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Transcript: Karora Resources (KRR) - Gold Everywhere They Look

February 10 2021, 15:38 GMT

Karora Resources

  • TSX: KRR
  • Shares Outstanding: 146.1M
  • Share price C$3.49 (10.02.2021)
  • Market Cap: C$512.9M

Interview with Paul Huet, CEO of Gold Producer Karora Resources (TSX: KRR) 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 Discuss:

  • 1:29 - Initiating the Growth Plan: Moving to Australia
  • 4:51 - ASX Listing Coming Soon?
  • 6:50 - Progress & Problems; Too Much Opportunity?
  • 10:47 - Coarse Gold: A Small Part of the Bigger Picture
  • 15:48 - Frequency of Reporting Drill Results
  • 17:08 - Lake Cowan Prospect: Plans, Data, & Depth of Drilling
  • 22:39 - Unearthing the Opportunities: Focus & Order of Play
  • 28:18 - The Drill Program: Budget, Result Announcements, & Delays
  • 34:11 - Increasing Mill Capacity: An Update
  • 35:57 - Value of Nickel Credits at Beta Hunt Mine
  • 37:27 - Excitement for the $20M Drill Program
  • 38:58 - NCIB; Why Not Take More Advantage?
  • 40:30 - Growth Plan: 2021 Goals & Accretion of Shareholder Value

Matthew Gordon: So, you've decided to move. Why?

Paul Huet: There's no doubt, at this point in the company it's just the next part of the evolution. Every step we have done to date has been very strategic and systematic. We're going to be putting out a growth plan here in the coming months. It's a very exciting plan. I'm not going to talk about the details here today but I am going to say that it's coming out, which is great. There's a milestone coming up. We would have loved to have it last quarter but there's a lot of work involved. There's a lot of work to get this thing out here and it's the first time. You heard me say that a lot last year. It's the first time. It's the first time. In this case, it will be the first time we ever put out a growth plan. In order to execute and deliver on this growth plan, Graham's going to need some help there. Our team in Australia has done an outstanding job. Our corporate team did an amazing job in 2020 with the reduction of the Royalties and every other thing we did in the company in 2020. 2021 is going to be a new year. We're going to have different challenges but I'll be there to help overcome them.

Matthew Gordon: You’re literally selling up and getting your hands dirty, right? You're not managing from a distance.

Paul Huet: A lot of people know me from Klondex. The first year we started Klondex it was very apparent that in order for us to be successful, I needed to be closer to the action. This is no different. It's tough to manage from overseas. We've got a large pond in between us here. Going there to help Graham grow this company is certainly the right thing to do, and my family is coming. Don't underestimate the size of this decision. This is a very big decision. Early on, I'll be completely transparent here; I was asked this when I became chairman - would you ever move to Australia? My immediate answer was, 'No, absolutely not.' I've got my wife, 7 children, we've adopted 2 little ones here in the last 2-years. We've got a large family. 5 children are coming across with us. Children in school. There's a lot to think about. People sometimes underestimate just how big a decision it is but it's certainly the right decision for our shareholders. When we look at what we want to do and how we want to grow the next stage of our company, getting over there, there's no doubt, that's the immediate - when I think of near-term opportunity in our company and our growth, the near-term opportunity, the next 24-months is certainly going to be in Western Australia.

Matthew Gordon: Given that you're going to be there, does this signal that you're definitely doing the ASX listing?

Paul Huet: We've always been transparent about the ASX listing. We had looked at it originally. We were heading towards that path in 2020. Things just got complicated with Covid and every other thing. There were a lot of things here. Certainly one of the objectives is going to be to revisit that very closely, assess it, and look at it very hard, while I'm there. It's a 2 to 4-year assignment, it'll depend on how things go, but it's certainly at the very top of our list. The ASX listing is something we're going to take where we left off and start it right back up immediately.

