Karora Resources Q3 2023 Earnings Call Transcript

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Provided by Quartr
November 10, 2023

There are 6 speakers on the call.

Operator

Morning, ladies and gentlemen, and welcome to the Carora Resources Third Quarter 2023 Conference Call. At this time, all lines are in listen only mode. Following the presentation, we will conduct a question and answer session. This call is being recorded on Friday, November 10, 2023. I would now like to turn the conference over to Paul Hewitt, Chairman and CEO of Carora Resources.

Operator

Please go ahead.

Speaker 1

Thank you, operator. Good morning, everyone, and I'd like to wish a happy Memorial Day to everyone. I'd like to welcome everyone to the Corora Resources Third Quarter 2023 Conference Call. Please note, we will be referencing a slide deck, which is available on the homepage of our website as well through the webcast of this call. Before I begin the presentation, I would like to remind you to please review our cautionary statements regarding forward looking information and non IFRS measures.

Speaker 1

These statements can be found in our Q1 MD and A news release and in our presentation slides. Today, we are joining you from Perth. In the room with me is Lee Jung, our Managing Director. And by the way, it's quite late at night here for those of you who don't know. Lee will take us through the operational highlights from the 1st 3 quarters of the year.

Speaker 1

Also on the call with me today is Oliver Turner, our Head of Corporate Development. Following on our record first half, Q3 was another strong quarter with gold production of approximately 40,000 ounces. Year to date for 2023, we have produced a record of 1 120,197 gold balances positioning us well to achieve our guidance. Our production has been consistent since our strategic acquisition of the Lakewood Mill last year. Looking back to 2022, I'm pleased we were able to move quickly to complete the transaction, which significantly derisked our expansion plans, especially considering the inflationary environment we've been in since that time.

Speaker 1

At Beta Hunt, I'm excited about our recent drill results. It really drives home the potential we have in front of us For many, many years of growth in both gold and in nickel. Lee will expand on this in his remarks. Look, to be honest, in my humble opinion, Betahunt truly is a beast. And I certainly believe that the best is yet to come for our shareholders.

Speaker 1

It's tough to contain one's excitement and passion given the success we've had at Beta Hunt with that drill bit. It's been Quite amazing. It's been impressive. Attracting the right talent to our team is a top priority. And during Q3, We strengthened both our Board of Directors and our senior team at Carora.

Speaker 1

Tony Makuch joined our Board of Directors and is Chair of our Tony is quite familiar with Carora having served as an advisor to the company since May 2022. It's no secret people like Tony Makuch are very much in high demand. The fact that Tony joins Corora Board is a true endorsement to the growth and exciting future we have in front of ourselves. When Barry Dahl, our former CFO, Decided to retire after a long and successful career in the mining sector, we were very fortunate to attract Derek Humphrey To the Corora team as our new CFO, after his first full quarter with us, I can say firsthand Derek is a great fit for our team. His 20 plus years of experience across both the TSX and ASX listed companies, Including both gold and nickel producers, fits perfectly into our plans to take Carora to the next level.

Speaker 1

We have also benefited from the addition of Peter Ganza to the position of Chief Operating Officer. Peter brings a strong track record of leadership, including in mining operations and growth at Goldfields, Saracen And most recently at Northern Star as GM of ESG and the Growth. As with Derek, Peter's experience Will be a great asset to help take us where we need to go. I am very pleased to welcome all 3 of them to our team. Turning over to Slide 6.

Speaker 1

I will now go over some of the financial highlights. This morning, we issued a news release with our Q3 financial results, our unaudited financial statements NMDA for the period ended September 30, 2023, have been filed and are available on our website and under Corora's profile on SEDAR. As I outlined at the beginning of the call, the 1st 3 quarters of 2023 have been in line with our guidance, with record consolidated gold production putting us in a strong position to achieve our full year guidance of a range of 145,000 to 160,000 ounces. All in sustaining costs for the first Three quarters were approximately $11.88 per ounce sold, Well within our full year 2023 guidance of $1100 to $12.50 per ounce again. Headline financial results for the Q3 included revenue of CAD107 1,000,000 Up 32% compared to Q3 of 2022 and slightly lower compared to the prior quarter when we had Record high gold ounces sold.

