Karora will host a call/webcast on August 12, 2022 at 10:00
a.m. (Eastern Time) to discuss the second quarter 2022
results. North American callers please dial: 1-800-289-0720,
international callers please dial: (+1) 647-484-0258. For
the webcast of this event click [here]
(replay access information below).
TORONTO, Aug. 12,
2022 /CNW/ - Karora Resources Inc. (TSX: KRR) (OTCQX:
KRRGF) ("Karora" or the "Corporation") is pleased to announce
its financial results and review of activities for the three and
six months ended June 30, 2022. All
amounts are expressed in Canadian dollars, unless otherwise noted.
For additional information please refer to Karora's Management's
Discussion & Analysis ("MD&A") and unaudited condensed
interim consolidated financial statements for the three and six
months ended June 30, 2022 and
2021.
Karora is also pleased to announce the results of its PEA study
on Nickel mining at Beta Hunt resulting in a 105% IRR using base
case (US$19,500/t Ni) assumptions and
232% IRR at upside case assumptions (US$25,000/t: current consensus Ni pricing). The
PEA demonstrates the tremendous by-product potential of Karora's
initial nickel resource (see Karora news release dated May 11, 2022) at Beta Hunt. Karora continues to
aggressively drill test the potential expansion of the nickel
resource which has significant potential to expand in years to
come. Importantly, the nickel PEA demonstrates ability to leverage
the dual-purpose infrastructure in place at Beta Hunt – a unique
feature of the mine which materially reduces capital requirements.
The strong results of the study are briefly summarized below
however readers are encouraged to read Karora's nickel PEA news
release announced this morning and available on our website,
www.karoraresources.com, and on Sedar.
Highlights
- Second quarter 2022 consolidated gold production of 30,652
ounces was the highest total since the acquisition of the
Higginsville Mill in 2019 and a 12% improvement compared to 27,489
ounces produced in the first quarter. First half production of
58,141 ounces places Karora well on track to deliver on improved
full year consolidated 2022 gold production guidance of 120,000 to
135,000 ounces (assumes no significant interruption to operations
as a result of the COVID-19 virus in the second half of 2022).
- Record tonnage performance at Beta Hunt with 290,000 tonnes
mined during the second quarter. Tonnes mined through the single
decline have been steadily increasing as productivity and
operational performance improve in advance of the commissioning of
the second decline in the first quarter of 2023, despite challenges
with COVID related interruptions and tight labour market
conditions. Second quarter 2022 consolidated
all-in-sustaining-costs ("AISC")1 of US$1,190 per ounce sold is a 15% decrease
compared to first quarter 2022 AISC of US$1,396 per ounce sold.
- Net loss of $0.3 million, or
$0.00 per share, for the second
quarter of 2022 was down $5.7 million
compared to second quarter 2021 net earnings of $5.4 million, or $0.04 per share.
- Adjusted earnings1 of $4.7
million, or $0.03 per share
for the second quarter of 2022, down $9.6
million compared to second quarter 2021 adjusted net
earnings of $14.3 million, or
$0.10 per share.
- Adjusted EBITDA1 was $22.6
million or $0.14 per share for
the second quarter of 2022, down $6.9
million from $29.5 million in
the second quarter of 2021, largely due to higher production costs
(including transitory costs related to COVID) and non-cash
adjustments related to share-based payments, derivatives and
foreign exchange related to intercompany loans.
- Cash flow from operating activities of $11.2 million decreased compared to $26.3 million for the second quarter of 2021
primarily related to higher production costs largely impacted by
the aforementioned cost pressures.
- Karora's cash position remains strong at $114.1 million as at June
30, 2022, after the planned deployment of capital into the
Company's growth plan at Beta Hunt and the acceleration of
exploration programs.
- On June 14, 2022, Karora closed a
bought deal financing of 14,375,000 common shares at a price of
$4.80 per common share despite very
challenging equity market conditions, for gross proceeds to the
Company of $69,000,000, including the
exercise in full of the Underwriters' over-allotment option.
- During the second quarter Karora entered into a binding
agreement to acquire the 1.0 Mtpa Lakewood Mill operating gold
processing facility located near Kalgoorlie Western Australia for
A$80 million comprised of
A$70 million in cash and A$10 million in Karora shares. The transaction
closed on July 27, 2022. Tolling of
Beta Hunt material at Lakewood Mill during Q2 2022 achieved 94%
gold recovery. The purchase of the Lakewood mill increases tolling
capacity of the group to approximately 2.6Mtpa, significantly
de-risking growth plans to increase gold production to between
185,000 and 205,000 ounces by 2024 given the current significant
cost pressures experienced in new capital projects across the
industry.
- Beta Hunt's second decline, commenced in the first quarter of
2022 with the second (west) decline boxcut now completed. The
access portal cut and decline development commenced from the
surface during the quarter. Contract development has advanced
1,032m since commencing in
December 2021, ahead of schedule
despite COVID impacts on contractor crews. Surface raise bore civil
works associated with increased ventilation demands of the future
2.0 Mtpa mining rate have also commenced. The Company remains on
track to complete the decline in the first quarter of 2023.
- On July 14, 2022, Karora closed
an arrangement to refinance its Bridge Loan with a lower-cost
senior secured $80 million Credit
Agreement with Macquarie Bank Limited ("Macquarie"). The Credit
Agreement provides for a $40 Million
term loan and a $40 million revolving
credit facility, both bearing an interest rate of Canadian Dealer
Offered Rate +4.5% per annum on the drawn principal and standby fee
of 1.5% per annum on the undrawn revolving credit facility. The
term of the Credit Agreement is to June 28,
2024 with an option for annual renewal thereafter. The
proceeds of the Credit Agreement were used to refinance Karora's
existing $30 million Bridge facility
and will be used for general working capital purposes.