Matthew Gordon: Where are you in that discussion? Have you spoken to brokers locally, some of the institutions? Do you know that there's a desire to see that happen?

Paul Huet: No, look there certainly is. One of the challenging things was it's hard to market from North America. We're doing everything over Skype and we're doing the best we can. Needless to say, we've managed to do quite well despite Covid. However, when you're meeting all new clients, a lot of people want to see you face to face. In North America, we had the advantage of knowing a lot of the institutions, reaching out to them, and we've got to maintain that institutional shareholder basis. I think something like 90% of our shareholder base today is North American, with almost 60% institutional. If you think back 18-months ago, we think about some of the issues or problems we had, I don't know how many times I was asked, 'Why is there no institution in this story? Why don't institutions buy this? Oh my God, look at the coarse Gold? Why aren't institutions buying this?' It was because of the coarse Gold. They didn't like the uncertainty. Institutions like predictability, repeatability, the fact that you can do what you said you'd do. Like 2020, we said we'd do 95,000oz at the high-end. We did 99,000oz. 18-months ago when I think of this story myself, I think back and remember walking through the doors in downtown Toronto, opening up the balance sheet and scratching my head going, 'What do we do here? We have -$8.7M in working capital. We disclosed that on June 30th at the financials. -$8.7M working capital.

We ended 2020 with $80M in cash. That's not luck. That's not, 'Oh my God they got lucky and hit another pod.' It's not about luck. It's about how we successfully, strategically mapped it out, and delivered it. We mapped this process out from day 1. I remember meeting you in my first week as CEO, flying up and I said, 'Look, we're going to reduce costs, we're going to do these things, we're going to d this.' I remember your discussion: 'Well, you've got a pretty heavy plate there. You're pretty ambitious.' I said, 'All we've got to do is stay focused and start doing these things one at a time. You don't eat an elephant in 1 chunk here.' And we started biting away at it. That's what we did. We delivered all those things we said we would. That's why we've got $80M in cash. That's why our mill is humming the way it should. That's why we have no Royalties, and you're seeing some of these results here in the exploration that I know we'll talk about. For the first time in 20-years, somebody's drilling in this district and you're seeing all this Gold being discovered. It's because it was saddled with all these Royalties. I know we've talked about it a lot but it isn't luck or coincidence. Sometimes when you encounter coarse Gold, it is pure luck. There's a lot of other coarse Gold in this operation. We're just going to mine it as part of a bigger system and that's really important.

Matthew Gordon: I know you hit your numbers and you put out 20% additional for 2021, which is great, but you had a different set of problems. That's a problem-solver issue that you went through, and you delivered your 99,000oz. We've talked about Spargos, Lake Cowan, Beta Hunt, Higginsville, Larkin. You've got so much optionality, are you going to put it in the right order?

Paul Huet: Matt, hang on I've got to interrupt you here. Let's go there. These are the best problems I could ever ask for. You named 5 different areas. All of them are filled with Gold. What a problem to have as a Gold miner. I'm not out here making ties or running shoes. I'm a Gold miner. Everything you just said, oh my God you've got Baloo, you've got Lake Cowan, you've got Larkin - all these things have Gold in them. Recognise that I'm a Gold miner and operator, so as far as I'm concerned, I think yahoo, we're winning the lottery here. We bought the right tickets; we have the right numbers, let's just start mining it. As far as I'm concerned they're a different set of issues, they're certainly not problems. They're opportunities in my opinion and I’d flip that completely around because I'm a lot more positive. I don't think they're problems. They're all opportunities and we're going to start taking advantage of almost all of them here as we start drilling. You see the results here already, Matt. Sorry to interrupt you here but I see it completely differently than you do, my friend.

Matthew Gordon: The question that we get sent every day of the week is, 'Why aren't they going back to the Father's Day vein?' You used the phrase, 'We are out there going for the coarse Gold but it's part of a much bigger plan.' It's worth stating again because you said it so many times.