Speaker 1

The strong revenue in the quarter was driven by sales of 41,200 78 gold ounces at an average realized gold price of $19.31 per ounce. Q3 adjusted earnings were $14,000,000 or $0.08 per share, a slight improvement from the prior quarter. Adjusted EBITDA was $37,000,000 or $0.21 per share And cash flow provided by operating activities was $45,000,000 or $0.26 per share, up $11,000,000 or $0.06 per share from the prior quarter. Our cash balance at the end of Q3 was $84,000,000 up $13,000,000 from Q2. With our undrawn $40,000,000 revolver credit facility, We have a strong and flexible financial position as we continue to execute our growth plan in the current gold price environment.

Speaker 1

With that, I'll now turn the call over to Lee Zheng to take you through the operating highlights.

Speaker 2

Thanks, Paul, and good morning, everyone. Our operating team led by our new Chief Operating Officer, Peter Ganza, Continue to achieve an excellent safe production performance, which is what we're striving for and it's a big part of our culture here at Karura. Now on to Slide 8, on a consolidated basis, gold production for the 3rd quarter remained strong 39,547 ounces from 516,000 tons milled at an average grade of 2.51 grams per ton. The small gold production decrease compared to the prior quarter was primarily driven by slightly lower tons milled. We experienced a short crushing interruption during the quarter, which was quickly overcome through the use of contract crushing while repairs are made to the crushing bridge at our Higginsville processing plant.

Speaker 2

Consolidated mill recoveries during the quarter remained strong and consistent at 95%. Consolidated cash operating costs for Q3 were US10.62 dollars per ounce U. S. Sold, a slight improvement compared to the prior quarter driven by higher grades and lower cost at Higginsville relative to Q2. It's important to note here that no nickel byproduct credits were booked in Q3 due to the timing of sales.

Speaker 2

We mined 5,193 tons of nickel ore at an average grade of 1.6%, which represents a byproduct credit of around US22 dollars an ounce on a consolidated basis when sold. In the prior quarter, we booked a credit of US38 dollars an ounce. The 1st 3 quarters of 2023, we mill 1,600,000 tons of ore at an average grade of 2.54 grams per ton For 120,197 ounces of gold at an average cash operating cost of US10.83 dollars per ounce sold. All improvements over last year and in line with our growth plan expectations. Turning to Slide 9 now.

Speaker 2

Before I get in the numbers, I'll give a brief update on the progression of the ongoing expansion of the Beta Hound operation. The 3rd and final Vent Ray's planned in this phase is now complete. This is a critical component as an increase of ventilation capacity to mine Allowing us to operate a larger mining fleet required for production ramp up towards our targeted rate of 2,000,000 tons per annum by the end of 2024. During Q3, we added 2 more trucks and a loader to the underground fleet with further fleet additions planned for 2024. Turning to the numbers for Q3 at Beta Hunt, we mined 357,204 tons, which is a 20% increase compared to the prior quarter, demonstrating the progress we're making in ramping up our production.

Speaker 2

During the quarter, as planned, we mined a lower grade section from the central part of Western Flanks for an average mine grade of 2 grams per ton, resulting in 19% reduction in contained gold mined quarter over quarter. We expect an improvement in mine grades for the current quarter as we mine Switching over to processing, 333,000 tons of beta hunt materials milled At an average grade of 2.17 grams per tonne for production of 21,926 ounces of gold. For the 1st 3 quarters of 2023, we milled 951,000 tons of Beta Hunt material at an average grade of 2.55 grams per ton for the production of 74,212 ounces. As I mentioned in Q3, 5,193 tons of nickel ore were mined average grade of 1.66 percent. And for the 1st 3 quarters, we mined 18,035 tons of nickel at a greater 2.14%.

