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Good morning, ladies and gentlemen and welcome to the Karora Resources First Quarter 2023 Conference Call. At this time, all participants’ lines are in a listen-only mode. Following the presentation, we will conduct a question-and-answer session. [Operator Instructions] Also note that this call is being recorded on Monday, May 15, 2023.
And I would like to turn the call over to Paul Huet, Chairman and CEO of Karora. Please go ahead, sir.
Thank you, operator. Good morning, everyone. I would like to welcome you to Karora Resources first quarter 2023 conference call. As a reminder, we will be talking to a slide deck, which is available on the homepage of our website as well as through this webcast.
Slides 3 and 4. Before I begin the presentation, I would like to remind you to please review our cautionary statements regarding forward-looking information and non-IFRS measures. These statements can be found on our first quarter MD&A, news release and in our presentation slides.
And over to Slide 5, on highlights. On the call with me today are Oliver Turner, our Executive Vice President of Corporate Development; and Leigh Junk, our Managing Director for Australia. I am pleased to welcome Leigh to Karora. He is the fantastic addition to our management team and brings over 30 years of executive experience, including a wealth of demonstrated success in both the gold and nickel sectors. Karora will benefit from Leigh's contribution as we continue to grow and create value from our asset base. Leigh will take us through the operational highlights for the first quarter. But first, I will cover some noteworthy achievements and review our financial results.
Following on our record year in 2022, we set another new record with gold production of almost 40,000 ounces in the first quarter of 2023. Key to our production growth has been increased milling capacity, which we obtained through the acquisition of Lakewood Mill last July. Obtaining Lakewood was an important strategic milestone that is already delivering significant benefits as we ramp up Beta Hunt's production.
If you have been following Karora for some time, no doubt, you will have noticed that we have set numerous production and sale records over the last two-plus years. Our performance is a direct result of the successful execution of our growth plan. As we continue to make progress, we look forward to reporting many more new records in the years to come.
Already in 2023, we have announced very positive news from our flagship Beta Hunt, which is the backbone of our growth plan. As previously reported, we completed the new second decline and the first of three new vent raises during the first quarter. We also reported significant growth in gold mineral resource of almost 500,000 ounces, while continuing to increase our 2P reserves.
On the nickel side, we added another 1,700 tons of mineral resources. Both the gold and nickel are net of mining depletion. We reported exciting exploration results from Beta Hunt that point toward continued resource growth for many years to come. All told, there is no doubt Beta Hunt is on a role and will continue to pick up momentum as we move forward.
Additionally, we announced an agreement last week with Kalamazoo Resources that will allow us to unlock value from the lithium potential on our Higginsville tenements. This is exciting news for many reasons. Oliver Turner will get into the details later on the call.
Turning to Slide 6, I will now go over our financial highlights. This morning, we issued a news release with our first quarter financial results. Our unaudited financial statements and MD&A for the period ended March 31, 2023 have been filed and are available on our website and under Karora's profile on SEDAR.
As I outlined at the beginning of the call, Q1 was very strong with record consolidated gold production, putting us in an excellent position to achieve our full-year guidance of 145,000 to 160,000 ounces of gold. All-in sustaining costs for the quarter were $1,213 per ounce sold, well within our 2023 guidance range of $1,100 to $1,250 per ounce.
Some key financial metrics for the first quarter were total revenue of $97 million, up 48% or $31 million compared to Q1 of 2022, mainly due to higher ounce sold. Q1 adjusted earnings were $4.8 million or $0.03 per share, an improvement of $3.7 million from just a year ago. Adjusted EBITDA was $28.6 million or $0.16 per share, which was an improvement of $16 million from last year. Our cash balance at the end of Q1 was approximately $66 million. And with our undrawn $40 million 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 in the current favorable gold environment.
With that, I'll now turn the call over to Leigh Junk to take you through some of the operating highlights. Over to you, Leigh.
Thanks, Paul. Good morning, all. I'm really pleased to be here reporting to you for the first time as a member of the Karora leadership team. We are excited about the potential that's in front of us, and I'm looking forward to bringing my experience to the task of continuing the drive to maximize value for our shareholders and all our stakeholders.
I'll start off by thanking our operations team led by Bevan Jones, our COO for Australia. The strong commitment to a safety-first mentality in our operations. We've seen a clear trend of improvement over the past several months in our key safety statistics, and we expect this to continue with initiatives being rolled out to maximize the engagement of all our team members to always maintain a safe work environment. Operationally, our team continues to teen out strong results as we execute our growth plan for gold and byproduct nickel production.