Paul Huet: I've heard it myself a million times. There's nobody in the world that likes coarse Gold more than me. Why do you think I joined RNC, now Karora? I joined because of my experience in coarse Gold mining. I was operating 2 or 3 of the highest Gold-grade mines in the world in the last decade. In the last 10-years of my career, I've been mining some of the highest Gold-grade mines in the world. I come from districts like Red Lake, Timmins, Nevada. This coarse Gold is not new to me but what happens is, Father's Day was a 30,000oz deposit. It was 30,000oz and it was great. Don't get me wrong. It's fantastic when you find coarse Gold at level. We're mining the entire stopes now. When I first walked through the doors again, not only did we have -$8.7M in working capital, Beta Hunt wasn't in operation. Beta Hunt was in a drill program. Why do you think that is? It's because prior to that, people were trying to mine selectively. They were trying to mine very, very narrow, these coarse Gold, and trying to find them, and then trying to drill them. Do you know how much money we would spend on just trying to drill these things out and find them? It's so expensive for our shareholders. That's why our cash balance was so low. That's why we were raising $8M every 3-months and people were getting angry and frustrated. Now, what are we doing? We're taking it as part of a whole plan. We're doing 120,000, or 110,000 - 105,000 to 115,000oz in our second year. Father's Day was a pod of 30,000oz. This is 4 times the size in the entire year. Why do we get to do it? Because we were able to demonstrate that we could mine this deposit at the average grade. We're including some, whenever we hit it.

You see we hit 2,000oz; we often get frustrated too. Should we report it, should we not? We have to think of materiality. We know that people want us to mine coarse Gold. So do we. I've been mining for 33-years. I was a bad hockey player at 18; I got thrown in a mine at 18-years old. I've come up through the ranks. I've worked for all kinds of companies. Some large ones, and a lot of junior ones. Mostly junior, in my career. Never in my life have I seen a company disclose stope by stope by stope. Hey, I'm going to mine this stope, then I'm going to mine that stope. They put out their guidance and they say, 'Look, measure us to our guidance.' It's the same situation here. What was happening here before 2-years ago, trying to selectively carve out these jewellery boxes is uneconomic. You can't do it. You can't survive. You can't do it forever. You can't repeat it. Our industry is like any other industry. People want to see us have the ability to predict and repeat what we can do. We have to be able to demonstrate, with confidence; look here's what we're going to do. Here's what we're going to accomplish, and then tick those boxes off. We need to be able to say to people, I'm going to do 95,000oz and then deliver 99,000oz. Last year, can you imagine if we had just targeted Father's Day and say there's 15,000oz there, you try to find another one, without paying attention to the bigger picture, and we missed our guidance? Can you imagine if that had happened? We were successful here. We did it by mining larger and thinking bigger. Thinking much bigger here. That's the way we have to continue.

I'll always say I love the coarse Gold at Beta Hunt. Beta Hunt has more coarse Gold. I don't even question it. People ask me all the time, 'Do you think there's more coarse Gold?' Hands down, I believe in my heart it's impossible that there's not more coarse Gold. How do you mine it? Not selectively. You don’t try to target that coarse Gold. You don't try to drill a deposit on 15ft or 25ft centres because then I'm wasting a lot of money for my shareholders. Drill it out with the wider spacing, take the larger stope, increase the tonnage, run it through your mill, make money. Make money. As boring as it may sound to make money every quarter, that's what we've done. We've put $80M on the balance sheet, making money. I don't know, sometimes I get a little passionate about it. I never get frustrated about it because I love the coarse Gold. I don't ever get frustrated. I get very passionate about it. I know I’m repeating myself, nobody likes to see to it more often than us. It's simply part of a bigger plan.

Matthew Gordon: No stope-by-stope reporting, no monthly reporting.

Paul Huet: How many companies do you follow, Matt? 

Matthew Gordon: Many.