Speaker 2

Cash operating costs for Beta Hunt in Q3 were US12.33 dollars an ounce Sold compared to $10.17 in the prior quarter. The high costs are due to 2 main temporary factors. The first one, the lower grade in Q3 resulted in lower gold produced and sold. And 2, there was no byproduct Contribution from nickel, which accounted for US61 dollars an ounce reduction in cash operating cost of Beta Hunt in the prior quarter. And for the 1st three quarters, the cash operating costs of Beta Hunt were US10.71 dollars per ounce sold in line with the same period of 'twenty two.

Speaker 2

Now looking at Slide 10, Higginsville Mines contributed 17,621 ounces of gold in Q3, Produced from 193,000 tons of ore milled and average grade of 3.13 grams per ton. Higginsville mine material was 96,367 tons at an average grade of 5.16 grams per ton. The reduced tons mined compared to the prior quarter was a result of the completion of the Aquarius underground mine During the quarter and the ongoing transition to ramp up production from the Pioneer open pit, production from Higginsville mines to the end of Q3 was 45,995 ounces from 603,000 tons milled at an average grade of 2.52 grams per ton. This is a really good result and testament to the new site management and the whole team at Higginsville are doing a great job. Higginsville Mines benefit from the higher grades During the Q3, resulting in quarter over quarter 28% reduction in cash operating costs to US832 dollars an ounce.

Speaker 2

Year to date, Q3 cash costs were US1101 an ounce. Turning to Slide 11, one of the many areas that Beta Hunt and I'm excited about from an exploration point of view is the Fletcher Shear Zone. In June, we began a 9 hole drill campaign at Fletcher to follow-up on significant results reported in April this year, which include an intercept of 46.5 grams per tonne over 7 meters at the southern end of Fletcher near the Alfa Island fault. All of the follow-up holes encountered significant mineralization in the targeted position. The results from the latest drill holes reported in September are highlighted in yellow on the Slide and you can see the intercepts of 15.9 grams per tonne over 6 meters and 4.8 grams per tonne over 32 meters amongst the standout results from the latest drilling.

Speaker 2

As a reminder, Fletch is considered a structural analog to Western Flanks, Peter Hunt's largest and most prolific gold zone today. Fletcher's positioned about 2 50 meters to the west and parallel to western flanks in the Hunt block And extends south to the Alfa Island Fault. Fletcher remains open along strike with the potential to extend for up to 2 kilometers And he's also open at depth. Overall, Fletch is a really exciting opportunity with huge potential for conversion into new growth area for our gold mineral resources. On Slide 12, you can see some of our other recent drill results from Beta Hunt.

Speaker 2

At the Mason Zone seen at the lower middle of the slide, You can see 14.7 grams per tonne over 4 meter highlighted. New drilling reported in September extended the gold mineralization strike 100 to 800 meters and we expect to be in a position to declare a maiden gold mineral resource at Mason in our next resource update. At Western Flanks A Zone in Larkin, results from drilling aim to upgrade and or infill the existing mineral resource was also reported in September. I won't list them all here, but you can see on the slide, we've got some really strong results from this drilling as well. As you can see, there's a lot happening at Beta Hunt on numerous fronts with exploration, development, improving infrastructure and fleet expansion, all part of our ramp up The team at Beta Hunt are doing a fantastic job at managing all of that.

Speaker 2

The next big milestone I'm looking forward to is providing an updated mineral resource and reserves soon. With that, I'll turn the call over to Oliver Turner.

Speaker 3

Thanks, Lee, and good morning, everyone. So I'm pleased to report that the Cali Metals spin off transaction remains on track to be completed by year end. Just last week on November 3, Cali Metals It's initial public offering prospectus for a listing on the Australian Stock Exchange. The IPO aims to raise AUSTRALIA $12,000,000 through the issuance of 48,000,000 ordinary shares at an issue price of $0.25 per share and is expected to close in December. As a reminder to Corora shareholders, Corora owns 45% of Cali pre IPO.

