Karora Resources (KRR) - Gold Everywhere They Look

February 16 2021, 14:01 GMT

Karora Resources

  • TSX: KRR
  • Shares Outstanding: 146.1M
  • Share price C$3.49 (10.02.2021)
  • Market Cap: C$513M

Karora Resources is a multi-asset mineral resource company focused primarily on the acquisition, exploration, evaluation and development of precious metal properties. It is Karora’s vision to become the next sustainable high-quality mid-tier producer.

After the transformational acquisition of the Higginsville Gold Operations, Karora’s primary operations are the Beta Hunt Underground Mine and the Higginsville Gold Operations including the Higginsville Open Pit mines and 1.4Mtpa Higginsville mill.

We caught up with Paul Huet, CEO of Gold Producer Karora Resources following the successful year for the company in 2020 and look towards the plans and opportunities moving forward.

Initiating the Growth Plan: Moving to Australia

Karora is planning to put out a growth plan in the coming months which is a great milestone for the company and in order to execute and deliver on the growth plan, Paul Huet is planning to move out to Australia to be closer to the action. This is significant commitment as his wife and 5 of his 7 children will be joining him.

ASX Listing Coming Soon? 

Karora had planned to head towards the ASX listing in 2020 but the Covid outbreak led to complications, so they are now planning to start where they left off on the ASX listing for the company.   

Progress & Problems; Too Much Opportunity?

Back in September 2019, it looked as though Karora Resources, then RNC Minerals, had a lot to do. They needed a big turnaround exercise which they have now completed successfully. In fact you could argue, they were the turnaround story of 2020 despite difficult circumstances of fires, flooding, and Covid. Karora hit their guidance numbers and has targeted another 20% production for 2021, which is great, but the 'problem' now is that there's too much choice! The company has much optionality with several different projects at Spargos, Lake Cowan, Beta Hunt, Higginsville, Larkin, they now need to prioritise. 

This is a good problem to have for a Gold miner as those 5 different areas are filled with higher-grade Gold. Those projects are all great opportunities for Karora and they are ready to start taking advantage of almost all of them as they start drilling.  

Karora Resources (KRR) - Gold Everywhere They Look

Coarse Gold: A Small Part of the Bigger Picture

Coarse Gold is part of the Karora mining operation and it is fantastic when you find coarse Gold at level, but they concentrate on mining the entire stopes now rather than trying to mine selectively to find the coarse Gold. When Paul Huet joined the company, they had been trying to find very narrow, coarse Gold, and then trying to drill which was very expensive for their shareholders. Their cash balance was low which was why they were raising CAD$8M every 3-months and people were getting angry and frustrated. Now, they're taking it as part of a whole plan, aiming for 110,000oz- 115,000oz in their 'second' year of production because they were able to demonstrate to institutional shareholders that they could mine the deposit at the average grade. The Father's Day vein was a pod of 30,000oz and they are now mining 4 times the size of that in the entire year.  

Karora has to be able to demonstrate, with confidence what they are planning to do in the year, and then be able to predictably repeat it. last year they said they would produce 95,000oz, and they then delivered 99,000oz. They were successful by mining larger and thinking bigger, which is what they plan to continuing. Huet is positive that there is more coarse Gold at Beta Hunt but they are not planning to target that coarse Gold by mining selectively as that will be an expensive way to find it. They will drill it out with wider spacing, take in larger stopes, increase the tonnage, run it through the mill and make more money that way. The company has added CAD$80M on the balance sheet, making money for the shareholders. They are not planning to report on a stope by stope basis but instead give yearly guidance which they will be accountable for.

Karora Resources (KRR) - Gold Everywhere They Look

Lake Cowan Prospect: Plans, Data, & Depth of Drilling

Karora put out a press release this morning on Lake Cowan which is an area that hasn't been tested in over 15-years. It's a similar sediment or salt-lake style, like Baloo which is a mine that they started with early on, a 2g/t open pit that they're still operating today and is a similar system to Gold Fields. This district is about 1,800km2 and has potential to have millions of ounces in a salt lake bed.

