Karora Resources Q1 2024 Earnings Call Transcript

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May 13, 2024

There are 6 speakers on the call.

Operator

morning, ladies and gentlemen, and welcome to the Carora Resources First Quarter 2024 Conference Call. Note that at this time, all participant lines are in a listen only mode. Following the presentation, there will be a question and answer session. Also note that this call is being recorded on Monday, May 13, 2024. And I would like to turn the conference over to Paul Hewitt, Chairman and CEO.

Operator

Please go ahead, sir.

Speaker 1

Thank you, Sylvie. Good morning, everyone. I'd like to welcome you to Corora Resources' Q1 2024 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. Over to Slide 34, cautionary notes.

Speaker 1

Before I begin the presentation, I'd just like to remind you to please review our cautionary statements regarding forward looking information and non IFRS measures. These statements can be found in our Q1 MD and A, our news release and in our presentation slides. Over to Slide 5, our highlights. On today's call with me is Lee Jung, our Managing Director for Australia. Lee will take us through the operational highlights for the Q1.

Speaker 1

Oliver Turner, our Executive Vice President of Corporate Development is also on the call, and you will hear from Oliver later in the call. But first, I will cover some recent highlights, then review our financial results. 1st and foremost, let me tell you how excited I am about the merger transaction with Westgold we announced on April 7. This is really good news for our shareholders. The combination of Carora and Westgold provides ongoing exposure to the strong gold market conditions through a 49.9% interest in the new merged Westgold Carora story, which will be the largest unhedged gold producer in Australia.

Speaker 1

The merged company offers substantial value to Carora shareholders, unlocking value across our mines and project, introducing exposure to Westgold's strong operations and includes substantial synergies. These synergies have the potential of reducing up to CAD440,000,000 in costs for the new company, almost AUD490,000,000 This merger is a really great example of equals 3. When you consider the value creation potential for both Carora and Westgold's shareholders, we are excited to bring it across the finish line. To that end, legal and regulatory work is progressing well and we have received very strong support from our shareholder base as we continue to engage with the market ahead of our boat in July. I know both Wayne and I are excited to hit the ground running after the deal closes to unlock all of the value we see in each other's operations.

Speaker 1

Turning back to Carora's operations, after a strong sales performance and costs coming in line to start the year, we remain confident in achieving the full year 2024 guidance we announced during March. As a reminder, our full year 2024 guidance is 170,000 to 185,000 ounces at an all in sustaining cost between $12.50 $13.75 an ounce. Turning over to Slide 6, I will go over some financial highlights. This morning, we issued a news release with our Q1 2024 financial results. Our unaudited financial statements and MD and A for the period ended March 31, 2024 have been filed and are available on our website under Corora's profile on SEDAR Plus.

Speaker 1

Headline financial results for Q1, 2024 included record revenue of $116,000,000 up approximately 19% to Q1 2023 and approximately 14% than the previous quarter. Record revenue was driven by both the strong gold price environment and higher ounces sold. Q1 adjusted earnings were $13,000,000 or $0.07 per share, a $10,000,000 improvement from the prior quarter. Adjusted EBITDA was $40,000,000 or $0.23 per share and cash flow provided by the operation operating activities was $43,000,000 or $0.23 per share, up $16,000,000 or $0.09 per share from the previous quarter. Our cash balance at the end of Q1 remains very healthy and strong at $87,000,000 up another $5,000,000 from the prior quarter, while we continue with our growth plan spending at Beta Hunt, placing us in a very strong financial position.

Speaker 1

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

Speaker 2

Thank you, Paul, and hello, everyone. Our operating team led by Peter Ganza continued to deliver a safe and productive operational performance from our Beta Hunt and Hingansville mines. And I thank all our team for their hard work and dedication to our safety culture while delivering these results. On Slide 8, on a consolidated basis for Q1, as previously announced, we produced 36,147 ounces from 436,000 tons milled in an average grade of 2.75 grams per ton. Consolidated mill recoveries remained strong and consistent at 94%.