Speaker 3

The Cali transaction As part of our strategy to unlock the Lithium Valley creation potential of our extensive Higginsville land package. In the second quarter, We have reached an agreement with Kalamazoo to create a jointly owned, but separately run lithium focused ASX listed exploration company. And the intent of this is to provide Corus shareholders with exposure to the lithium value creation potential through participation in a well capitalized lithium focused investment vehicle that will have significant scale in a Tier 1 jurisdiction. It's important to note that Calumetals will fund its own exploration and development activities, allowing Core to keep its management and capital allocation decisions focused on growing our gold and nickel production across our operations. So under the agreement, both Thor and Kalamazoo have vendored their lithium rights at their various projects across Australia into the vehicle.

Speaker 3

The newly formed Cali Metals has an impressive 3,800 square kilometers of highly prospectium lithium and critical metal tenements, much of which is adjacent to existing large lithium mines and deposits. Lastly, on Cali, it will be led by a very experienced management team with a proven track record Success, including Managing Director, Graham Sloan. So just one last point before I turn the call back over to Paul. Late last month, we renewed our normal course issuer bid. Under the normal course issuer bid or NCIB, the company is permitted to repurchase up to 8,900,000 of its common shares subject to certain conditions.

Speaker 3

Under the renewed NCIB, but we are very pleased to have it in place if needed in the future. With that, I'll turn the call back over to Paul Hewitt.

Speaker 1

Thanks, Oliver. Operator, we'll turn the call over now for a couple of questions, please.

Operator

Thank you. Ladies and gentlemen, we will now conduct a question and answer session. Your first question comes from Puneet Singh of 8 Capital. Your line is already open.

Speaker 4

Thanks. Good morning. I just had a couple of questions on Beta Hunt. Maybe just Because the mining sequence affected this quarter, how do you see that shaping up over the next couple of quarters? And then maybe just As you expand, how many stopes do you expect to be open when you're mining at Beta Hunt and what's your fully ramped up?

Speaker 4

Thanks.

Speaker 2

Yes, sure. We are expanding so the number of stopes we'll be mining Is increasing. Next year, we plan to mine about 9 stopes a month Throughout next year and ramp up over next year and in the future and we can do up to 12, 13 stopes So, yes, we are ramping that up.

Speaker 1

Okay.

Speaker 4

And then could you provide some more insight on the nickel plants? How those are progressing? And what kind of timeframe until we see production from those newer areas?

Speaker 2

Yes, sure. The nickel plant to date, we've been mining remnants to date, so which is why The production has been fairly low, but Karura discovered an offset in the main channel, which we call the 50 C, which is to the south Of the main ore body that's been mined to date. So Kouroua found that. So we're currently drilling that. We've been developing up to that because it's It's a bit higher than the last channel.

Speaker 2

So we've been developing up there. We're drilling it now and First production from that area is planned for the second half of next year and that will be the first time that Karura's mined A brand new virgin area of nickel and we've got about 3 kilometers of strike from there to our southern boundary. So once we get into that, that

Operator

Your next question comes from Jeremy Hoi of Canaccord Genuity. Your line is already open.

Speaker 5

Hey, good evening, Paul, Lee and Oliver. Thanks for taking my questions. I'll start with, I guess, sort of further on the to Puneet's question about where you guys will be mining next I'm just wondering if you could give us a bit of an idea of some of the other areas where you'll be mining and what and how we can see that impacting grades?

Speaker 2

Yes. Good day, Jeremy. Next year, we'll be mining A Zone, A Zone North, Western Flanks in Central, North and South. So 3 areas in Western Flanks and 2 areas in A Zone. And we'll also commence Larkin as well in the second half of next year.

Speaker 2

So like all the more options you have, the more areas you mine, the more flexibility you have The mine to manage grade and production. So the more we open up these new areas like Hazo North and Larkin And extend the Western Flanks down with those three declines, the more flexibility we have. So we're mining more areas next year.

Speaker 5

Okay, great. And I appreciate that you reiterated the 2024 guidance as well. My next question is about drilling and when we can expect to see that hitting The resources and reserves, so you had some great results at Fletcher Zone as well as at Spargos. And with the Spargos results, You guys mentioned that there'd be an updated reserve and resource update in Q4 followed by a potential decision to proceed with development of that underground operation. Is that still on track?

