Karora Resources Q2 2023 Earnings Call Transcript

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August 14, 2023

There are 6 speakers on the call.

Operator

Good morning, ladies and gentlemen, and welcome to the Corolla Resources Second Quarter Conference Call and Webcast. At this time, all lines are in a listen only mode. Following the presentation, we will conduct a question and answer session. I would now like to turn the conference over to Mr. Oliver Turner, Executive Vice President, Corporate Development.

Operator

Please go ahead, sir.

Speaker 1

Thank you, operator, and good morning, everyone. I would like to welcome you to Crora Resources Second Quarter 2023 Conference Call. I'm sitting in today for Paul Hewitt, our Chairman and CEO. Please note, we will be talking to a slide deck, which is available on the homepage of our website as well as throughout this webcast. On Slides 34, before I begin my 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 Q2 MD and A news release and in our presentation slides. Over to Slide 5. On the call with me today is Lee Jungk, our Managing Director for Australia. Lee is joining us on the call from Perth down in Australia. And just last week, Lee represented CORR at the Diggers and Dealers Mining Conference in nearby Kalgoorlie.

Speaker 1

Lee will take us through the operational highlights from our record second But first, I will cover some recent achievements and review our financial results. Following on our record first quarter, We set another new record with gold production of over 40,000 ounces for the first time in our history. For the first half of twenty twenty three, we produced a record 80,650 gold ounces. The key to our rapid ounce production growth Over the last few quarters has been the increased milling capacity resulting from our strategic acquisition of Lakewood last July. Turning over to Slide 6, I'll now go over our financial highlights.

Speaker 1

This morning, we issued a news release with our Q2 financial results, Our unaudited financial statements and MD and A for the period ended June 30, 2023 have also been filed and are available on our website and under Carora's profile on SEDAR. As I outlined at the beginning of the call, The first half of twenty twenty three was very strong with record consolidated gold production putting us in an excellent position to achieve our full year guidance of 145,000 ounces to 160,000 ounces. All in sustaining costs for the first half were $11.84 per ounce sold, well within our 2023 guidance range of $1100 to $12.50 Headline financial results for the 2nd quarter included record revenue of $111,000,000 up 50% compared to Q2 of 2022 and up 14% compared to the Q1. The increased revenue is the result of Cora enjoying increased sales and higher gold prices compared to prior periods. 2nd quarter adjusted earnings were $13,900,000 or $0.08 per share, an improvement of $9,100,000 or $0.05 $16,000,000 from the prior quarter.

Speaker 1

Our cash balance at the end of the second quarter was a very strong $71,000,000 And with our undrawn $40,000,000 revolving credit facility, we continue to have a very strong and flexible financial position. Looking ahead, we are poised to generate solid cash flow over the balance of the year as we continue to execute operationally the currently favorable gold price environment. So with that, I'll turn the call over to Lee Zheng to take you through our operating highlights.

Speaker 2

Thank you, Oliver. Good morning, everyone. I'm excited to be reporting to you today on the strongest operating result in Carora's history. As I did last quarter, I'll start off by recognizing our operations team for their commitment to working safely and buying into our culture of strong operational discipline. We continue to see improvement across the business, which I believe reflects good engagement from our team members to maintain the safest possible work environment while executing the plan.

Speaker 2

Operationally, our team continues to meet or exceed our expectations as demonstrated by the record results we've been achieving as we deliver on our growth plans for gold and byproduct nickel production. Now referring to Slide 8. On a consolidated basis, gold production for the 2nd quarter was a record 40,823 ounces From 536,000 tonnes milled at an average grade of 2.5 grams per tonne. The gold production increase from the prior quarter of almost 1,000 ounces was driven by higher tons milled. Consolidated mill recoveries improved slightly to 95% from 94% in Q1, remaining strong and consistent as a result of our strategy Consolidated cash operating costs were US10.68 dollars per ounce sold, A 5% improvement compared to the prior quarter, driven by higher grades and lower costs at Higginsville relative to Q1.