The salt lake system adopted by Karora, and perfected by Gold Fields, is an air core system. The results from Lake Cowan are from a maiden drill hole, but there is huge opportunity for exploration as there is a lot of land available. They put out some brand new scout holes and have hit economic ore straight away. The salt-lake system is a very exciting system that hasn't been tested. They started the geophysics last year and did some additional soil sampling. They're now laying the work from the structures, the geophysics, soil sampling, all on top of each other to try and target some holes and have seen some good results early on which will lead to another great opportunity for the company.  

The targets at Lake Cowan are shallow so will start as an open pit with the potential to mine down and then could eventually become an underground mine. They have high strip ratios  and are generally very economic deposits at about a 2g/t open-pit.

Unearthing the Opportunities: Focus & Order of Play

Karora made some good announcements last year about their assets, and they also have a growth plan that's going to be announced towards the end of Q1/21. Spargos is likely to happen in Q2/21 so they will be mining there in the very near future. 

This year, one of their growth plans is a step up in the mill. They are planning a significant increase at not a very high cost to increase the mill by 550tpd which will give them an extra 15% capacity. This will be used for slightly better grades because they're going to be starting to mine Spargos. 

Karora Resources (KRR) - Gold Everywhere They Look

At the Larkin Zone they had 9m of 19g/t underground with some amazing hits in Q4/20. The area is missing some additional infrastructure there as it needs ventilation. 

In is important to remember that both Larkin's numbers and the Spargos numbers were excluded from the Karora reserve update. There will be another reserve update later on in the year, and it should show better grades. They will put one out for Spargos before the main one comes out this year.

Karora Resources (KRR) - Gold Everywhere They Look

The Drill Programme: Budget, Result Announcements, & Delays

The budget for the drill programme is AUS$20M. Currently, they have 7 drills turning, 3 drills at Beta Hunt and 4 drills at their HTO operation. There are no lack of drills. The delays they encounter are with the assay results due to high demand for the assay labs at the moment which is a problem for all the other mining companies too. They are not getting results as quickly as they would like which slows down the results they can give to the market. 

The company will be judged on their quarterly announcements as we are unable to expect weekly, monthly, regular updates on the drilling due to the delay in assay results.  Putting out results on a quarterly basis is an industry-accepted standard which is what Karora will continue to do unless they hit a result which they will disclose.

Karora Resources (KRR) - Gold Everywhere They Look

Increasing Mill Capacity: An Update

Karora plans to increase the capacity at the mill by increasing the feed. They have had some initial results in the ore sorter but are a little frustrated by the cost. However, they know they will need some extra capacity and need to increase the mill by 550t - 600t a day from 1.4Mt to 1.6Mt for about CAD$2M which will happen in the middle of this year. 

Value of Nickel Credits at Beta Hunt Mine 

Beta Hunt was also a Nickel mine and Karora has just put out a Nickel reserve for the first time. They can expect anywhere from CAD$25/oz to CAD$35/oz contribution from the Nickel there which is a saving on their own sustaining cost because of the Nickel credits. The team is quite excited about the grades of the Nickel and they’re seeing from 2% to 6% Nickel at Beta Hunt. Beta Hunt is an opportunity not just in Gold, but also in Nickel which will drive shareholder value.

Growth Plan: 2021 Goals & Accretion of Shareholder Value 

It is clear that the company had a great year last year and the team deserves commendation for their achievements. They've increased their target for this year and we should judge them on their quarterly announcements going forward. We are intrigued by what they're going to set out as the growth plan which will hopefully come out at the end of this quarter or by end of this half at the latest. There is a lot of review and engineering work which requires third-party consultants. This growth plan is going to be a very exciting time for the company and their shareholders as it will set a new path forward that will change the company.

Karora plans to spend their money only on projects that are accretive for shareholder value. It's that simple. They have a lot of land in front of them and are going to focus on the organic growth for the company and the shareholders. Paul Huet and his family are moving to Australia in the near future and Paul will get involved in the operations to deliver the plan that they're about to send to the market. 

We appreciate the catch up with Karora Resources after their successful year in 2020. This year looks to be impressive too. They just need to get those drill results out and prove investors right.

To find out more, go to Karora Resources' Website.

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