- On July 15, 2022, Karora received
approval of the TSX for a normal course issuer bid (the "Bid") to
purchase up to no more than 8,492,971 of the Corporation's issued
and outstanding common shares. Purchases under the Bid may commence
on July 20, 2022. The Bid will expire
no later than July 19, 2023.
Purchases of common shares will be made through the facilities of
the TSX in accordance with its rules. Purchases may also be made
through alternative Canadian trading systems. The Corporation has
not made any purchases of its common shares during the past twelve
months.
- Drilling at Beta Hunt's Western Flanks zone confirm the
consistency of the Western Flanks Main shear mineralization up to
150 metres below the current Mineral Resource, including an
interval of 13.6 g/t over 5.3 metres (see Karora news release dated
August 2, 2022). The Western Flanks
is Beta Hunt's largest gold zone and these results provide
increased confidence for the continued expansion of Karora's
resource base. In addition to extending the Main Shear
mineralization, drilling has also outlined significant footwall
mineralization which is not included in the current Mineral
Resource.
- Positive Preliminary Economic Assessment ("PEA") for increased
nickel production from the Beta Hunt Mine. Highlights from the PEA
include:
-
- Strong Economics on Initial Resource: Base case results (nickel
price of US$19,500/t) yields a
pre-tax NPV5% of A$57 million and IRR
of 105%. Upside case results, closer to nickel consensus pricing of
US$25,000/t yields a pre-tax
A$111 million NPV5% and IRR of
232%.
- Leverage to Nickel Prices: A 20% increase in the nickel price
increases NPV5% to A$95.2 million, or
66% compared to the Base Case.
- Low-Cost: Nickel net C1 cash costs are expected to be
A$14,542/t. Base Case Net AISC costs
are expected to be A$16,946/t. On a
per gold ounce produced basis, this equates to an approximate
annual average of A$80 to
A$100 per ounce sold.
- Upside Potential: The Beta Hunt Nickel Mineral Resource occurs
in two main blocks, the Beta Block and Gamma Block, both of which
have significant potential for Mineral Resource additions,
including the 50C nickel trend where continuous nickel
mineralization has been defined over 800 metres in strike, with the
potential to extend up to 2.6 km in strike length. The current PEA
results are based on only the current Beta Hunt Nickel resource,
with significant expansion potential remaining.
- Nickel drilling: Nickel-dedicated drilling for the remainder of
the year will comprise both resource definition to upgrade the 40C
and 50C Mineral Resource and exploration drilling targeting the 44C
and 90C nickel troughs. The 44C is the interpreted position of the
40C trough, offset and north of the Alpha Island Fault and west of
the Western Flanks gold deposit. The 90C represents the interpreted
offset extension of the Beta West mineralization previously mined
by Consolidated Minerals. Both the 44C and 90C are untested by
existing drilling.
- Karora has increased the lower end of its previously announced
full year consolidated 2022 production guidance to a range of
between 120,000 - 135,000 ounces (previously 110,000 - 135,000
ounces). Full year 2022 AISC1 guidance has been
increased to a range of US$1,100 -
US$ 1,200 per ounce sold (previously
US$950 – US$1,050 per ounce sold). Growth capital guidance
has been moderately increased by A$5
million for 2022 to a range of A$57
million – A$70 million).
Paul Andre Huet, Chairman &
CEO, commented: "The second quarter results demonstrate a strong
operating performance improvement compared to the first quarter,
when we faced many concurrent COVID-19 related challenges. While
some of those challenges certainly remain, particularly the tight
labour market for skilled workers which have impacted our cost
guidance, we are now once again resuming the operational momentum
that we expect to carry into our second half performance when
compared to the first half.
Our second quarter gold production of 30,652 ounces represents a
new quarterly production record since the acquisition of the
Higginsville mill in 2019 and our AISC costs were much improved at
US$1,190 per ounce sold, a tremendous
15% reduction compared to the prior quarter when we faced
significant COVID-related costs. We are continuing to monitor the
COVID-19 situation very closely in Western Australia and are remaining vigilant
in our efforts to minimize impacts to drive costs down in the face
of ongoing supply chain and labour challenges.
Driving our record quarterly ounce performance was record mined
production from the Beta Hunt Mine with output of 290,000 tonnes,
equating to almost 1.2 Mtpa on an annualized basis. This is a
significant achievement by our operating team and provides further
confidence in our ability to ramp up production from our flagship
Beta Hunt Mine. Since 2019, we have taken monthly tonnages from
30,000 tonnes to now over 100,000 tonnes, all with a single ramp.
The Beta Hunt expansion to double mined tonnes to 2.0 Mtpa
continues to track very well with completion of the second decline
expected during the first quarter of 2023, ahead of the of the
original schedule for completion in the second quarter of 2023. The
expansion project remains on budget, which is particularly
impressive given the industry wide cost pressure we and our peers
have all been challenged with.
Providing further optimism for the potential of the growing Beta
Hunt Mine is our recent very strong gold exploration results. In
July, we announced the best intercept to-date from the Larkin Zone
of 29.8 g/t over 7.8 metres, which importantly occurred 20 metres
below the existing Larkin Mineral Resource. At Western Flanks, we
reported the shear mineralization has been extended by 150 metres
below the existing Mineral Resource, highlighted by a drill
intercept of 13.6 g/t over 5.3 metres. Both these results point
towards the continued expansion potential of Beta Hunt.
Today we also published a robust Nickel PEA highlighting the
nickel by-product potential of Beta Hunt. This PEA is based on just
our initial Karora Resource announced in January, with significant
potential for expansion remaining. The PEA outlines the low-cost
nickel potential of the mine for a relatively modest capital
investment of just over A$18 million
(A$7 million in year one) yielding a
strong pre-tax IRR of 105% for the base case and 232% for the
upside case. The results further fuel our optimism for the future
performance of Beta Hunt by providing significant potential to
drive down gold AISC costs through growing by-product credits from
nickel. On an average annual basis, the nickel by-products based on
our initial resource have the potential to range between
A$80 and A$100 per ounce.
