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Calibre Mining Continues to Deliver Value and Invest for the Future

Dave Jackson Dave Jackson, Stockhouse
2 Comments| November 17, 2020

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(Click image to play video)

Being a “multi-asset gold producer” means a lot. With it, the Company owns and operates multiple mining operations that extracts, processes, mills and smelts the precious metal…a complete, autonomous turnkey operation from beginning to end. “Friends with everyone and aligned with no one”, as they like to say.

And one the industry’s best and most successful examples of this business model is Vancouver, BC-based Calibre Mining Corp. (CXB) (TSX: CXB, OTCQX: CXBMF, Forum) – a well-established exploration and gold mining company that’s been delivering exceptionally high-grade gold results from its two 100 percent-owned operational gold mines in Nicaragua.

The Company is focused on its 80,000-metre drilling program, which is currently operating 14 active drill rigs. This work consists of various infill, resource expansion, and discovery activities, while focusing on new targets that could quickly translate into organic growth and free cash flow, given a surplus in processing capacity at its Libertad project.

In this intriguing video podcast, Stockhouse Media’s Dave Jackson was joined by company Vice President of Corp. Development and IR, Ryan King, to talk about some of Calibre’s recent exciting news from their Central American exploration and mining operations, and their big plans going forward.

Transcription below:

SH: Ryan, to start off with, can you give our investors who might not be that familiar with mining in Nicaragua a little bit of history about the region and Calibre’s interests there?

Ryan King: For those that don't know Calibre has been in in country for over 10 years, actually from exploration now through to, to mine development, mine production. And we started to get interested in the region, I guess it was 2009. At the time our, our, one of our founders Douglas Forrester, who's a well-known entrepreneur and geologist in the space that has had many successes identified this as an opportunity and acquired a very large land package up in the Northern part of the country, which is known as the Borosi district and has had significant amount of past production from Falconbridge, Noranda. And these assets were mined decades ago. And it really demonstrates the opportunity in terms of geological potential there. So that's what brought us to Nicaragua. And over the last 10 years prior to acquiring these assets from B2 Gold you know, the ebb and flow of the resource market, you know, the cyclicality of the gold space up and down and over the last you know, call it 2013 or so through to basically 2019, we were in a, a bit of a drought for the gold market, a drought being, you know, sort of uninterested in, in the sector.

And so we kind of pivoted and, and Calibre became a bit of a prospect generator. We had partners coming in, earning in on different concessions that we had. And over the years we've had B2 Gold. We've had Centara, we've had IAMGold and I'll talk more about our, our most recent partner Rio Tinto. And then of course we acquired last year in 2019, we acquired these assets from B2 Gold and have now transitioned from exploration Calibre to exploration, mine development and gold producer in the country. So yeah, we liked the location, very strong mining legislation, supportive government. We've had there'll B2 Gold laid a very good foundation of modern mining in Nicaragua. They acquired these assets back in 2009, which spawned B2 Gold. And so we were fortunate enough to, to do a win-win deal with B2 in 2019 and become a gold producer in the country.

SH: Can you update our audience and your shareholders on your recent stock surge following what's clearly a very strong Q3 for both production and revenue growth?

Ryan King: Yeah, I think look, if we, if we take a step back here, you know, looking at the macro landscape for a second, when the gold price has risen over 30%, almost 30% in the last 12 months. So it's, it's been a very good time for gold investors for, for gold producers, as they're starting to see revenues, uptick because of the price of gold. You know, we had a strong quarter, our average realized price of the metal that we sold was $1,913. So obviously that's going to benefit the revenue, but yeah, we had a strong quarter. We produced over 45,000 ounces from Limon, and Libertad the two milling operations mining operations that we have. Our strongest record quarter so far as a, as a gold producer. And yeah, we had some very strong costs, sub $1,000 all in sustaining costs for the quarter as well.

So we generated over $30 million of free cash, cash added to the balance sheet in the quarter. You know, so, so it's a combination of how we look at these assets a little differently, which I'll explain and how we're operating the assets a little, a little differently to be able to focus on, on we'll call it production with a margin and really looking at the opportunities that we have within the landscape of these, these assets. So it all culminated together in Q3. And I think, you know, we're investing in the business where we're starting to see a real opportunity in front of us with these assets and with these gold prices generating some good revenue and free cash.