Now referring to Slide 8. On a consolidated basis, gold production for the first quarter was a record 39,827 ounces from 502,000 tons milled at an average grade of 2.6 grams a ton. The increase in gold production from the prior quarter of 7% was driven by an 11% grade improvement largely as a result of comparatively more high-grade beta hunt material and less lower grade stockpile material. Consolidated mill recoveries remained strong and consistent at 94%, once again, demonstrating consistent results quarter-after-quarter from our strategy to optimize the feed win from Beta Hunt and Higginsville.
Turning over to Slide 9 now. For Beta Hunt in quarter one, we mined 300,000 tons, a 19% increase over the prior quarter, with mining mainly focused in the Central Western Flanks and A Zone areas. The average mine grade was 2.81 grams a ton, which is in line with the mine plan for the year. 298,000 tonnes of Beta Hunt material were milled at an average grade of 2.92 grams a ton for production of 26,577 ounces of gold.
We continue to be on track to deliver on our growth plan at Beta Hunt to bring throughput to a rate of 2 million tons per annum by the end of 2024. With the second decline now completed, the remaining key deliverables for achieving the throughput increase are the installation of 2 more vent raises, which are on track for this year to be followed by development to open up new gold and nickel mining areas.
Now looking at Slide 10. Higginsville contributed 13,250 ounces of gold in quarter 1 from milling 204,000, an average grade of 2.18 grams per ton. HGO mined 72,200 tons at an average grade of 3.85 grams per ton, and the remainder was from process stockpile material. For the balance of the year, HCA production is scheduled to come from a combination of the Mousehollow and Pioneer open pits and the Aquarius underground.
Mining at the Spargos open pit was completed late last year. However, planning is currently underway at Spargos for an underground operation, which could be brought into production during 2024.
Turning to exploration. Already this year, we've released highly favorable drill results from Beta Hunt that clearly demonstrate the potential for significant ongoing mineral resource growth.
On Slide 11, you can see a planned view showing eight active gold exploration targets and three active nickel exploration targets. We mentioned just a few recent results. In January, we reported drill results from the Western Flanks zone that provide confidence that gold mineralization extends up to 250 meters below the current mineral resource and it remains open at depth. At the A Zone, drilling has supported the extension of mineralization up to 150 meters below the current mineral resource. While results from the Mason Zone demonstrated the potential for 700 meters of mineralized strike extent.
Turning to Slide 12. One area from Beta Hunt that I'd like to highlight is the recent announcement that the Fletcher zone potential strike length has been extended to 1.4 kilometers. Fletcher is considered a structural analog to Western Flanks, Beta Hunt's largest and most prolific gold zone. Fletcher's position to the west and parallel to Western Flanks and extend south to the Alpha Island Fault, which is very close to the existing nickel infrastructure in the beta block and the Larkin mineral reserve to the south. Fletcher remains open along strike with the potential to extend it up to two kilometers and is also open at depth. Overall, Fletcher looks like a fantastic opportunity, and there's certainly an area we intend to get more drill holes in as possible.
So with that, I'll turn the call over to Oliver Turner.
Thank you, Leigh, and good morning, everyone. So last week, we released an exciting announcement outlining our strategy to unlock the tremendous lithium potential across our Higginsville, land package and for our shareholders.
On Monday, we reached an agreement with Kalamazoo Metals to create a jointly owned but separately run lithium focused ASX-listed exploration company to be called Kali Metals. The proposed transaction is great news for Karora shareholders as it will provide participation in a well-capitalized lithium focused investment vehicle that will launch with significant scale in a Tier 1 mining jurisdiction.
Kali Metals will fund its own exploration and development activities, allowing Karora to maintain its management time and capital allocation decisions focused on growing our gold and nickel production at our operations. Under the agreement with Kalamazoo, which is a gold-focused ASX-listed mining company, Karora will vend its Higginsville lithium rights into Kali Metals, and Kalamazoo will vend its Australian lithium projects located in the Pilbara area of Western Australia and the Lachlan Fold Belt area of New South Wales and Victoria into the vehicle. The combination of these two land packages results in an impressive 3,800 square kilometers of highly prospective lithium and critical metal sentiments, much of which is adjacent to existing large lithium mines and deposits.
At the helm of this new lithium vehicle will be a managing director very familiar to Karora shareholders, Graeme Sloan, who was instrumental in the tremendous success of Karora's operations over the last 3.5 years. We expect Kali Metals to be IPO-ed on the ASX in the coming months. At IPO, Kali Metals is targeting a raise of A$10 million to A$12 million of its own capital. Pre-IPO, Karora will own 45% of Kali Metals with Kalamazoo owning 55%.