Speaker 2

For the first half of twenty twenty three, we milled just over 1,000,000 tons of material at an average grade of 2.56 grams per ton The 80,650 ounces of gold at an average cash operating cost of US10.94 dollars per ounce sold. Turning over to Slide 9 now. Before I get into the numbers, let me briefly bring your attention to the cat truck shown in the Lower right hand corner of the slide. This truck was delivered to our Beta Hunt mine late last week and illustrates the ongoing fleet expansion and upgrade that's been underway The new equipment is more efficient than the models are replaced, so it's always an exciting time from a productivity standpoint when we add new equipment to our mining fleet. Once again, we attended the Diggers and Dealers Mining Forum in Kigoori last week, and we're proud to have our new track on display at the mine entrance Australia's largest mining event prior to its delivery of the site.

Speaker 2

Then we created some exciting discussion around our booths to reinforce how far Karora has come in the last few years. Turning to quarter 2, at Beta Hunt, we mined 297,100 tonnes, which is flat when compared to the prior quarter. Similar to the Q1, mining was focused in the Central Western Flanks and A Zone areas. The average mine grade The Q2 was 2.97 grams per tonne consistent with the mine plan for the year. Switching the processing, 390,000 tonnes of liter hunt material was milled at an average grade of 2.62 grams per tonne to production of 25,709 For the first half of twenty twenty three, we milled 618,000 tonnes of beta hunt material, An average grade of 2.77 grams per tonne for the production of 52,286 ounces.

Speaker 2

Now looking at Slide 10, Higginsville Mines contributed 15,114 ounces of gold in Q2, Produced from 217,000 tonnes of material milled at an average grade of 2.31 grams per tonne. Higginsville mine material was 178,100 tonnes at an average grade of 2.76 grams per tonne. Mining commenced in April 23 at Mouse Hollow, which contributed 115,300 tonnes of mine material through the quarter. First half production from Higginsville Mines was 28,364 ounces from 420,000 tonnes Milled at an average grade of 2.25 grams per tonne. Higginsville production is scheduled to come from a combination of Mouse Hollow and Pioneer Open Pits and the Aquarius underground for the balance of the year.

Speaker 2

With respect to our growth plan progress, our overall plan is moving forward well. During the Q2, we progressed work on the 2nd vent raise Underground Development at Beta Hunt, piling storage facilities at Higgins Hill and Lakewood and mill upgrade work at Lakewood. We do note there has been some delay in the capital spend schedule due to particularly wet weather at both sites as well as continued contract labor force availability in the region. We remain well on track to deliver our capital program during 2023, where we previously forecast a total of approximately 105,000,000 Aussie dollars in capital during the year. However, we now anticipate a back half weighted spend as we move these projects forward.

Speaker 2

During the first half, we spent approximately $45,000,000 on our planned 2,003 capital program. We want to be clear that we do not expect the minor delay in capital outlay to impact any of our production targets or guidance. Turning to Slide 11. One area from B to 100, I'd like to highlight is our most recent exploration results from the Fletcher Shear Zone. In June, we began a 9 hole drill program at Fletcher to follow-up on significant results we reported in April this year, which included an intercept of 46.5 grams per tonne over 7 meters and 6.5 grams per tonne over 26 meters Essays from 4 of the 9 follow-up polls received today all intersected strong mineralization And further increased our confidence in the continuum of Fletcher mineralization.

Speaker 2

The results from the latest drill holes are highlighted in yellow on Slide and include intercepts of 4.7 grams per tonne over 11 meters, 11 grams per tonne over 2.9 meters and a very wide intercept of 2.8 grams per tonne over 52 meters. We look forward to receiving More outstanding results for the remaining 5 holes from the follow-up campaign before the end of this quarter. As a reminder, Fletcher is considered a structural analog to Western Flanks, Beta Hunt's largest and most prolific gold zone. Fletcher is positioned west and parallel to Western Flanks in the Hunt Block and extends to the Ultra Island Fault. The most recent drilling in Fletcher south is only 230 meters from existing nickel infrastructure in the Beta Block and 150 meters from the Larkin mineral reserve to the south.