SH: Now, back in February, completing that aforementioned Rio Tinto partnership was a real eye-opener in the metals and mining investment community. Can you walk us through the deal and what it means for shareholders and would-be investors?

Click to enlargeRyan King: Yeah, that's a great question. The main, the discussions with various partners started months, if not almost years before we actually became a gold producer and acquired these assets from B2 Gold. So again, the deal with Rio Tinto is focused on the Borosi concessions, this is 876 square kilometer land package up in the Northern part of the country, which is still very connect, very well connected with roads and power, infrastructure. And when we showed this project to Rio and others months before we did the deal with B2 Gold they saw an opportunity there. And as we, as we executed CA’s and went through the process, I think at first you know, it was unknown. It was a new jurisdiction for them new geology, new opportunities. And that's who we dealt with in this, with this was their new opportunities department.

And you know, after a couple of site visits, reviews of all the technical data. And then of course, all of the due diligence that goes and comes with a major mining company going to a new jurisdiction, this was a brand new jurisdiction for them, which I think speaks volumes from my perspective, you know, they've done all this due diligence, not only on the country, on the infrastructure, on the government, but also it's a new, so again, a new jurisdiction. So they do all this due diligence. So I think it speaks volumes to the validity of the opportunity and that they've really validated this as a jurisdiction, they're willing to go and spend some money. They validated the geological potential within the suite of assets that we're doing the deal on. So the deal is, you know, as we announced in February, they can spend up to $45 million over the next 11 years to earn into 75% of these concessions.

And so specifically what, what we have presented to them and what I believe they're interested in is the copper gold porphyry potential. For those that don't know, porphyry systems are large generally lower grade bulk tonnage, copper and gold deposits that are intermingled and intertwined into one type of deposit. So they're often known as some of the best deposits in the world, in some cases, company makers, because they can be so good and because they produce copper and gold. So a really good opportunity. We've actually had a discovery of said type of deposit back in 2012 and 13. It did not grow to be large enough, but case in point as well as we, haven't had a lot of exploration beyond what we did in 2012 and 13, because of the metal price environment that we went through.

So in presenting this opportunity, they saw the opportunity there. And for those that do know, you know, one of our better grade drill intercepts was 280 meters grading 0.3 copper and 0.8 gold, right from surface. So this is this is a significant discovery. And as I mentioned, you know, there's infrastructure up there low rolling hills, back of a farmer's field. So a really good opportunity. So, you know, again, if you go through all the science this infrastructure, the fact that they want to invest into this country speaks volumes to the opportunity and the validity.

SH: Well, segueing back to the B2Gold deal. You just recently made your final acquisition payment. What are the advantages of this and what does it bring to Calibre?

Ryan King:
The advantages of paying off or the advantages of doing the deal?

SH: The acquisition itself…

Ryan King: The acquisition itself was very, very pivotal. Maybe what I'll do is I'll step back. You know, one of our last deals was called New Market Gold. This group came together back in 2014, 15. We acquired three producing gold assets in Australia because our founders saw a really good opportunity for mine optimization as well as geological upside. And we actually discovered one of the highest grade underground gold mines in the world known as Fosterville, which we actually came together and decided that we wanted to diversify the portfolio, we did so with Kirkland Lake, we financial engineered to deal, to create a better financial product backed by gold. And so we sold that company or merged it with Kirkland Lake. It was a 47/53 split on the, on the share ownership, post the deal.

And of course, Kirkland Lake, as many of your audience and investors would know in the gold space has gone on to do incredible returns for shareholders since 2017 early on when we completed that deal. So, and again, when I equate this back to Calibre, you know, we, we looked at many different opportunities with this team again, to try and replicate our success in the past. And we saw an opportunity with these assets in this country and underexplored region. And again, I mean, these assets were smaller and B2 Gold's portfolio. I think at the time when we did the deal probably worth less than four or 5% of their NAV, less than 8% of their production. And we saw an opportunity whereby that we could do a win-win deal so that we, we focus 120% on these producing assets. We saw good, a mine optimization and geological opportunities there.
And so that was the pivotal point, is that, can we get this deal done in a win-win fashion for both sides? And, and I think we were able to strike that really well and creatively for both sides. And now we're reinvesting, we're 120% focused on both of these assets. So we've transitioned from just an exploration company to now a mining, a gold producer that is generating good revenues to reinvest in the business and not have to go back to the market like a traditional exploration company would have to do so it's been a great success.