Paul Huet: How many companies do you follow that put out a stope-by-stope plan? Anybody in the world? Do you know of any?

Matthew Gordon: Zero. But your retail shareholders are asking for it. That's why I'm asking.

Paul Huet: And we're not ignoring that. I respect every shareholder. I do my best to respond to them. I've got a lot on my plate as you pointed out and it's important that we deliver. I'll never ignore it but here's what we're saying: 'Stope by stope, we won't go back to that. We won't go back to saying, 'Hey we're going to mine the stope below this 1 drill hole. We're going to mine the stope here.' We're going to say, 'Hold us accountable to 110,000oz for the year. We fall short of that; we believe that we should get slapped on the hands. We're going to get slapped in our own metrics, our bonuses, the objectives we put out there are very much aligned with any type of compensation incentive all of us have as well. It's very important that we deliver for a lot of reasons. When we deliver and when we're successful, you can see the end results, Matt. You really see them here. Going to Australia is a big step for me, the company. There are all kinds of growth in front of us. You talk about a different set of problems, I say they're huge opportunities because I think we're blessed in so many areas with different goals.

How many press releases have I put out this year on new discoveries? I put out 1 this morning on Lake Cowan. Lake Cowan is an area that hasn't been tested in over 15-years. It's a similar sediment or salt-lake style, like our Baloo. Baloo, a mine that we started with early on, that 2g open pit that we're still running today, was only supposed to be around for a couple of months but it's still operating today. It's a similar system to what Gold Fields has. Gold Fields has, on similar salt lakes, almost 7Moz. 7Moz surrounding us. Why is it exciting? This district hasn't been tested for so many years. We've been talking about 1,800km2. If that's not more exciting than 100oz of coarse Gold, I don't know what is. I ought to tell you when I think about mining millions of ounces in a salt lake bed, that is very exciting because that makes money and shareholders are excited about making money because the share price goes up when we make money.

Matthew Gordon: Lake Cowan, Salt Lake. What type of drilling are we talking about? What type of mining could it be, if we look at the analysis of who's doing what around you?

Paul Huet: It's a little different here. We've adopted a system that's perfected by Goldfields. It's an air core system. This is a maiden drill hole. I've got to tell you, we were expecting to see traces of Gold. I remember speaking to the DP of geology, Steve Devlin, and Graham, and they're going, 'Look, if we can catch any traces of Gold, we're going to see something. We've got so much land here, we've got a huge opportunity for exploration.' We put out some brand new scout holes here and we hit economic ore right out of the gate. Of all the opportunities we have in Western Australia, and they are numerous, and they're opportunities, not problems, Graham and Steve Devlin, our 2 most senior geologists on our ground in Western Australia today, love it the most. When you ask Graham or Steve, 'Where do I want to drill? Where would you drill the most?' Hands down, it's always Lake Cowan. I'm an underground guy so I say, 'What about Larkin?' 'That's exciting too, Paul, don't get me wrong. Larkin's exciting.' I say, 'Let's go drill Larkin because I like the grade there.' It's a balance. These guys absolutely love Lake Cowan or this salt lake system, which is a very exciting system that hasn't been tested. We did start doing the geophysics last year. We started doing some additional soil sampling. We did some structures. We're laying the work from the structures, the geophysics, soil sampling, all on top of each other to try and target some holes and we see some of these results early on. That's very exciting for us. It's going to lead to another, you might call it a problem, I'm going to call it an opportunity, where we're going to require some more capacity in the mill. Maybe we'll go there in this discussion.

Matthew Gordon: What depth are we talking about? Is this going to be an open-pit thing? Is it going to be relatively inexpensive?