Perhaps our most significant recent announcement was the closing
of the Lakewood mill acquisition in July. Lakewood is a fully
permitted 1.0 Mtpa gold mill which is expected to provide immediate
strategic and operating benefits. Lakewood increases our nameplate
milling capacity to approximately 2.6 Mtpa and, importantly,
significantly de-risks our growth by eliminating the procurement,
schedule and construction risks that have been associated with new
capital projects in the current macro environment.
Lastly, we are pleased to increase the bottom end of our 2022
gold production guidance to a new range of 120,000 to 135,000
ounces based on our strong first half production performance. As
with all mining companies this year, we have experienced elevated
input cost pressures during the first half of the year, which has
driven an increase in AISC1 guidance to US$1,100 per ounce to US$1,200 per ounce sold for the year. We continue
to expect a stronger cost performance in the second half compared
with the first half of the year.
Overall, I am extremely pleased with our second quarter results
and recent announcements that demonstrate we are on the right track
in both emerging from the current environment that is dominated by
COVID-19 and inflationary challenges to gaining significant
momentum on our drive to increase production and become a 200,000
ounce gold producer. With a robust balance sheet in place, we look
forward to continuing to execute on our plan."
1
Non-IFRS: the definition and reconciliation of these measures
are included in the Non-IFRS Measures section of this news release
and Karora's MD&A dated August 12, 2022.
|
COVID-19 Protocols
In response to the global COVID-19 pandemic, Karora's protocols
and contingency plans have helped mitigate impacts of the pandemic,
but not eliminate them. Karora's ongoing response to the COVID-19
pandemic continues to prioritize the safety of its workforce and
host communities.
Results of Operations
Table 1 - Highlights of operational results for the periods
ended June 30, 2022 and 2021
|
Three months
ended,
|
Six months
ended,
|
For the periods ended
June 30,
|
2022
|
2021
|
2022
|
2021
|
Gold Operations
(Consolidated)
|
|
|
|
|
Tonnes milled
(000s)
|
462
|
345
|
856
|
716
|
Recoveries
|
94 %
|
94 %
|
94 %
|
93 %
|
Gold milled, grade
(g/t Au)
|
2.21
|
2.72
|
2.25
|
2.43
|
Gold produced
(ounces)
|
30,652
|
29,831
|
58,141
|
54,524
|
Gold sold
(ounces)
|
30,398
|
30,412
|
56,685
|
55,959
|
Average exchange rate
(USD/CAD)
|
1.2768
|
1.2282
|
1.2715
|
1.2471
|
Average realized price
(US $/oz sold)
|
$1,860
|
$1,823
|
$1,881
|
$1,793
|
Cash operating costs
(US $/oz sold)1
|
$1,130
|
$874
|
$1,214
|
$910
|
All-in sustaining cost
(AISC) (US $/oz sold)1
|
$1,190
|
$996
|
$1,285
|
$1,020
|
Gold (Beta Hunt
Mine)1
|
|
|
|
|
Tonnes milled
(000s)
|
295
|
221
|
528
|
454
|
Gold milled, grade
(g/t Au)
|
2.14
|
3.35
|
2.26
|
2.98
|
Gold
produced(ounces)
|
19,169
|
22,354
|
36,277
|
40,615
|
Gold sold
(ounces)
|
19,140
|
22,991
|
35,269
|
41,745
|
Cash operating cost
(US $/oz sold)1
|
$1,130
|
$787
|
$1,133
|
$837
|
Gold (HGO
Mine)
|
|
|
|
|
Tonnes milled
(000s)
|
167
|
124
|
328
|
262
|
Gold milled grade (g/t
Au)
|
2.32
|
1.99
|
2.24
|
1.77
|
Gold produced
(ounces)
|
11,484
|
7,477
|
21,864
|
13,909
|
Gold sold
(ounces)
|
11,257
|
7,421
|
21,416
|
14,214
|
Cash operating cost
(US $/oz sold)1
|
$1,130
|
$1,141
|
$1,346
|
$1,120
|
1
Non-IFRS: the definition and reconciliation of these
measures are included in the Non-IFRS Measures section of this news
release and Karora's MD&A dated August 12, 2022.
|
Consolidated Operations
For the second quarter of 2022, 462,000 tonnes of material was
milled at an average grade of 2.21 g/t to produce 30,652 ounces of
gold. Tonnes milled were 17% higher than the first quarter of 2022.
The feed blend through the Higginsville mill during the second
quarter of 2022 comprised 59% material from the Beta Hunt
underground mine with an average grade of 2.31 g/t, with the
remaining 41% feed coming from the HGO operations at an average
grade of 2.32 g/t, for a combined average grade of 2.31 g/t. Lower
grade stockpile material from Beta Hunt was also treated through a
third party mill during the second quarter of 2022, as part of the
Lakewood Mill due diligence process, with an average grade of 1.34
g/t resulting in the total average grade milled of 2.21 g/t.
Beta Hunt Mine
Operations
Production for the second quarter of 2022 was 295,000 tonnes
milled at a grade of 2.14 g/t, a 27% increase and 8% decrease,
respectively, compared to the first quarter of 2022. The higher
tonnes milled and lower grade was largely due to the treatment of
low grade stockpile material as noted above.
Of note, the 290,000 tonnes mined at Beta Hunt is a company
record from a single decline at the mine in a single quarter. The
record performance positions Karora very well for the commissioning
of the second decline in the first quarter of 2023 as the Company
ramps production towards its target mining rate of 2.0 Mtpa at Beta
Hunt as part of the growth plan.
Higginsville ("HGO") Mine
Operations
HGO mined 106,000 tonnes during the second quarter of 2022, 49%
lower than the second quarter of 2021, at an average grade of 3.28
g/t containing 11,211 ounces of gold. Lower tonnes were
compensated with higher grade resulting in a 7.4% increase in mined
ounces of gold compared to the second quarter of 2021.
