“You would be hard pressed to find anywhere in the world a company that has gone from their maiden year of production and then plan to double that production within four years. It’s an aggressive growth plan,” Karora chairman and CEO Paul Andre Huet said.
That production growth is set to rise steadily from 99,249oz in 2020 – beating the guidance of 90,000-95,000oz/y – to 185,000-205,000oz/y by 2024. This will position the company as one of just a handful of gold producers around the globe of that size range.
The company has consolidated 2P reserves of 1.33 million oz and consolidated M&I resources of 2.52Moz.
And Karora is executing the growth plan fully funded, with low operating costs, nickel credits, and substantial upside opportunities that aren’t yet even factored into the growth outlook – such as an aggressive drilling campaign, and significant new discovery.
“It’s very exciting that our plan is fully self-funded. We don’t need to go to the market to raise money. We have the cash on hand and expect to generate enough to see the plan through in the current metal price environment.
“And along the way to 2024, we plan to spend $80 million on drilling. That’s an aggressive drilling campaign for a junior of our size – and none of that upside is included in the growth plan. We plan to spend $20 million each year and we expect to have success given that in 2020 we spent $15 million and had three new discoveries: two gold, and two nickel.
“There are certainly signals that we’re undervalued, which brings tremendous opportunity for shareholders. Companies that are 200,000+oz/y with similar profiles have market caps generally ranging from $1.3 billion to $1.9 billion. Our market cap is still about $550 milliom-$560 million; and, with the trajectory we’re on, the opportunity to double that to a billion dollars is something that’s very real – as we continue to deliver,” the CEO said.
And delivering is something that Karora and Huet know how to do.
“We’ve done seven quarters in a row of achieving all metrics in our guidance. We’ve got a team that doesn’t accept failure.
“We’ve had fires, disasters that shutdown roads to our plant; we’ve had torrential rain, with floods throughout January and February; and, of course, we’ve had the pandemic. Achieving a consistent 25,000oz/quarter for seven quarters was surely not luck. It was on the back of strong planning.
Huet, himself, executed a similar growth plan as CEO of North American Klondex Mines from 2012-2018, where that company took a single asset operation with zero production and grew it to four operations with production of 200,000 oz/year.
“This is something I’ve done before. And we’ve put a team around us who have done it before,” he said.
Karora has also slashed its all-in sustaining costs and sees further potential for reductions. They were sliced from initial costs north of $1,200/oz to guidance of $985-$1,085/oz in 2021 and are expected to drop to just $885-$985/oz by 2024.
“Since I took over as CEO and chairman 18-months ago, we’ve focused on the reduction of costs and how we got there was removing royalties.
“Higginsville royalties were based on gold prices, so anytime gold was higher than A$2,200/oz, we would have been paying about 22%-25% royalties. It’s a massive royalty. We’ve eliminated that altogether – they’re gone, they’re behind us. So we’ve really unlocked this massive district.
“This district has been saddled with royalties for two decades. That’s the reason people weren’t spending money, because of the handcuffs that were there in the form of royalties. We’ve unlocked those chains and we’re really going to spend some money and start exploring in this district that’s one of the most prolific in Western Australia,” he said.
Another thing that makes Karora stand out – and brings further reductions to costs – is its nickel exposure.
“It’s extremely rare for a gold company to have some sort of by-product credits. If you look throughout the world; if you take 100 gold mines, maybe 90 of them are just gold mines. We’re one of those very few that have a by-product credit.
“To-date, we’ve seen up to $35-$45/oz savings from the nickel credits. Our nickel lots have averaged as high as 2.9% nickel and the exciting thing about what we’ve just uncovered is that we’ve had new discoveries of nickel for the first time in almost two decades and we have assay results that exceed 10%-11%, ranging up to 18% nickel. So, you can do the math, we can double the grade and potentially improve this by-product significantly.
‘It’s very exciting that our plan is fully self-funded. We don’t need to go to the market to raise money’
– PAUL ANDRE HUET
CHAIRMAN AND CEO
“That’s something that’s very, very real,” he said. “But the nickel does not distract us from any of our gold productions.
“Along with the drilling campaign and potential increased nickel credits, Karora’s current growth plan also doesn’t factor in the likely benefits from the recent new Larkin discovery at Beta Hunt, which supports the existence of a potential third major gold resource.
“Larkin is a new discovery and the thing that’s great about it is the grade, on average, could be even higher than the average grade of what we’re mining at Beta Hunt already.
The initial Larkin mineral resource will be included in the 2021 consolidated resource and reserve update.
Karora is also a rare entity among its peers due to the fact that it’s on its way to becoming one of the world’s first net zero junior gold mining companies.
“We’ve engaged ESG Global out of Toronto and they’re preparing our maiden sustainability report. Coupled with that we’ve engaged the Net Zero Company out of North America on reducing our carbon footprint.
“What we’re working towards first is becoming scope-one and -two carbon neutral.
“We’re working very hard at reducing carbon emissions across our operations in both scope one and scope two, we will then begin to tackle scope-three emissions which will take considerably more time.
“Our approach with the Net Zero Company will be a phased one, with reductions targets set first and carbon sequestration projects used to offset what cannot be reduced in the short term.
“Ultimately becoming net zero is a an ambitious step for a company like ours. We’re probably one of the only juniors heading towards that very quickly, and it reflects how seriously we take the climate change challenges ahead of us.
“We are keen to do our part while exploiting opportunities along the way to enhance overall returns for our shareholders.”