Paul Huet: No, these are shallow. These are not very deep. However, when you think about Western Australia as a whole, a lot of the undergrounds start as open pits. They start as an open pit and they as they mine down, you can see some improved grades at a lower depth, then it becomes a ramp off of the pit wall and it becomes an underground mine, which is not unlikely what's going to happen to us in several scenarios. These are quite shallow. They'll have high strip ratios but you're talking about 10-days, you're doing with the stripping and you're in the ore. That's what we're seeing in some of these deposits. They're so economic, these things. You're talking about a 2g open-pit. If you're in Nevada - I'm living in Nevada still now - you can see a great open-pit at 0.5g. 0.5g open-pit and it's making some really decent money. Despite ending the year with $80M, people forget that we had hedges in place last year. I think we paid - don't quote me on the number here Matt - but it was $12M to $14M in hedges that we paid last year that could have been on the balance sheet. Those hedges were in place because of the mill. Those are things that we work through now. We have no more hedges this year. We're exposed to entire metal price. After listening and hearing our shareholders, we believe it's very important that we don't hedge any of our Gold position. We might look at having hedging the FX. We have hedged some diesel fuel that has helped us on numerous occasions here, at making sure that all-in sustaining costs, control that we've had and identified as sustainable in getting to that $1,000oz. We've hedged some other things besides Gold.

Matthew Gordon: Lake Spargos, you had some pretty good grades there, right? I'm just trying to understand the order of play because you've made some great announcements last year about some of these assets that you've got, these projects that you've got. You've got a growth plan that's going to be announced, I assume towards the end of this quarter. What are we going to be seeing?

Paul Huet: Let's talk about your first point. Graham's pretty excitable. I don't know how you can't be excited when you see the drill results that we issued at Spargos, to be quite honest. If you're into Gold mining and you saw going up every 19m or 16m of 29g, or 16m of 17g, I don't know how you can't get excited about that. Hats off to Graham for getting passionate about some drilling success that he and his team have uncovered when we bought an asset for $4M. I can share that excitement with him. There's no doubt about it. Shareholders can certainly appreciate it as well. We're looking at potentially mining an open-pit between 3g and 4g, a higher grade than the average grade of our underground. You talk about prioritising. We've already disclosed that Spargos is likely, in Q2. That's right around the corner here. I remember talking about it in 2020, saying, 'Look, it's not that far away. It's really close. We're not that far away. We're going to be mining Spargos in the very near future.' That's still the plan. When you think about the global picture and the larger picture, what do you prioritise? We always look at what's nearest to the mill, grade, we look at all these things. We started with 32 brownfields targets that we looked at. We're starting to find our own targets that, as you know, we've uncovered. It comes back to capacity.

This year, one of our growth plans is a step up in the mill. We're doing a significant increase at not a very high cost, I think it's about $2.4M it's part of our budget, to increase the mill by 550t a day. That's really quick solution for us. It gets us an extra 15% capacity in the door and you're going to see that extra 15% capacity come in with slightly better grades because we're going to be starting to mine Spargos. That Larkin zone - I know I’m going to another area. The Larkin Zone, what did we have? It was 9m of 19g underground. We had some amazing hits in the fourth quarter of 2020 in the Larkin Zone. The only thing that area's missing is some additional infrastructure. It needs ventilation. One of the things we talk about is the advantage of mining at Beta Hunt because it was a Nickel mine, Matt. It has 400km of waste development in place. We used one of those old drifts that were inside the mine, we channel sampled it and discovered the Larkin zone. We drilled above our heads, hit the 30C Nickel zone. We had some follow-up drilling here this year, that 9m of 19g. As I mentioned, what it requires now is more infrastructure. But that 400km that we have of infrastructure already are going to reduce our sustaining costs year over year by so much. I'm used to spending anywhere from $15M to $20M every year on sustaining capital waste development. That's every year. For 100,000oz to 150,000oz a year, I'm typically spending $15M to $20M depending on which operation. We're not going to have to spend half of that.

