road, like the continuous delays with respect to the prefeasibility feasibility study for the Carmen deposit, the lack of any significant drill results for the El Orito Norte and Carotare targets, and the attention that the Company had recently been giving to other "promising" targets when the Company had previously stated that drilling up El Orito Norte and Carotare were their next top priorities after Carmen.

I'm not even going to get into the shenanigans at the front office.

Here is the newsletter in all its gory detail, with my appended comments:

VANCOUVER, Feb. 7 /PRNewswire-FirstCall/ - Kimber Resources Inc. (AMEX:KBX, TSX:KBR)

January brings a fresh start to a new year for Kimber Resources. [A refreshing introduction right before the disasster is spelled out in the next paragraph.] We are over the corporate distractions of the last half of 2006. [With a lame duck for CEO, I think it's a little too early for this statement.] We have strengthened our team in Mexico. At the AGM in December we welcomed some very experienced new directors to our board. The next key event will be the selection and appointment of the new CEO which we expect to happen soon. [I'll give Kimber credit for one thing. At least they've learned to dispense with deadlines, rather than setting deadlines and then ignoring them.]

In the field, access roads to all identified drill sites at El Orito Norte have been completed. ["...We're on a road to nowhere..."] As mentioned in the last newsletter (for November), results from Carotare at that time had not been encouraging. Since then we have completed Carotare West, a visually impressive structure with alteration, gold, and silver but our intersections have not demonstrated enough gold and silver to be economic. [But at least it's visually impressive.] The same can be said for the south structure at Carotare East. [Meaning, that it's visually impressive as well? Or meaning that it also hasn't demonstrated enough gold and silver to be economic? Or both?] After the excellent start when the first 28 holes in 2005 generated a resource of 240,000 gold-equivalent ounces this has been disappointing. Similarly, although we have intersected mineralized structures, early drilling at El Orito Norte has not provided much excitement yet. Drilling on the main structure continues and we will evaluate progress with each batch of results. [Read: Carotare, one of the company's top three targets is now officially a failure. El Orito, another one of the top three is looking increasingly like a failure.]

In order to achieve our objective of three million gold-equivalent resource ounces, rather than relying solely on Carotare and El Orito Norte, we initiated a reconnaissance exploration program in December to expand the search beyond the 3% of the property already mapped and sampled.[Read: the company is basically back to square one. With the exception of the Carmen deposit, which has stalled for over a year, this is no longer primarily a development company. It's now back to being a risky explorer.] This will be a key priority for 2007. [That's quite a change of priorities. Kimber went from a development company to primarily an explorer.] One new occurrence of epithermal alteration ("Arimo") only two kilometres southwest of Carmen has already been identified. The Monterde property is 28,000 hectares in area and 37 kilometres in length. [Wow. Big. Ah, the great wild wilderness. Lots of places to play hide and seek.]

More holes have been drilled on the Veta Minitas, a mineralized structure 200 metres to the west of the Carmen, which provided the excellent intersection (in LMR-47, reported November 29th). While we await results on the follow-up holes, we are optimistic that Veta Minitas will generate resources which could be mined from underground. [One good drill hole and the company is optimistic that it's going to be a mine. Considering that this place is right next to Carmen but wasn't previously considered as important as Carotare and El Orito Norte, but is now suddenly, after the failures at Carotare and El Orito Norte, getting hyped for its potential, I would be pretty suspicious about expecting too much from Veta Minitas.]

We have completed core drilling on our identified targets and accordingly, we are relinquishing the core drill for return when we have sufficient new targets. [Does that mean there are still reverse circulation drills at Carotare and El Orito Norte? Or are these targets being abandoned altogether?] This will come as a disappointment to some, but exploration is not solely drilling. [Yes, when a project fails, you're back to square one of conducting surveys, sending people out into the field to examine visually impressive outcroppings etc. As I mentioned, until yesterday, Kimber was primarily a project development company, not an exploration company.] The reconnaissance program will be integral to identifying additional drill targets, a key step to growing resources at Monterde. [A key step and a FIRST step, that, with luck, will lead back to drilling.]

Metallurgical studies on the Carmen deposit continue. Silver recoveries are the key. Not only does the recovery of silver range from high to low, but it also varies with location within the deposit and with the fineness of grind. We are currently considering alternative mining operations and processing methods as we continue to work towards optimizing the rate of return from the Carmen deposit. Open pit only, open pit combined with underground, underground only are all being looked at alongside heap leach only, heap leach and mill, and mill only. Combined feed from both open-pit and underground is already being used by Gammon Lake (Ocampo) and is being considered by Palmarejo (Palmarejo Trogan), Agnico-Eagle (Pinos Altos), and now Minefinders (Dolores). The possibility that the Carmen deposit includes resources which can be mined from underground is now a focus of attention. [This may all sound like Kimber has been confronted with a truly unique problem. But unfortunately, the point of the pre-feasibility study is to come up with answers to the questions raised in this paragraph. That's exactly what prefeasibility studies are about. There's no unique issue here at Kimber.] The pre-feasibility study will take place when enough is known about resources, metal recoveries, and mining methods. [Read: Kimber has no meaningful update or schedule for the pre-feasibility study since postponing it twice and the Carmen deposit which has been pretty much drilled to death, continues to languish indefinitely.]

I think this best sums it up:

About Kimber from January 17:

Kimber Resources Inc., which holds a 100% interest in the Monterde property in the Sierra Madre of northern Mexico. On the Monterde property, The Company is advancing the Carmen gold-silver deposit towards production. The Carmen deposit, an underground mine in the 1930's, is a typical low sulphidation epithermal system, oxidized, and believed to be suitable for open pit mining. Two adjacent epithermal systems first identified in 2005, the Carotare deposit and El Orito Norte exploration target, appear to be similar to the Carmen. The goal of the Company is to demonstrate at least three million resource ounces from the two deposits and exploration target identified. For further information on the company, visit SEDAR or the company website at.

About Kimber February 7:

"Kimber Resources Inc. holds a 100% interest in the Monterde property in the Sierra Madre of northern Mexico. On the Monterde property, The Company is advancing the Carmen gold-silver deposit towards production. The Carmen deposit, an underground mine in the 1930's, is a typical low sulphidation epithermal system, oxidized, and believed to be suitable for open pit mining. Two adjacent epithermal systems first identified in 2005, the Carotare deposit and El Orito Norte exploration target appear to be similar to the Carmen. The Company recently acquired a second project, the "Pericones" in Estado de Mexico. This prospective silver system is undergoing a mapping and sampling program with drilling expected in 2007. For further information on the company visit SEDAR or the company website at ."
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Get it? The two adjacent epithermal systems appear to be similar. Period. But who cares? The important thing is that the company no longer expects 3 million ounces from their top three projects.

The funny thing is that the above description of "About Kimber" in which the reference to the company's goal of getting 3 million ounces from their top three targets was removed also appeared in the January 17 announcement which was titled "Kimber announces drill results from Monterde & sampling at Pericones project". You just had to look very carefully to see that little "detail" or rather omission at the bottom of the announcement.