Current situation for Karora as stock investment This week has not been a good one for KRRGF stock. The beating of 2020 upper guidance or 95,000oz with 99,000+ and then putting out 2021 guidance of 21% increase in production over 2020 guidance is again excellent execution by Karora. https://www.karoraresources.com/2021-01-19-Karora-Announces-21-Increase-in-Production-Guidance-for-2021-Following-Record-Annual-Production-of-99-249-ounces-Beating-2020-Guidance
Plus having $80 million cash as the end of the year shows that Karora has transformed under Huet from a company that had to raise money 3 times in one year into the opposite, a cash machine. Because of that cash machine they have boosted drilling budget for 2021 by 25%. And when they have drilled rather amazing amounts of gold was found and some very high grade nickel too.
The 2019 and 2020 drilling produced huge results. For the next few years it seems they can find as many millions of oz of gold as they want at very low finding cost. 2020 was
"Karora Announces 334% Increase In Proven And Probable Mineral Reserves To 1.33 Million Ounces And 167% Increase In Measured And Indicated Mineral Resources To 2.52 Million Ounces" https://www.karoraresources.com/2020-12-16-Karora-Announces-334-Increase-in-Proven-and-Probable-Mineral-Reserves-to-1-33-Million-Ounces-and-167-Increase-in-Measured-and-Indicated-Mineral-Resources-to-2-52-Million-Ounces
In 2021 four things should happen to make things even better.
1. Higher grade mines will be opened up. First "At Higginsville Central, where mining will be focused over the short and medium term, we have outlined a Reserve of 218,000 ounces at high open pit grades of 2.0g/t. This Reserve is backed by a high grade M&I Mineral Resource of 382,000 ounces at 2.8g/t, which we expect to be further bolstered by mid-2021 via the addition of feed from our high grade Spargos Reward open pit into the Higginsville plant." 2.0 and 2.8 gram open pits are superb, but Spargos will be even better with sections over 10 grams a ton. https://www.karoraresources.com/2020-11-18-Karora-Resources-Intersects-29-8-g-t-Gold-Over-19-0-Metres-and-27-3-g-t-Gold-Over-15-0-Metres-from-Initial-Drilling-at-Spargos-Project
Initial drill results1 within 100 metres of the surface have intersected new high grade gold intercepts at the Spargos Project. These include:
SPRC0026: 29.8 g/t over 19.0 metres, including 99.5 g/t over 5.0 metres
SPRC0012: 27.3 g/t over 15.0 metres, including 168.0 g/t over 1.3 metres
SPRC0019: 8.0 g/t over 19.0 metres, including 20.6 g/t over 2.0 metres
SPRC0028: 29.8 g/t over 3.0 metres
SPRC0032: 8.7g/t over 16.0 metres
2. Do not forget another high grade mine that will be opened up, Aquarius: https://www.karoraresources.com/2020-11-09-Karora-Provides-Update-on-2020-Drilling-Program-and-Announces-New-Regional-Mining-Strategy-for-Higginsville-Area
Recent drilling has extended both near-surface supergene and primary high grade mineralization at the Aquarius Project, outlining a potentially economic starter pit ahead of mining higher grades underground
Supergene mineralization1
KAQRC039: 43.5 g/t over 3.0 metres
KAQRC015: 5.7 g/t over 6.0 metres, including 14.6g/t over 2.0 metres
Primary mineralization1
KAQRC032: 4.7 g/t over 3.5 metres
KAQRC048: 4.0 g/t over 9.1 m, including 12.3g/t over 1.4 metres
3. The high grade nickel deposits recently found at Beta-Hunt are worth far more than the average gold deposit grade there. Last time looked at grades it was over $1,000 a ton for this new nickel find. https://www.karoraresources.com/2020-09-10-Karora-Announces-Further-Discoveries-at-Beta-Hunt-Mine-New-High-Grade-Larkin-Gold-Zone-and-30C-Nickel-Trough-Driving-Increase-to-2020-Exploration-Budget
4. Mill expansion. Everyone following the stock knows that Karora has a good problem, far more gold than their substantial mill they own can process. And that if they expanded mill production they could easily mine more gold. And there is automated ore sorting that can be done of top of that. Even though Covid hardly hurt their mining (unlike the majority of PM miners worldwide) and they exceeded there guidance anyway, it did bring their ore sorting project to a standstill, the equipment company withdrew their personnel. So 90% we would have had an ore sorter in 2020 if not for Covid. The ore sorter project is now back on track and I would say 90% in 2021 the mill will be expanded or a new mill will be bought. They are working on both.
And even prior critics of Karora have become fans of it as the execution has been so good. This is one example of that written last week here on Seeking Alpha https://seekingalpha.com/article/4400501-karora-resources-entering-new-year-reasonable-valuation
Karora Resources: Entering The New Year With A Very Reasonable Valuation
So how is the stock doing? This week not very good, it is down 4% while the GDXK is even. In spite of that Karora blows the GDXJ away if you look longer than last two days. Over the last 3 months the GDXJ is down 12% while Karora is up 3%, a 15% outperform. And for the last 52 weeks Karora and GDXJ mirrored each other almost perfectly until July 13 and since then Karora has blow the GDXJ away. Since then the GDXJ is up 20% and Karora is up 85%.
Have a good guess on why Karora stock has had a slack period here. It is that big nuggets have not been found in the quantity expected the last 5 months or so and many retail investors were in the stock just for that. Have even got a message last Friday from an investor that thanked me for all the info on Karora but that he was exiting because he was in for the nuggets. Did talk with company today and they said their Fund investors are buying more and they think the selling pressure is retail investors.
This is all understandable. My personal opinion is we were extremely lucky on Beta nuggets, in fact maybe the best luck any gold miner has had in years, but when the reentered the FDV area we had below average luck. We know from drill holes there are more than one extremely rich gold area. Away from their current workings their are amazing drill intercepts, so more exciting nugget pockets will be found, you just do not know when.
We also got one of the best mining deals ever with HGO acquisition of mill and land and have had exceedingly good luck on the 1,800 sqKM land package with it proving out to have a great deal of economic gold resources. With our AISC way down and gold price way up our cashflow has gone way up. Thrown in more gold and at higher grade in 2021 ignoring mill expansion and an ore sorter the cashflow will be even better, then with higher tonnage from expansion or mill capacity it goes on steroids.
It is still my largest position and I did add today at $2.76usd.
Cheers