Overall, we're extremely excited about the potential Kali Metals offers to Karora shareholders in a strong Australian lithium market. Over the last two years, we evaluated several options to crystallize value from the lithium potential across Karora, Higginsville tenements and we believe that the creation of Kali Metals is the most attractive way to accelerate that value creation for our shareholders while we continue to execute on our gold and nickel growth strategy.
And with that, I'll turn the call back over to Paul.
Thanks, Oliver, and Leigh. I just want to take a moment and thank the entire Karora team. We've been on an aggressive, aggressive growth profile here over the last couple of years. And Q1 is a great start to 2023, and I want to thank everyone and celebrate the wins as we succeed them.
And with that, I'm going to turn it over back to you, Sylvie, the operator, for some questions, please.
Thank you, sir. [Operator Instructions] And your first question will be from John Sclodnick at Desjardins. Please go ahead.
Hi, guys. Yes. Thanks very much for taking my question. Just yes, really impressive drilling there at the Fletcher zone. Just wondering if this has changed the way you're thinking about the pace of additional drilling in the zone and if you'd look to expedite that? And then also, if you have thoughts on when you might have an initial resource out in this area.
Yes, John, this is Paul. Thanks for the question. Look, there's no doubt the strong results from the exploration on Fletcher have changed our thinking we're obviously going to add additional dollars to that area so that we can focus on there and follow up. It's kind of early at this moment to say when it's going to be added to resource. We could get lucky and it could make 2024. I'd say, look, that's going to be aggressive. But I've seen us do some things more aggressively. But no doubt, the intercepts are the best we've seen ever at Beta Hunt and very wide encouraging to see the paralleling shears having such better grades than the existing shears we've been lining up. So we're hoping for 2024 for resource, but we'll just see the drilling, and we're going to advance that drilling significantly from where we had started, John.
Okay. Yes. Sounds good. And yes, really exciting drilling. They're looking forward to that and the potential for grade to tick up, I guess. I guess moving on to Spargos. Just curious if you got a bit more of an update on the underground and if this has been approved to proceed with the underground development there?
Yes. Look, Spargos, most of you will recall, we bought that a couple of years back for $4.5 million. It was a great decision for us to buy at the open pit part of Spargos was completed just before Leigh came on. We're in the process now of completing the final engineering work. But look, I've seen all the results I've seen the drill results. It looks very strong, very promising. There's a very high likelihood. We have an underground there. We'll have that information mid-20 – it will be this year, we'll have the information, but we won't be going into it until mid-2024. So look, it's very encouraging, very strong results. We just got to finish up that engineering work, John, but it will be – we won't start it this year. It will be mid-2024.
Okay. No, I appreciate that update. That's all the questions for me. And congrats on a great quarter and looking forward to some more records here going forward.
Yes. John, thanks.
Thank you. Next question will be from David Talbot of Red Cloud Securities. Please go ahead.
Good day, gentlemen. Thank you for taking my call. It looks like you're attempting to add some unrealized asset value by entering the lithium sector here. Now when do you expect Kali Metals to be listed on the ASX? And with respect to its $10 million to $12 million raise, will Karora be contributing any cash in addition to its mineral rates?
Yes, Dave, thanks for the question. I'll pass that one over to Oliver Turner. Over to you, Oliver.
Yes. Thanks, Paul, and good morning, David. Yes, absolutely, we're very excited to bring what was, I think, no value in any analyst or any investors NAV table trying to crystallize that and accelerate that. If we had proceeded on our own here that wouldn't have been crystallized for several years down the road. So we're really happy to put this vehicle together.
With respect to Kali Metals, it will be a late third quarter, early fourth quarter IPOs what we're targeting the window in Australia there. Obviously, we'll have more details on that as it progresses. And of course, once Kali Metals start their IPO road show.
With respect to the financing, targeting that $10 million to $12 million, that is going to be funded separately with new investors. So Karora and Kalamazoo will both have their interest reduced their vending in the properties, but it's key to have that separately funded and the whole idea here is not only does it not distract Karora management from executing on the lithium, but also it's not diluting Karora shareholders.
Would you consider going higher than the $10 million to $12 million?