Speaker 2

Consolidated cash operating costs for Q1 were US1193 dollars per ounce sold and AISC was US1285 dollars per ounce, well within our full year guidance range of $12.50 to $13.75 per ounce. Quarter 1 AISC was about US150 dollars an ounce or 10% lower than the prior quarter, reflecting higher gold sales and the impact of higher nickel byproduct credit of $2,900,000 or $54 an ounce compared to US5 dollars an ounce for the prior quarter. Turning over to Slide 9. At Beta Hunt during quarter 1, we mined 271,200 tons at an average grade of 3.73 grams per ton containing 32,485 ounces of gold. This represented a 10% reduction from the Q1 of 2023 ore tons mined and a 25% decrease from the prior quarter 1 tons reflecting short term delays experienced in the stoping schedule, power upgrades in the lower section of the mine and a number of local power transmission network failures impacting the ongoing production ramp up at Beta Hunt.

Speaker 2

Contained gold was 8% lower than the prior quarter reflecting the planned mining of a higher grade section of Beta Hunt during the quarter. The majority of the mine tons were from the central and southern sections of Western Flanks and the scheduled higher grade ore zones from A Zone. Overall though, sales remained very strong for the quarter at over 40,000 ounces. Switching to processing, 271,000 tons of Beta Hunt material was milled at an average grade of 3.81 grams per ton for production of 31,249 ounces of gold. Compared to the prior quarter, higher grades were offset by the lower processed tons resulting in 9% lower gold production compared to the prior quarter.

Speaker 2

Cash operating cost per ounce sold at Beta Hunt were very strong at US869 dollars per ounce in the Q1 of 2024, which compared to US11.23 dollars the previous quarter. The reduction in cash operating cost per ounce from the previous quarter reflects the impact of the higher grade and higher sales volume in Q1. Turning to nickel, we mined 4,337 tons of nickel ore at an estimated grade of 2.5% during the Q1 compared to 5,253 tonnes of nickel ore at an estimated grade of 2.3% in the previous quarter. We're currently developing a drive from our Western Flanks decline across the Fletcher, which is really exciting for Beta Hunt. To date, we have been mining primarily from only 2 main areas Western Flanks and A Zone.

Speaker 2

So to access a whole new mineralized zone in addition to those 2 is significant. We plan to intersect the ore in late June, which will set us up for ore deliveries from Fletcher for the second half of the year and beyond. If you've seen some of the high grade sections in our announcement, then you'll see why we are so keen to commence mining there and also provide additional working phases and stoping areas to the mine plan. We are still continuing to drill Fletcher as well. Now looking at Slide 10, production from Higgins Hill Mines totaled 4,898 recovered ounces based on milling 164,700 tons at an average grade of 1 gram per ton.

Speaker 2

Production in the Q1 of 2024 was 16% lower than the previous quarter despite 34% higher tons processed reflecting lower grade compared to the previous quarter as mining was negatively impacted due to extreme wet weather, the laying back of sections of the Pioneer pit walls, which required the use of historic low grade stockpile feed sources. All this plus the other temporary impacts of the higher cost per ton reported in our call on March 22, including the temporary use of contract crushing and higher costs incurred on setting up the 2 boys underground resulted in short term higher cash operating costs at Higginsville. The majority of planned ounces at Higginsville are to be mined in the remainder of 2024 as production of both Pioneer and Two Boys ramps up in the Q2 and we'll see higher production and lower costs of both of these mines reach full production. With that, I'll turn the call over to Oliver Turner.

Speaker 3

Thank you, Lee, and good morning, everyone. Without question, the highlight of the last quarter was our merger announcement with Westgold. The synergies realized, projects accelerated, combined team and tremendous cultural fit all point in a positive direction for the new Westgold operations across Western Australia once the merger closes in July. In the context of the market, what we are creating via this merger, we will be one of the largest gold producers in Australia, entirely unhedged in what is the strongest gold price environment we have ever seen. In these types of exciting markets, being a first stop vehicle of choice is even more powerful and that's exactly what the New West Gold will be, a top tier investment vehicle for larger institutional investors, which neither company currently has access to on their own.

Speaker 3

Furthermore, this exposure will be available for investors on both the ASX and the TSX, creating around the clock gold and nickel investment vehicle. A significant benefit of the larger scale is increased index demand. We anticipate strong buying from indexes and ETFs on both the ASX and the TSX dual listings. On the ASX, we expect demand from the ASX200 and on the TSX, we expect demand from the GDX. To date, our marketing of the deal to institutional investors has gone very well with strong support shown by both sets of shareholders in Australia, Canada, the U.

Speaker 3

S. And in Europe. We continue to deliver our message to investors with our marketing roadshow continuing this week. And on the research side, we've also seen strong support from our analyst coverage with tender ratings coming in. Overall, I am very excited of the prospect of being a shareholder of the combined company in a market for gold producers that is unlike anything we have seen before in our careers.