We might spend $6M in infrastructure. This is more waste development for ventilation that we're going to have to put in. Those tunnels that exist at Beta Hunt are so advantageous for us to access all these areas, including areas like the very, very near-term Larkin Zone. It's almost double the grade than what we're mining presently, and even wider. It's even wider. There are a lot of exciting things when you talk about the targets. I know there are plenty of them but it's a big reason and rationale as to why Paul Huet is going to Australia. Why is Paul going to Australia? There are a lot of reasons why Paul's going to Australia. It makes sense. Why is he disrupting his whole family, his wife, and children, pulling them out of school? Why does it matter? It matters because there are these types of opportunities in front of us that we need to think about together. Imagine having 32 targets all within a 20km radius of the mill and you're trying to identify which one. Where do you spend the dollar? Having several of us there on the ground and strong operators making those decisions will help us tremendously to grow even from that 110,000oz to 115,000oz, to step it up again next year. These are all leading questions as to why I'm going there and why it makes sense to go and help Graham.

Matthew Gordon: You just reminded me, also with Larkin, they weren't in the September numbers, were they? This is going to be a new incremental-

Paul Huet: Actually, thanks, you're right. I forgot about that. You're right.

Matthew Gordon: So did I.

Paul Huet: Both Larkin's numbers, those grades were excluded from the greatest resource reserve update I’ve ever put out in my career. Again, that's 33-years. I've been doing it for a couple of years now. That's the largest reserve update I've ever had in my lifetime. Spargos was excluded. Larkin was excluded. When you see the resource reserve update later on in the year, you're going to see some better grades. We're going to put out a Spargos one before the main one comes out this year.

Matthew Gordon: How many drills are actually turning? I know you upped the budget to - what was it again?

Paul Huet: $20M. Currently, we have 7 drills turning. We have 3 drills turning at Beta Hunt and 4 drills turning at our HTO operation. There's no lack of drills. Here's where we're struggling. We have the same challenge as other people in Western Australia and actually, I'll tell you, it's a very common struggle in North America. We're struggling to get assay results. That's just a function of the demand for the assay labs right now. We're not getting the results as quickly as we'd like to get them but we're in line with everyone else here. Because we're not getting results as quickly as we can, it slows down the results we get to give to the market. We drilled these almost 2-months ago. We should have had these results but we simply don't. It's not a problem or an issue that's specific to Western Australia. This is an issue that the entire world is seeing because of delays in assay labs, compounded by the fact that in Western Australia we are seeing a lot of people, because of the restrictions with respect to Covid, taking other jobs. You're not letting people in from other countries so we're starting to get stretched here on people and resources. That's starting to impact us. We have yet to not make our numbers and that's a huge coup to Graham, his general managers, Don and Greg, all those guys on the ground, all of whom are working very hard and tirelessly.

 

There was just a 1-week shutdown in Western Australia. I got a call from Graham saying, 'Look, we have to shut down everything, the borders are shut down.' He calls me 2-hours later and says, 'You're never going to believe what happened. Other mining companies are forcing their people who are not fly in fly out. Our entire group requested to stay on for an extra week and not go home. 'I’ve never seen it in my life, Paul. I have a list of all these people who have come forward and said that they'd stay on for that extra week.' That is unbelievable, the loyalty. The team we have in Western Australia have demonstrated that when things get tough, they're willing to step up and help us out. That's exactly what's happened here. Most people would say, 'Hey, it's my rotation out, it's fly in fly out, I’m going.' Our whole team, every one of them, decided to stay back while that 5-day mandatory shutdown occurred in Western Australia and we didn't feel a disruption. I can't tell you how pleased I was and the message that I sent to the team in Western Australia, thanking them for staying back and thinking of the company. They all have families. Every one of them. After spending 2-weeks in a camp, most people want to get home. This entire team just blew their mind. Nobody left. They all stayed because we couldn’t bring anyone in. We were unable to bring anyone in. This team stayed behind and got it done. Hats off to them.