Speaker 2

Fletcher remains open along strike with the potential to extend for up to 2 kilometers and is open at depth. Overall, Fletcher looks very exciting and is certainly an area with high potential to be converted into new mineral resources. We'll be updating our Mineral Resource before the end of the year. With that, I'll turn the call back to the operator to poll for questions.

Operator

Thank you, sir. Ladies and gentlemen, we will now begin the question and answer Your first question comes from the line of John Sklodnick from Desjardins. Please go ahead.

Speaker 3

Hey, thanks guys. And yes, great quarter. Nice to see costs come in slightly ahead of expectations as well. In an outlier versus my model as a top line, I'm just curious if you're confident on the average realized gold price, which was a bit below spot over the quarter.

Speaker 1

Yes. Thanks, John. I can take that one. Yes, so minorly below the spot price there. We did have some internal contracts during the quarter while we had some of the capital outlay that we planned just to lock in Some of that period and rolling forward to the Q3, we're fully exposed there.

Speaker 3

Okay, perfect. I appreciate that. I guess over to Spargo, just curious, I think you guys are working on some underground development. Just curious on What we could expect for production and grade ranges there and when that could come in?

Speaker 2

Yes. I might as well grab that, John. Yes, we're still working on that. We haven't started underground Development yet, decisions will be made this year and potentially get going next year. It will be reasonably small, but high margin, probably 15,000 ounces a year or something like that, but good grade and high margin.

Speaker 2

So we'll make a decision on that later this year.

Speaker 3

Perfect. Yes. No, it's good to have a little sweetener in the mill there. I guess looking over to another potential sweetener down the road, Fletcher, just curious on maybe Timing for a resource in that area and just how much drilling might be required there?

Speaker 2

Yes. We will be with these results, we will continuously be drilling to the north, but the idea was to Earmark is section of 500 meters to 600 meters at the southern end and drill that to at least an inferred resource, which We'll probably need a few more holes after this program to get a few more holes on each section. So this was a bit of a patent drill out And we'll probably require a few more holes to have a few on the same section and then we can get a resource out. It won't take long to get a resource out. So Yes.

Speaker 2

We could potentially get one towards the end of this year or early next year. Okay. Thanks. So much of Fletcher to go.

Speaker 3

Yes. No, fair enough. That makes sense and exciting to see what you guys get there. Last one for me before freeing up the line. Just curious, you guys are tracking to the top end of guidance, I think 6% of the midpoint through the year to date.

Speaker 3

Just curious how Q3 is going and kind of how you see the rest of the year evolving? Yes.

Speaker 2

The rest of the year will be very similar to the first half there. We're pretty fortunate that we are not relying on Coming home with a huge production quarter in the last quarter, each of our quarters this year will be pretty similar. So Yes. So what we've done today for the first half, yes, we'll We're looking to replicate that in the second half. So we've made good progress in this quarter And certainly, a ramp up at Beta Hunt is going well.

Speaker 2

We have had a bit of downtime with our crusher over at Higginsville For about a week, while we're doing some repairs on the connection with the ROM pad there, we won't see much impact on production. There will be a slight impact on cost, but we could see that coming through in this quarter. But the production, as I said, Should be pretty similar to what we're seeing in the first half, I mean for the topping the garnets.

Speaker 3

Perfect. Okay, that's great. Yes, nice. You don't have to rely on a massive Q4 like some many mining companies out there. So, yes, no, that's great.

Speaker 3

You guys are really well Great first half. That's it for me. Thanks guys.

Speaker 2

Thanks, Sean.

Operator

Your next Question comes from the line of Matthew O'Keefe from Cantor Fitzgerald. Please go ahead.

Speaker 4

Thanks, operator. Good morning. Another great quarter, so Thanks for that. Just a couple of operational questions here. 1 on beta or actually On both on all operations, your production was your throughput was, I think, record on both Beta Hunt and Higginsville, Largely on Beta Heinz II.