Speaker 3

And with that, I'll turn the call back over to Paul.

Speaker 1

Thanks, Oliver. Sylvie, over to you. We're going to turn it over for questions at the moment.

Operator

Thank you, sir. Sir. And your first question will be from John Skradnik at Desjardins. Please go ahead, John.

Speaker 4

Great. Thanks for taking my question and congrats guys obviously on a good quarter in terms of cost, but also obviously the merger being the highlight there. I guess and on that topic, just curious kind of the market reaction that you've seen through this marketing with Westgold. And I guess a further question on that topic is, have you seen kind of a bit of a differentiated reaction between the North American market

Speaker 1

and Australian market? Yes. Thanks, John. It's Paul here. To be quite honest, we obviously started marketing immediately both in North America.

Speaker 1

We covered all the desks, including yours. As you know, we did all the active shareholders. We got immediate support, as you know, directly from one of our largest shareholders, Eric Sprott that was very well received. Following that, we did a huge campaign over in Australia that was very well received. The message is being received on both sides of the ocean here very positively.

Speaker 1

Once people understand what it is we're building, they really, really like it. Many people we are seeing are buying more of it. The reception has been quite strong in this current gold market and we're not seeing a different response. We're seeing quite positive response on both sides. With that, we're doing some follow-up here in the next coming days in San Francisco, New York, Toronto, even over in Europe.

Speaker 1

So quite a bit of additional marketing just to see some of the people we might have missed in the 1st round and to follow-up with both Wayne and myself side by side on any other of the clients. But overall, the message on both sides of the ocean has been quite positive, very well received. It's an easy story to get out there and get in front of John. It's not a tough one to get out there and sell, it sells itself.

Speaker 4

Excellent. No, I appreciate that. And yes, certainly it seems like a vehicle perfectly designed for this gold price environment, particularly Aussie dollar gold price environment. That's it for me. Thanks, guys.

Operator

Thank you. And your next question will be from Jeremy Hoye at Canaccord Genuity. Please go ahead.

Speaker 5

Hi, good morning, everyone.

Speaker 1

A couple

Speaker 5

of questions from me. At Fletcher, you said you should access mineralization And will it be a significant percentage of production in H2?

Speaker 1

Hi, Jeremy. It's Paul. I'll turn yes. Sorry, I'm going to let Lee answer that one. Go ahead, Lee.

Speaker 2

Sorry, Paul. Good day, Jeremy. Yes, it's going really well. Our drive out to Fletcher is going really well. We should hit it late this current quarter.

Speaker 2

So that will give us really the half 2 to deliver all that ore from Fletcher. We're planning some more driving and hopefully do some stope towards the end of the year in Q4. So it will be pretty meaningful given that if you're seeing some of the grades out of there hopefully that gives that grade a bit of a kick.

Speaker 5

Yes, definitely higher grades based on the drill results. On the resource, do you guys have an update on the timing for it? Is it still looking at back half of this year?

Speaker 2

Yes, Jeremy. We're still drilling there now. So we're drilling at the same time as we're heading out there. So it will just be when we cut that off because we're continuously getting results back, but it will be in the second half of the year.

Speaker 5

Okay, great. And finally from me, what's the outlook for Higginsville production from Pioneer Open Pit and 2 Boys over the balance of the year?

Speaker 2

Sure. In between the two, we'll probably produce about 400,000 tons give or take from both of those projects and roughly around 30,000 ounces in the from here towards the end of the year.

Speaker 5

Okay. That's really helpful. Thanks. That's it for me.

Speaker 1

Thanks, Jim.

Operator

Thank you. And at this time, I would like to turn the call back over to Mr. Hewitt for any closing remarks.

Speaker 1

Thanks, Sylvie. I know everyone's quite busy, but before they sign off, I just want to thank everyone for joining our call today. I just wanted a quick shout out to our team in Australia who've been working very, very hard around the clock during this time and say thank you to our entire team in South Africa, our shareholders and all the analysts who've been covering us. So thank you to everyone. We appreciate all your support and our shareholders.

Speaker 1

And we'll be seeing you soon and have a great day. All the best.

Operator

Thank you, sir. Ladies and gentlemen, this does indeed conclude your conference call for today. Once again, thank you for attending. And at this time, we do ask that you please disconnect your lines.

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Earnings Conference Call
Karora Resources Q1 2024
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