Matthew Gordon: I speak to companies who are going through the same issue where you are too. We are going to see quarterly announcements and you say, 'Judge us on our quarterly announcement. If I hit my numbers, that's the number you should be focused on. Don't expect weekly, monthly, regular updates on the drilling.' People are saying, 'Where are the drill results?'

Paul Huet: We talked about this before, I remember, in a previous interview. Just judge us like the rest of the world. We're a Gold operator. We put out quarterly numbers. We're not a little junior anymore who you might say, 'Well, this month he might do 5,000oz, next month he might do 26,000oz, the month after he might do 2,000oz, he might not do anything for 3-months in a row but hopefully he'll have something to show for it in 90-days, maybe he'll hit a pod or something.' Judge us like the rest of the mining industry. We were putting out, in the beginning, monthly results. Then we said, 'Look, we've got to get away from this, back to normalisation.' Even for us, you know the amount of work it presents for people when you're already tight and stretching people. Putting out results on a quarterly basis is an industry-accepted standard. We're going to continue doing that. Full stop. If we hit something that's material, we're going to disclose it. We're always going to disclose it. We're not going to withhold information but if you pick up the phone and say, 'Paul Huet, when are you going to mine a stop here,' I'm going to say, 'Matt, look, it's part of a bigger plan.' We have more than 1 stope here. We're mining the entire district. We're mining to our models and that's going through our mill.

Matthew Gordon: You talked about increasing the capacity at the mill. That's not through an ore sorter, that's just increasing the feed, right?

Paul Huet: We have had some initial results in the ore sorter. What's been a little frustrating has been the cost. At this point, the results from the ore sorter, you have to do a pass 1, then you have to do a second pass. Then with the second pass, you see some good results. The additional cost of that second pass prevents us from actually pulling the trigger and saying, 'Look we're going to go with this’. We've told him, 'Unless you can sharpen your pencil or get it to a single pass, we're not willing to do that because we break even.' It's not worth it. It's not the end of the world. We were trying to test this during Covid, we were in and out, there are others, we're going to keep looking at it, it's certainly something that we're very interested in still. However, we know at the end of the line we need some extra capacity. Increasing the mill by 550t - 600t a day is a low hanging fruit for us. There are some mills that I operated here in Nevada that were only 600t a day. That was their full capacity. We're talking about increasing ours from 1.4Mt to 1.6Mt for about $2Bn. That'll be done in the middle of this year. Any future growth for mill expansion or an additional mill will all be part of our growth plan that is coming out. It'll all be part of the rationale for Paul Huet and Mrs Huet to be relocating to Australia, hence why we believe our next 24-months are so critical to our organic growth plan that we have in front of us. We have the cash to deliver our organic growth.

Matthew Gordon: Are you learning anything more about what value Nickel credits may be to you further down the line?

Paul Huet: I'm glad you said it. Everybody knows Beta Hunt was a Nickel mine. 400km, it's a repeat. We've identified the 30C zone. We've just put out a Nickel reserve for the first time and I'm quite excited about it. We can expect anywhere from $25oz to $35oz contribution from the Nickel here. That's a huge saving for us on every ounce going forward. When you think back at the Maverick Royalty, that was a $46oz. The Morgan Stanley, close to $50oz. The reduction from our vendors, $38oz - $40oz. We're talking another $25oz to $35oz saving on our own sustaining cost because of the Nickel credits. I have to tell you, our team is quite excited about the grades of the Nickel. We're seeing anywhere from 2% to 6% Nickel here. The future is bright for Beta Hunt. It's not that Beta Hunt is exhausted. Beta Hunt is an opportunity not just in Gold, but there are some Nickel opportunities. We talked about the coarse Gold at Beta Hunt. Beta Hunt has Gold, coarse Gold, and some Nickel. Beta Hunt is far from exhausted and we're going to really start unlocking the value now that we're reduced that Royalty by 37%. Let's not forget that $20M. $20M in drilling in 2021. I know you touched on it but you can't help but be excited about that. Last year, we did about $14M. The year before that, in the district, it was $300,000. 2019, you're talking $300,000 at HTO. We're stepping it up and stepping it up so you can't help but get excited. What's accretive for a mining company? What drives shareholder value? A drill bit. Production of Gold. Making money. A drill bit is accretive for shareholders. A drill bit drives shareholder value. Our shareholders want to make money just like we do. The likelihood of making money is a lot better when you're sitting on money than it is when you're sitting on Gold without any money. We have them both. We've got an exciting future.