Speaker 5

And can I confirm that's just for Spargos, the Fletcher Results we can expect to see with a later resource update? Could you just provide some clarification around when we'll get what in terms of Resources?

Speaker 2

Yes, sure, Jeremy. We will put out like you said our resource and reserves this current quarter, so pretty soon. And it won't contain Fletcher because we're still drilling that and we haven't got a resource there yet. So we're still drilling that. And as for Spargos, we are targeting commencing that in the first half of Next year, so we're just finalizing our plans and getting ready to put that into production, but We should be getting going there in the first half of next year.

Speaker 5

Okay, great. That's all for me.

Operator

Your next question comes from John Slodnick of Deshardins. Your line is already open.

Speaker 5

Yes. Hi, Paul, Lee and Ali, and yes, nice quarter there. Just a few questions from me. First, it looks like you're tracking well on guidance here. Just wanted to clarify if you're comfortable with the top end or Really any reason we should expect lower production in Q4?

Speaker 2

Good day, John. We We're tracking well. We should be above the midpoint of production for the year.

Speaker 5

Okay, perfect. And I guess looking out to 2024, just curious on the major capital projects you've got planned and any reason to change that CapEx Guidance for next year, looking out?

Speaker 1

Yes, John, look, we just had the Board here. The team are putting together the final numbers here. As you can appreciate, we've got a new CFO. Lee has been in the role here in the chair of MD for a number of months here, New Chief Operating Officer with Peter. We're putting together a budget as we speak.

Speaker 1

So we don't have anything finalized at the moment. Stay tuned. We'll be putting out something here shortly, all right, John?

Speaker 5

Okay. Yes. No, understandable. And looking at the leaf, Just that beta hunt, wondering about the pace of ramp up that you'd expect next year. Like should we expect Steady quarter over quarter increases than hitting that annual run rate at year end?

Speaker 1

Before we answer that, why don't we take a step backwards here? John, you've been covering this story for quite a while now. You think back, what was it? 2019, when we first started, We were struggling. You'd remember we were struggling to get 25,000 tons a month out of Beta Hunt.

Speaker 1

We've consistently gone from 25,000 tons a month to 50,000 tons. We hit 80,000 tons. We settled in there for about 9 months. We pushed it all the way up to 120,000 tonnes a month. Remember, this was an operation doing 25,000 tonnes a month.

Speaker 1

We're about at 140. So to sustain that, our guidance next year was somewhere between 1,500,000 to 1,700,000 tonnes to top of my head. I don't have it right in front of me. But I suspect we're going to be right in line with that guidance that we Without on tonnage. And let's face it, those are big numbers.

Speaker 1

Those are stepping up year after year after year and delivering. So That range of 1.5 to 1.7. I suspect we're going to be right in there.

Speaker 5

Okay. No, thanks Paul and appreciate that. And yes, equity research channels are the worst. We're just always wondering what's next. So

Speaker 1

Yes, we got to appreciate where we come from, right? It was heck of a journey.

Speaker 5

No, absolutely. For sure, no, it's been very impressive. Last one for me, just wondering on toll milling, is that all done at Lakewood?

Speaker 2

Yes, we haven't done any This year or since I've been here and we had no plans to do

Speaker 4

any, no.

Speaker 5

Perfect. That's great. Thanks guys. That's all my questions.

Speaker 1

Thanks, John. Thanks, John.

Operator

There are no further questions at this time. I would hand over the call to Paul Hewitt for closing comments. Please go ahead.

Speaker 1

Thank you, everyone. Appreciate you taking the time to listen to us today. We know how busy people's lives and calendars are. I do want to say thank you to our team in Australia. We've done some amazing changes here.

Speaker 1

I'm really proud of the team. Another strong quarter, A very safe quarter. Thanks to the Board. Thanks to our shareholders. We appreciate everyone and have a great day.

Operator

Ladies and gentlemen, this concludes today's conference call. Thank you for your participation and you may now disconnect.

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Earnings Conference Call
Karora Resources Q3 2023
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