Planned production ramped up by 86% at the Spargos open pit mine
compared to the previous quarter. Planning and approvals are
underway to extend the Spargos open pit at depth. Two Boys and
Aquarius underground operations also contributed to mined tonnes
and ounces from development material.
Tonnes milled at the HGO mill and a third-party mill during the
second quarter of 2022 were 462,000 (64% from Beta Hunt and 36%
from HGO), a 34% increase in tonnes compared to the second quarter
of 2021, at an average grade of 2.21 g/t. Recovered gold was 30,652
ounces. Included in the recovered gold was third-party mill
processed material of 51,549 ore tonnes for 2,085 recovered ounces,
as part of the due diligence to acquire the Lakewood Mill. Total
gold ounces sold were 30,398 ounces during the second quarter of
2022.
Cash Operating Costs and
AISC1
For the second quarter of 2022 consolidated cash operating
costs1 and AISC1 were US$1,130 and US$1,190 per ounce sold, decreases of 14% and
15%, respectively compared to the prior quarter.
Financial Highlights
Table 4 – Highlights of First Second Quarter
(in
thousands of dollars except per share amounts)
|
Three months
ended
|
Six months
ended
|
For the periods ended
June 30,
|
2022
|
2021
|
2022
|
2021
|
Revenue
|
$73,609
|
$69,570
|
$138,881
|
$128,854
|
Production and
processing costs
|
40,093
|
29,570
|
82,529
|
58,871
|
Earnings (loss) before
income taxes1
|
1,053
|
10,200
|
(1,100)
|
20,536
|
Net earnings
(loss)
|
(328)
|
5,391
|
(4,037)
|
11,015
|
Net earnings (loss) per
share – basic
|
0.00
|
0.04
|
(0.03)
|
0.08
|
Net earnings (loss) per
share – diluted
|
0.00
|
0.04
|
(0.03)
|
0.07
|
Adjusted
EBITDA1,2
|
22,602
|
29,481
|
34,805
|
50,691
|
Adjusted EBITDA per
share – basic1,2
|
0.14
|
0.20
|
0.22
|
0.35
|
Adjusted
earnings1
|
4,662
|
14,270
|
5,782
|
22,357
|
Adjusted earnings per
share – basic1
|
0.03
|
0.10
|
0.04
|
0.15
|
Cash flow provided by
operating activities
|
11,242
|
26,371
|
23,392
|
45,029
|
Cash investment in
property, plant and equipment and mineral property
interests
|
(35,084)
|
(16,982)
|
(59,868)
|
(35,175)
|
1
Non-IFRS: the definition and reconciliation of these
measures are included in the Non-IFRS Measures section of this news
release and Karora's MD&A dated August 12, 2022.
|
2
Earnings before interest, taxes, depreciation, and
amortization ("EBITDA").
|
Revenue for the second quarter of 2022 was $73.6 million, a 6% increase over the comparable
period in 2021. The increase in revenue in 2022 was mainly the
result of higher average realized prices on ounces sold which
increased by 6%.
The net loss for the three months ended June 30, 2022 was $0.3
million compared to net earnings of $5.4 million for the comparable period in 2021, a
decrease of $5.7 million. The
decrease was mainly attributable to increases in production and
processing costs, general and administrative costs, COVID-19
related costs and depreciation and amortization.
Adjusted net earnings1 for the second quarter of 2022
were $4.7 million, or $0.03 per share, a 67% decrease compared to the
same period in 2021, primarily due to higher costs associated with
the current operating environment.
Adjusted EBITDA1 for the second quarter of 2022
was $22.6 million, or $0.14 per share, compared to $29.5 million, or $0.20 per share, in the second quarter of 2021.
The reduction was due to the aforementioned cost pressures.
Table 5 - Highlights of Karora's Financial Position
(in thousands of dollars):
For the period
ended
|
June 30,
2022
|
December 31,
2021
|
Cash and cash
equivalents
Working
capital*
PP&E &
MPI
Total assets
Total
liabilities
Shareholders'
equity
|
114,094
75,627
322,303
476,909
160,275
316,634
|
91,005
64,447
300,680
436,333
184,968
251,365
|
*Working capital is a
measure of current assets (including cash and cash equivalents)
less current liabilities.
|
Karora's cash position increased to $114.1 compared to $91.0
million as at December 31,
2021.
For a complete discussion of financial results, refer to
Karora's MD&A and unaudited condensed interim financial
statements for the three months ended June
30, 2022 and 2021.
Outlook
Karora has increased the lower end of its previously announced
full year consolidated 2022 production guidance to a range of
between 120,000 - 135,000 ounces of gold (previously 110,000 -
135,000 ounces) following strong first half 2022 production of
58,141 ounces. Full year 2022 AISC1 guidance has
been increased to a range of US$1,100
- US$ 1,200 per ounce sold
(previously US$950 – US$1,050 per ounce sold) to adjust for the
increased input costs driven largely by COVID-19 disruptions in the
first quarter of 2022, in addition to elevated sector-wide
inflationary impacts during 2022. Karora continues to expect
stronger second half cost performance when compared to the first
half driven by improved grades and reduced cost pressures as
experienced during first quarter of 2022. Growth capital guidance
has been moderately increased by A$5M
for 2022, driven primarily by the positive acceleration of the
second decline development which is tracking ahead of original
schedule and remains on track for completion in the first quarter
of 2023 as well as minor upgrades to the Lakewood milling facility,
offset by reduced outlays previously allocated in 2022 for the
expansion of the Higginsville mill.