Matthew Gordon: NCIB. Why aren't you taking better advantage of it?

Paul Huet: We're always going to help out when we can. Remember, we gave up some stock that we didn't want to give up at about 365 when we bought back that Royalty with them. We said we didn't want to use that. We have money set aside to buy into it, however, I think there's some confusion that people don't appreciate and it's unrecognised that we must follow the blackout restrictions. We have to follow all the restrictions, same as an employee. We don't have the ability to just buy when the share prices drop. We don't have that ability. If we're in a blackout, we are prevented. There are some very unique situations where sometimes you can try to apply and get a variance. We tried it for the first time. We were in a blackout. We did a very small test. We were successful. It's not that easy. While you’re in a blackout, you can't buy. It's that hard. When you're in a blackout, you're in a blackout and the company has to follow the blackout.

Matthew Gordon: Can the exchange not give you guidance? Can your brokers not give you guidance?

Paul Huet: We have a broker, absolutely. I'll get guidance from anybody in the world, a broker, the exchange, and I'm in a blackout. I have stock options that are expiring. They're going to say, 'Too bad, you're in a blackout. Get your information out, get your financials out, get whatever sensitive information you have out, get yourself off of blackout then pull the trigger.'

Matthew Gordon: Do you hit the ounces, yes or no? I'm really intrigued by what you're going to set out as the growth plan. Can you confirm, I think I said it for you but I don't know- when are you coming to the market with the growth plan?

Paul Huet: We're targeting very, very much the end of this quarter. I've seen the amount of work that's got to happen. There's so much review and engineering work here. The reason it's getting pushed sometimes by a month or so is because of a lack of engineers. We have to use a lot of third-party consultants for this. There are a lot of engineers looking at milling ounces. How do we get this growth plan out? This growth plan is going to be a very exciting time for our shareholders and us. It's going to really set forward a path here that we've never been on before. It's going to set forward some guidance that changes us. It needs to be done right. Call it the first half of the year. I'm really hoping March/April but the thing that's slowing it down, and I know everybody says, 'Why don't you do it faster?' I say, 'Can you find me 5 engineers? Can you find me a firm that will sign off as the QP to make sure that this technical work is done right? Can you sign off on these mining plans we have? Can you sign off on this milling plan that we have?' It's a little slower than expected. Covid has a big effect but despite going through fires, floods, Covid, we've still managed to push through everything else. We're pushing this through. It's important, It's so important that it gets done right because it will set forth a plan that'll change the company.

Matthew Gordon: The ASIC is coming down. Where do you end the year? Have you given us an idea of what you think this year could hold for you? How do you spend your money? I guess it's more about- you can't forward look that way, but how do you spend your money? Or are you saving it?

Paul Huet: We spend our money on things that are accretive for shareholder value. It's that simple. We look at all kinds of things. I'll tell you, we've looked at 7 things and passed on all 7 of them. Why? They would have been a great way to spend money but they're not accretive for shareholder value. I know that's the template response but it's the truth. It's that simple. One of the biggest boxes we check it, is thing accretive? Next step. We have so much land now in front of us. We're going to focus on our organic growth here.

Matthew Gordon: Paul, I appreciate today. Great catch up. Well done for last year. This year looks fantastic. Just get those drill results out and prove us all right.

Paul Huet: Let's not forget the production. We always talk about; every quarter there are some pretty big production numbers to hit. Safely delivering that is going to be really, really good.

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


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