We'll see what the market does, right? I mean we all know the lithium market moves fairly quickly here, up and down in both directions. There's no doubt the ASX and the Australian lithium market is still very red hot. It's a strong market there for sure. So once that roadshow starts any sort of market testing, we'll test that range and evaluate at that point in time. But of course, that will be a Kali Metals decision by Kali Metals management, and of course, Graeme Sloan and Luke over there. They'll make that decision. But we'll see what the market dictates at that point in time.
And was there any discussion whether you should keep this lithium potential entirely within Karora?
We evaluate that. So over the past two years, we've done an extensive amount of on the work, groundwork and –sorry, on the groundwork and study work as well. We engaged a group called CSA Global. That data review over entire Higginsville tenements, did some priority ranking work and prospectivity ranking as well. We actually did some rock chip sampling, which returned some fantastic results, which Kali Metals will be releasing at some point in time for sure. It was very strong, very interesting. But look, we’re first and foremost, we're a gold company. We're more than doubling gold production over the last several years into 2024 and 2025, which is a big step forward for us. That requires a huge amount of management time, energy and effort, and Bevan and the team are executing on that fantastically. With Leigh now brought in and helping on that front and, of course, helping to accelerate and expand our nickel. That's a lot for us to work on. And if there's one thing we're focused on, it's on executing every single quarter and delivering into what we say we'll do.
So gold and nickel will remain our priority. If we started going into the lithium space as well with the team size that we have and how we like to operate in a lean environment that could potentially be distracting, particularly given the prospectivity and the encouraging results that we're seeing. So we wanted to find a team that we trusted. We also, at the same time, really enjoyed reviewing the Kalamazoo properties. They've got some fantastic properties up in Northern WA there that are actually a bit more advanced than our properties. So this also provides Karora shareholders with exposure to Kalamazoo’s properties. You're kind of getting two for one and one vehicle here. So we're really confident that we'll do quite well once it's listed.
Great. Okay. Thank you, Oliver.
No problem.
[Operator Instructions] And your next question will be from MacGregor Ross at Canaccord. Please go ahead.
Good morning, guys. And congrats on a solid quarter. A few questions for me. So starting on the cost side, it looks like the operations had a solid quarter overall, and particularly at beta with another quarter of sub-$1,000 cash cost. I'm wondering if you could talk about the drivers there and if you're seeing any easing on the labor and supply chain pressures that you faced last year?
Yes. Thanks for the question, Michael. I'll turn that one over to Leigh. He's pretty up to date on the labor and supply chain in WA. Over to you, Leigh.
Yes. Thanks for the question. I think I'd put it that it's not getting any worse. And I think we are learning to deal with the market that we're in. So it – I think labor might be easing a little in some areas, but in saying that we certainly have enough people to operate all our equipment and execute our growth plan. But where we're probably finding it a bit harder is in maintenance labor, which we still have all the people. We just are using a lot more contractors than we otherwise probably would. But we have enough people to do the job.
Okay. That's great color. And then just in terms of mining and processing rates, with Lakewood, you've locked in processing capacity above 2 million tonnes per annum now, which I believe should be above your mining rates until the expansion at beta is complete. So what I'm wondering is if you look to fill that additional milling capacity in any way until the mining rates catch up? And if so, how?
Yes. Thanks. We've got – we are at capacity with our milling. So you are right there. By purchasing that mill, it has given us milling capacity ahead of our ramp-up at Beta Hunt, which is fantastic. It's where you'd rather be. And we also have numerous stockpiles that we can put through the mill to keep it full topped up which does make us more money than toll milling to keep it full. So we can fill it from all our material until the Beta Hunt, the higher grade from Beta Hunt comes through and filled it up from that.
Okay. Excellent. And then just final question for me here. Could you give any color on the remaining key milestones for the growth plan? Are there any long lead time items that are still outstanding there?
So with the decline being done, the rest of the growth plan is the second and third vent raise, which are underway. We've got some equipment deliveries for those, and we'll commission that vent system in Q4 this year, ready for next year. So it's well in train. And yes, no reason to think that, that won't happen this calendar year.
Okay. Great. Thanks guys. And congrats again on a good quarter.
Thank you. And at this time, there are no further questions. Mr. Huet, please proceed with closing remarks.
Yes. In closing, I just want to thank everyone for taking the time out of your busy schedules to join us on our call today. We're very grateful to our team for doing all the hard work, to our shareholders, to our Board to all the analysts. So thank you, everyone. You guys have a great day and enjoy your Monday. Have a great day, everyone.
Thank you, sir. Ladies and gentlemen, this does indeed concludes your conference call for today. Once again, thank you for attending. And at this time, we do ask that you please disconnect your lines.