On June 28, 2021 the Corporation
announced three-year production guidance as part of a multi-year
growth plan that is expected to see gold production increase from
99,249 ounces in 2020 to a range of 185,000 – 205,000 ounces in
2024 at an AISC1 of US$885
– US$985 per ounce sold. Payable
nickel production guidance for 2022 remains at 450 to 550 tonnes,
which is treated as a by-product credit in
AISC1.
Table 3 – Consolidated Multi-Year Guidance to 2024
Production &
Costs
|
|
2022
|
2023
|
2024
|
Gold
Production
|
Koz
|
120 - 135
|
150 – 170
|
185 - 205
|
All-in sustaining
costs
|
US$/oz
|
1,100 -
1,200
|
890 – 990
|
885 - 985
|
Capital
Investments
|
|
Sustaining
Capital
|
A$ (M)
|
9 - 15
|
11 - 16
|
18 - 23
|
Growth
Capital
|
A$ (M)
|
57 - 70
|
47 - 57
|
30 - 40
|
Exploration &
Resource
Development
|
A$ (M)
|
21 - 24
|
22 - 25
|
20 - 23
|
|
|
|
|
|
|
1
The 2022 guidance was updated August 12, 2022. 2023 and 2024
guidance was announced in January 2021 (see Karora news release
dated January 19, 2021), is unchanged. This production guidance
through 2024 is based on the 2020 year-end Mineral Reserves and
Mineral Resources announced on December 16, 2020.
|
2
The Corporation expects to fund the capital Investment
amounts listed above with cash on hand and cashflow from
operations, includes the capital required during the applicable
periods to expand the capacity of the Higginsville mill to 2.5
Mtpa. See below for further detail regarding this
expansion.
|
3
The material assumptions associated with the expansion of
Beta Hunt mining production rate to 2.0 Mtpa in 2024 include the
addition of a second ramp decline system driven parallel to the ore
body, ventilation and other infrastructure that is required to
support these areas, and an expanded trucking fleet.
|
4
The Corporation's guidance assumes targeted mining rates and
costs, availability of personnel, contractors, equipment and
supplies, the receipt on a timely basis of required permits and
licenses, cash availability for capital investments from cash
balances, cash flow from operations, or from a third-party debt
financing source on terms acceptable to the Corporation, no
significant events which impact operations, such as COVID-19,
nickel price of US$22,000 per tonne, as well as an A$ to US$
exchange rate of 0.70 in the second half of 2022 and 0.78 in 2023
and 2024. and A$ to C$ exchange rate of 0.91. Assumptions used for
the purposes of guidance may prove to be incorrect and actual
results may differ from those anticipated. See below "Cautionary
Statement Concerning Forward-Looking Statements".
|
5
Exploration expenditures include capital expenditures
related to infill drilling for Mineral Resource conversion, capital
expenditures for extension drilling outside of existing Mineral
Resources and expensed exploration. Exploration expenditures also
includes capital expenditures for the development of exploration
drifts.
|
6
Capital expenditures exclude capitalized
depreciation.
|
7
AISC guidance includes Australian general and administrative
costs and excludes share-based payment expense.
|
8
See "Non-IFRS Measures" set out at the end of this news
release and Karora's MD&A dated for the period ended June 30,
2022.
|
The growth plan will be driven by an expansion of Beta Hunt
underground mine production to 2.0 Mtpa by 2024, from 0.8 Mtpa
recorded in 2020. Increased production from Beta Hunt will be
complemented by ore from HGO Central and Spargos. The increased
tonnage is expected to be processed by the Higginsville mill and
the newly acquired Lakewood mill, which combine for approximately
2.6 Mtpa of capacity.
Further details on the growth plan can be found in Karora's news
release dated June 28, 2021, and the
third quarter MD&A.
Exploration and Resource
Definition Drilling
At Beta Hunt, 16,710 metres of drilling was completed during the
second quarter, comprised of 13,938 metres for gold and 2,772
metres for nickel.
Gold drilling during the quarter focused on testing the down-dip
extensions of Western Flanks and A Zone, targeting parallel shear
zones to Larkin known as Mason and Cowcill and infill drilling the
Larkin Zone.
Exploratory drilling also tested for shear-hosted gold
mineralization in the Gamma block (3 holes) and at Sorrenson (2
holes). All drill targets are in support of the growth plan to
increase Beta Hunt mine production to 2.0 Mtpa by 2024.
Nickel exploration and resource definition activities continued
to target extensions to the 25C nickel trough in the Beta block,
south of the 30C Ni Mineral Resource.
A number of significant gold intersections were reported post
the first quarter and can be reviewed in Karora news releases dated
May 24 2022, July 19, 2022 and August
2, 2022. Results from infill and extensional drilling of
Western Flanks, A Zone and Larkin have generally supported and in
some cases extended the known mineralization associated with these
Mineral Resources.
Conference Call /
Webcast
Karora will be hosting a conference call and webcast today
beginning at 10:00 a.m. (Eastern
time). A copy of the accompanying presentation can be found
on Karora's website at www.karoraresources.com.
Live Conference Call and Webcast Access Information:
North American callers please dial: 1-800-289-0720
Local and international callers please dial: 647-484-0258
A live webcast of the call will be available through Cision's
website at:
Webcast Link (https://app.webinar.net/mD9ybgWbWBX)
A recording of the conference call will be available for replay
through the webcast link, or for a one-week period beginning at
approximately 1:00 p.m. (Eastern
Time) on August 12, 2022,
through the following dial in numbers:
North American callers please dial: 1-888-203-1112; Pass Code:
2825394
Local and international callers please dial: 647-436-0148; Pass
Code: 2825394
Non-IFRS Measures
This news release refers to cash operating cost, cash operating
cost per ounce, all-in sustaining cost, EBITDA, adjusted EBITDA and
adjusted EBITDA per share, adjusted earnings, adjusted earnings per
share and working capital which are not recognized measures under
IFRS. Such non-IFRS financial measures do not have any standardized
meaning prescribed by IFRS and are therefore unlikely to be
comparable to similar measures presented by other issuers.