Speaker 4

So what are we looking at from the driving that? I mean, you've got a second decline. Is that operational? And what are the what's the outlook for the rest of the year on throughput?

Speaker 2

So we are using the 2nd decline, so that's operational now. So We are beginning to be more efficient with our trucking, which will help us Going forward, so that is helping. We're still doing a third of our 3 primary vent raisers to go into Predominantly Western Flanks, so that will help us towards the end of the year when our third one is in and all links up. So We've got a few things to go until we are fully going there, That's where we've certainly started the ramp up is going well.

Speaker 4

That's great. Okay, thanks. And then with respect to that, I guess a follow on there would be on with respect to CapEx. The range this year was, I think $85,000,000 to $105,000,000 Aussie. And so is that still what we're expecting for 2023?

Speaker 4

And what are the items to fall into that for the remainder of the year?

Speaker 2

Yes. We'll be Looking at delivering the top end of that is about $105,000,000 We're going well with gold price and cash flow. We'll deliver I'll handle that to you for our capital. What are the bigger buckets? There's There's some mill upgrades at Lakewood, sales dams, TSF facilities there, Some equipment at Beta Hunt, the primary fan to put on top of those raised boards, I just said, a bit of surface infrastructure and more equipment And some work to do on the Higginsville processing plant as well.

Speaker 4

Okay. And then on the call, So Lakewood, you're so far happy, no surprises there or anything you're happy with the operation?

Speaker 2

Yes. Lakewood is going great. It was in far better far Much better condition than I was even hoping for when I started. So life was going really well.

Speaker 4

Okay. That's it for me. Thanks. Thanks a lot and keep up the great work. Thanks,

Operator

Your next question comes from the line of Jeremy Oi from Canaccord Genuity. Please go ahead.

Speaker 5

Hi, good morning, Lee and Oliver. Thanks for taking my questions. I just wanted to start I'll revisit the reserve and resource update that you guys said is coming out later this year. So it sounds like there's Potential that some of Fletcher could make its way in, but what else are we expecting to contribute to that?

Speaker 2

Yes. We'll put out our yes, like you say, resource and reserves towards the end of the year. Yes. I don't think we'll bank on Fletcher coming in. It could happen depending on our drilling that we do between now and then.

Speaker 2

We have a new zone just in the south of the Alpha Island Fault, Mason, which is next to Larkin, so we'll be bringing Mason in for its first resource And Castle, which sits right beside Larkin will be splitting last year. We had Larkin sort of encompass Both that will be spinning Castle out of Larkin. So just at the Alfa Island float, there will be And just, yes, and the big ones of Western Flanks and Aza.

Speaker 5

Okay. Sounds good. And then I guess just one more quick one for me. Are you seeing any limitations or easing of some of the pressures you've seen in terms of labor and Supply chain at your operations? You did mention contractor labor there.

Speaker 2

Yes, a little on the contractor, but it's not across the board in all things. We have a full labor force that So we have all our positions are full. And like I said with the new truck, we are getting all our equipment right on schedule. So the big pieces of equipment that we really need To arrive and arrive on time for us to deliver that growth, they're all turning up right on time. So Yes, all the bigger things.

Speaker 2

And so it's not all across the board that it's slowing absolutely everything down. So maybe we've seen the peak of the supply chain issues, but touch wood. But yes, we're coping okay.

Speaker 5

Okay. Well, great to hear.

Operator

Thank you. There are no further questions at this time. I'd now like to turn the call back over to Mr. Turner for any closing remarks.

Speaker 1

Yes. Thank you very much, operator, and thanks to everyone who took the time this morning or this evening, if you're over in Australia, To listen to our call, we appreciate the support. And look, it's been a great first half of the year, operationally outstanding job by Australian operations, And we're excited to deliver into this guidance for the second half of the year. So once again, thank you for the time. And operator, you can close the line.

Operator

Thank you, sir. Ladies and gentlemen, this concludes your conference call for today. We thank you for participating and ask that you please disconnect your lines. Have a lovely day.

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Earnings Conference Call
Karora Resources Q2 2023
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