Management uses these measures internally. The use of these
measures enables management to better assess performance trends.
Management understands that a number of investors and others who
follow the Corporation's performance assess performance in this
way. Management believes that these measures better reflect the
Corporation's performance and are better indications of its
expected performance in future periods. This data is intended to
provide additional information and should not be considered in
isolation or as a substitute for measures of performance prepared
in accordance with IFRS.
In November 2018, the World Gold
Council ("WGC") published its guidelines for reporting all-in
sustaining costs and all-in costs. The WGC is a market development
organization for the gold industry and is an association whose
membership comprises leading gold mining companies. Although the
WGC is not a mining industry regulatory organization, it worked
closely with its member companies to develop these non-IFRS
measures. Adoption of the all-in sustaining cost and all-in cost
metrics is voluntary and not necessarily standard, and therefore,
these measures presented by the Corporation may not be comparable
to similar measures presented by other issuers.
The following tables reconcile these non-IFRS measures to the
most directly comparable IFRS measures:
Mining Operations
Cash Operating and All-in
Sustaining Costs
The Corporation uses these measures internally to evaluate the
underlying operating performance of the Australian Operations.
Management believes that providing cash operating cost data allows
the reader the ability to better evaluate the results of the
underlying operations.
Consolidated Mining
Operations
|
|
Three months
ended,
|
Six months
ended,
|
For the periods ended
June 30,
|
2022
|
2021
|
2022
|
2021
|
Production and
processing costs
|
$47,193
|
$35,860
|
$95,302
|
$71,937
|
Royalty expense:
Government of Western Australia
|
1,853
|
1,700
|
3,450
|
3,088
|
Royalty expense:
Other
|
2,333
|
2,656
|
4,370
|
5,023
|
By-product
credits
|
(415)
|
(1,294)
|
(2,867)
|
(3,550)
|
Adjustment
1
|
(7,100)
|
(6,290)
|
(12,773)
|
(13,066)
|
Operating costs
(C$)
|
$43,864
|
$32,632
|
$87,482
|
$63,432
|
General and
administrative expense – Australia 2,3
|
1,908
|
2,762
|
4,140
|
3,883
|
Sustaining capital
expenditures
|
406
|
1,791
|
1,018
|
3,799
|
All-in sustaining costs
(C$)
|
$46,178
|
$37,185
|
92,640
|
$71,114
|
Average exchange rate
(C$1 – US$1)
|
0.78
|
0.81
|
0.78
|
0.80
|
Operating costs
(US$)
|
$34,355
|
$26,569
|
$68,802
|
$50,898
|
All-in sustaining
costs (US$)
|
$36,168
|
$30,276
|
$72,860
|
$57,076
|
Operating costs
(A$)
|
$48,128
|
$34,502
|
$95,663
|
$65,989
|
All-in sustaining
costs (A$)
|
$50,668
|
$39,316
|
$101,300
|
$74,001
|
Ounces of gold
sold
|
30,398
|
30,412
|
56,685
|
55,959
|
Cash operating costs
per ounce sold (US$)
|
$1,130
|
$874
|
$1,214
|
$910
|
All-in sustaining
cost per ounce sold (US$)
|
$1,190
|
$996
|
$1,285
|
$1,020
|
Cash operating costs
per ounce sold (A$)
|
$1,583
|
$1,134
|
$1,688
|
$1,179
|
All-in sustaining
cost per ounce sold (A$)
|
$1,667
|
$1,293
|
$1,787
|
$1,322
|
1 Negative
adjustment for intercompany tolling transactions
|
2 G&A
costs were reduced with R&D and Due Diligence costs
|
3 G&A:
share-based payments were excluded in calculating AISC
|
Beta Hunt
Mine
|
|
|
|
|
|
Three months
ended,
|
Six months
ended,
|
|
For the periods ended
June 30,
|
2022
|
2021
|
2022
|
2021
|
|
Production and
processing costs
|
$24,475
|
$19,677
|
$47,214
|
$40,147
|
|
Royalty expense:
Government of Western Australia
|
1,218
|
1,288
|
2,226
|
2,309
|
|
Royalty expense:
Other
|
2,317
|
2,545
|
4,208
|
4,628
|
|
By-product
credits
|
(393)
|
(1,274)
|
(2,813)
|
(3,508)
|
|
Operating costs
($)
|
$27,617
|
$22,236
|
$50,835
|
$43,576
|
|
Average exchange rate
(C$1 – US$1)
|
0.78
|
0.81
|
0.78
|
0.81
|
|
Operating costs
(US$)
|
$21,630
|
$18,105
|
$39,966
|
$34,961
|
|
Operating costs
(A$)
|
$30,302
|
$23,510
|
$55,604
|
$45,326
|
|
Ounces of gold
sold
|
19,140
|
22,991
|
35,268
|
41,745
|
|
Cash operating costs
per ounce sold (US$)
|
$1,130
|
$787
|
$1,133
|
$837
|
|
Cash operating costs
per ounce sold (A$)
|
$1,583
|
$1,023
|
$1,577
|
$1,086
|
|
|
|
|
|
|
|
|
|
|
|
Higginsville
Mine
|
|
|
|
|
|
|
Three months
ended,
|
Six months
ended,
|
For the periods ended
June 30,
|
2022
|
2021
|
2022
|
2021
|
Production and
processing costs
|
$22,718
|
$16,183
|
$48,088
|
$31,790
|
Royalty expense:
Government of Western Australia
|
635
|
412
|
1,224
|
779
|
Royalty expense:
Other
|
16
|
111
|
162
|
395
|
By-product
credits
|
(22)
|
(20)
|
(54)
|
(41)
|
Adjustment1
|
(7,100)
|
(6,290)
|
(12,773)
|
(13,066)
|
Operating costs
($)
|
$16,247
|
$10,396
|
$36,647
|
$19,857
|
Average exchange rate
(C$1 – US$1)
|
0.78
|
0.81
|
0.78
|
0.80
|
Operating cost
(US$)
|
$12,725
|
$8,465
|
$28,836
|
$15,926
|
Operating cost
(A$)
|
$17,827
|
$10,992
|
$40,059
|
$20,663
|
Ounces of gold
sold
|
11,258
|
7,421
|
21,416
|
14,214
|
Cash operating costs
per ounce sold (US$)
|
$1,130
|
$1,141
|
$1,346
|
$1,120
|
Cash operating costs
per ounce sold (A$)
|
$1,584
|
$1,481
|
$1,871
|
$1,454
|
|
|
|
|
|
|
|
|
|
|
1. Negative adjustment
for intercompany tolling transactions
|
Quarterly
Consolidated Mining Operations
|
|
For the three months
ended,
|
Jun 30,
2022
|
Mar 31,
2022
|
Dec 31,
2021
|
Sep 30,
2021
|
Jun 30,
2021
|
|
Production and
processing costs
|
$47,193
|
$48,109
|
$38,855
|
$36,149
|
$35,860
|
Royalty expense:
Government of Western Australia
|
1,853
|
1,597
|
1,780
|
1,679
|
1,700
|
Royalty expense:
Other
|
2,333
|
2,036
|
1,876
|
2,972
|
2,656
|
By-product
credits
|
(415)
|
(2,453)
|
(1,357)
|
(2,821)
|
(1,294)
|
Adjustment1
|
(7,100)
|
(5,673)
|
(6,341)
|
(5,641)
|
(6,290)
|
Operating costs
($)
|
$43,864
|
$43,616
|
$34,813
|
$32,338
|
$32,632
|
General and
administration expense – Australia3
|
1,908
|
2,232
|
2,503
|
1,916
|
2,762
|
Sustaining capital
expenditures
|
406
|
611
|
422
|
994
|
1,791
|
All-in sustaining
costs ($)
|
$46,178
|
$46,459
|
$37,738
|
$35,248
|
$37,185
|
Average exchange rate
(C$1 – US$1)
|
0.78
|
0.79
|
0.79
|
0.79
|
0.81
|
Operating costs
(US$)
|
$34,355
|
$34,447
|
$27,623
|
$25,665
|
$26,569
|
All-in sustaining
costs (US$)
|
$36,168
|
$36,693
|
$29,944
|
$27,975
|
$30,276
|
Operating costs
(A$)
|
$48,128
|
$47,534
|
$37,910
|
$34,941
|
$34,502
|
All-in sustaining
costs (A$)
|
$50,668
|
$50,632
|
$41,096
|
$38,085
|
$39,316
|
Ounces of gold
sold
|
30,398
|
26,286
|
28,734
|
28,935
|
30,412
|
Cash operating
costs per ounce sold (US$)
|
$1,130
|
$1,310
|
$961
|
$887
|
$874
|
All-in sustaining
cost per ounce sold (US$)
|
$1,190
|
$1,396
|
$1,042
|
$967
|
$996
|
Cash operating
costs per ounce sold (A$)2
|
$1,583
|
$1,808
|
$1,319
|
$1,208
|
$1,134
|
All-in sustaining
cost per ounce sold (A$)2
|
$1,667
|
$1,926
|
$1,430
|
$1,316
|
$1,293
|
1. Negative adjustment
for intercompany tolling transactions.
|
2. Quarterly costs in
functional currency.
|
3. G&A:
share-based payments were excluded in calculating AISC
|
Adjusted EBITDA and Adjusted
Earnings
Management believes that adjusted EBITDA and adjusted earnings
are valuable indicators of the Corporation's ability to generate
operating cash flows to fund working capital needs, service debt
obligations, and fund exploration and evaluation, and capital
expenditures. Adjusted EBITDA and adjusted earnings exclude the
impact of certain items and therefore is not necessarily indicative
of operating profit or cash flows from operating activities as
determined under IFRS. Other companies may calculate adjusted
EBITDA and adjusted earnings differently.
Adjusted EBITDA is a non-IFRS measure, which excludes the
following from comprehensive earnings (loss); income tax expense
(recovery); interest expense and other finance-related costs;
depreciation and amortization; non-cash other expenses, net;
non-cash impairment charges and reversals; non-cash portion of
share-based payments; acquisition costs; derivatives and foreign
exchange loss; sustainability initiatives.
(in thousands of
dollars except per share amounts)
|
Three Months
Ended
|
Six Months
Ended
|
For the periods ended
June 30,
|
2022
|
2021
|
2022
|
2021
|
Net earnings (loss) for
the period - as reported
|
$(328)
|
$5,391
|
$(4,037)
|
$11,015
|
Finance expense,
net
|
1,070
|
965
|
2,115
|
2,046
|
Income tax
expense
|
1,381
|
4,809
|
2,937
|
9,521
|
Depreciation and
amortization
|
13,689
|
7,718
|
22,443
|
15,001
|
EBITDA
|
15,812
|
18,883
|
23,458
|
37,583
|
Adjustments:
|
|
|
|
|
Non-cash share-based
payments1
|
(3,836)
|
2,308
|
1,932
|
3,450
|
Unrealized loss on
revaluation of marketable securities2
|
881
|
857
|
1,527
|
497
|
Other expense,
net2
|
249
|
-
|
228
|
15
|
Loss (gain) on
derivatives2
|
(827)
|
2,914
|
288
|
54
|
Foreign exchange
loss3
|
9,142
|
4,519
|
6,191
|
9,092
|
Sustainability
initiatives4
|
1,181
|
-
|
1,181
|
-
|
Adjusted
EBITDA
|
$22,602
|
$29,481
|
$34,805
|
$50,691
|
Weighted average number
of common shares - basic
|
157,838,797
|
146,801,153
|
156,149,243
|
146,529,214
|
Adjusted EBITDA per
share - basic
|
$0.14
|
$0.20
|
$0.22
|
$0.35
|
1. Primarily non-recurring items which do not impact
cash flow.
|
2. Non-operating in nature which does not impact
cash flows.
|
3. Primarily related to intercompany loans for which
the loss is unrealized.
|
4. Primarily related to non-recurring environmental
initiatives.
|
Adjusted earnings is a non-IFRS measure, which excludes the
following from comprehensive earnings (loss): non-cash portion of
share-based payments; revaluation of marketable securities;
derivatives and foreign exchange loss; tax effects of adjustments;
sustainability initiatives.
(in thousands of
dollars except per share amounts)
|
Three Months
Ended
|
Six Months
Ended
|
For the periods ended
June 30,
|
2022
|
2021
|
2022
|
2021
|
Net earnings (loss) for
the period - as reported
|
$(328)
|
$5,391
|
$(4,037)
|
$11,015
|
Non-cash share-based
payments1
|
(3,836)
|
2,308
|
1,932
|
3,450
|
Unrealized loss on
revaluation of marketable securities2
|
881
|
857
|
1,527
|
497
|
Loss (gain) on
derivatives 2
|
(827)
|
2,914
|
288
|
54
|
Foreign exchange
loss 3
|
9,142
|
4,519
|
6,191
|
9,092
|
Sustainability
initiatives 4
|
1,181
|
-
|
1,181
|
-
|
Tax impact of the above
adjusting items
|
(1,551)
|
(1,719)
|
(1,300)
|
(1,751)
|
Adjusted earnings
(loss)
|
$4,662
|
$14,270
|
$5,782
|
$22,357
|
Weighted average number
of common shares - basic
|
157,838,797
|
146,801,153
|
156,149,243
|
146,529,214
|
Adjusted earnings
(loss) per share - basic
|
$0.03
|
$0.10
|
$0.04
|
$0.15
|
1. Primarily
non-recurring items which do not impact cash
flow.
|
2. Non-operating in
nature which does not impact cash flows.
|
3. Primarily
related to intercompany loans for which the loss is
unrealized.
|
4. Primarily
related to non-recurring environmental
initiatives.
|
Working Capital
Working capital is calculated as current assets (including cash
and cash equivalents) less current liabilities.
(in thousands of
dollars)
|
Jun 30,
2022
|
Dec 31, 2021
|
Dec 31, 2020
|
Current
assets
|
$154,375
|
$135,426
|
$109,857
|
less: Current
liabilities
|
78,748
|
70,979
|
53,022
|
Working
Capital
|
$75,627
|
$64,447
|
$56,835
|
Compliance Statement (JORC 2012
and NI 43-101)
The disclosure of scientific and technical information contained
in this news release has been reviewed and approved by Stephen
Devlin, FAusIMM, Group Geologist, Karora Resources Inc., a
Qualified Person for the purposes of NI 43-101.
About Karora Resources
Karora is focused on increasing gold production to a targeted
range of 185,000-205,000 ounces by 2024 at its integrated Beta Hunt
Gold Mine and Higginsville Gold Operations ("HGO") in Western Australia. The Higginsville treatment
facility is a low-cost 1.6 Mtpa processing plant, which is fed at
capacity from Karora's underground Beta Hunt mine and Higginsville
mines. Karora recently acquired the 1.0 Mtpa Lakewood Mill in
Western Australia. At Beta Hunt, a
robust gold Mineral Resource and Reserve are hosted in multiple
gold shears, with gold intersections along a 4 km strike length
remaining open in multiple directions. HGO has a substantial
Mineral gold Resource and Reserve and prospective land package
totaling approximately 1,900 square kilometers. The Corporation
also owns the high grade Spargos Reward project, which came into
production in 2021. Karora has a strong Board and management team
focused on delivering shareholder value and responsible mining, as
demonstrated by Karora's commitment to reducing emissions across
its operations. Karora's common shares trade on the TSX under the
symbol KRR and also trade on the OTCQX market under the symbol
KRRGF.
Cautionary Statement Concerning
Forward-Looking Statements
This news release contains "forward-looking information"
including without limitation statements relating to the liquidity
and capital resources of Karora, production guidance, full year
consolidated 2022 production guidance and the potential of the Beta
Hunt Mine, Higginsville Gold Operation, the Aquarius Project, the
Spargos Gold Project, the commencement of mining at the Spargos
Gold Mine, the Lakewood Mill, and the completion of the resource
estimate.
Forward-looking statements involve known and unknown risks,
uncertainties and other factors which may cause the actual results,
performance or achievements of Karora to be materially different
from any future results, performance or achievements expressed or
implied by the forward-looking statements. Factors that could
affect the outcome include, among others: future prices and the
supply of metals; the results of drilling; inability to raise the
money necessary to incur the expenditures required to retain and
advance the properties; environmental liabilities (known and
unknown); general business, economic, competitive, political and
social uncertainties; results of exploration programs; accidents,
labour disputes and other risks of the mining industry; political
instability, terrorism, insurrection or war; or delays in obtaining
governmental approvals, projected cash operating costs, failure to
obtain regulatory or shareholder approvals. For a more detailed
discussion of such risks and other factors that could cause actual
results to differ materially from those expressed or implied by
such forward-looking statements, refer to Karora 's filings with
Canadian securities regulators, including the most recent Annual
Information Form, available on SEDAR at www.sedar.com.
Although Karora has attempted to identify important factors
that could cause actual actions, events or results to differ
materially from those described in forward-looking statements,
there may be other factors that cause actions, events or results to
differ from those anticipated, estimated or intended.
Forward-looking statements contained herein are made as of the date
of this news release and Karora disclaims any obligation to update
any forward-looking statements, whether as a result of new
information, future events or results or otherwise, except as
required by applicable securities laws.
SOURCE Karora Resources Inc.