SH: Can we just quickly pivot back to the current projects that you were just talking about a little while ago there. Ryan, what are some of the things that investors should be looking out for moving forward?

Ryan King: Yeah, in particularly we've got an 80,000 meter infill resource expansion and discovery drill program ongoing within the concessions that we have at the Limon mine and mill operation, the Libertad mine and mill operation and our new development stage project for Pavon, which is going to come on stream in Q1 2021, so very soon here. From my perspective, that's very exciting, you know, any time, whether it's an exploration company or a gold producer finds new material, finds new resources finds new mineable resources that could add to organic growth. That's exciting. And I think that's an opportunity for us as Calibre is to find new in this under explored region where we have a, these two processing capacities, two processing facilities, Limon, and Libertad, and one of them Libertad is very under-utilized today. There's over a million tons of annual surplus capacity. So we've got this sunk capital here. And while we do this multi rig, I think we're up to 16 rig drill program. There's an opportunity for us to discover, delineate, permit and then truck down to the Libertad facility. So it's a very exciting opportunity for us. We regularly update the market with drill results and how, and as we've talked about how these operations are, are producing good amounts of gold and free cash flow to reinvest into this business.

SH: In a recent Stockhouse article, Ryan, we talked about the company's multi-asset business model. What are the core benefits to this big play strategy?

Ryan King: Yeah, that's a really fundamental shift that has happened since we acquired these assets. So previously they were, they were operated independent of each other. So Limon the mill and the mines they're operated independent of the Libertad operation, the Libertad facility. And in mines, what we did was we took a step back and we saw an opportunity where we could reduce for the time being some throughput, save some money. So our Chief Operating Officer, Darren Hall identified this opportunity. We, we idled down one of our ball mills, so we're saving almost $600,000 a month in that operation by doing that. But at the same time only seeing a De minimis reduction in the production annually. So a real, a real shift here of how we operate that. And then rather than having them in independent of each other, he saw an opportunity that you could integrate them because of the good infrastructure in the country, because of the favorable haulage costs between the operations, because Limon has excess resources and a smaller mill, so we can haul, we can mine, and we can haul it down to the Libertad facility process ore there and generate more production. And of course, then a higher cash flows and revenues. So a real opportunity of interlinking them together. That's the big difference here. Now we've got, you know, a total of 2.7 million tons of installed annual processing capacity, and we're one of the only gold producers in the region. So a real opportunity for us to take advantage of the processing through all the exploration we're doing and, and optimize the operation through that approach.

SH: Ryan, Calibre continues to post head-turning drill results. What really is the secret sauce here?

Ryan King: That's a great question. I mean, you know, I'd almost prefer to have our geological team answer some of these questions, but, you know, again, I kind of stepped back and, and in you know, I remember Doug Forester identifying the opportunity at New Market and saying, you know, there's a very good potential to find more gold and higher grade. And he was right. He was very successful in doing that and then finding a multi-million ounce, very high grade Fosterville gold deposit. Here again, Doug was very instrumental as a founder of Calibre identifying these types of opportunities. And he saw really good opportunities from the, from the geological setting that we're in. Saw opportunities where there had been, in some cases, not a lot of exploration, in some cases limited drilling and an endowment that has produced multimillion ounces of gold over decades.

You know, and what do they say often is some of the best places to find more gold is at a gold mine. Right. And you know, I, and I think that speaks to not only Doug's understanding of these types of geological systems who's experienced as well. And so, yeah, you're right. We've been finding some additional zones. We have been doing a lot of infill drilling and getting better than expected results. You know most recently with 150 grams over five meters, 50 grams over five meters. So some excellent drill results, but really, I got to say that, you know, B2 Gold laid a very good foundation. They did some good work there. So we're just following their footsteps and continuing to work hard work with the local communities and reinvest in these assets.

SH: Ryan, could you tell us about any new projects outside of the aforementioned that Calibre Mining has in development that might be of interest to investors?

Ryan King: For sure. Absolutely. And of course staying within the country because we see some good opportunities there. You know, as I mentioned originally what brought us there was these Boroci districts concessions, and one of them which we call the Eastern Borosi, it's 176 square kilometer land package. We had originally back in 2014, struck a deal with IAMGold whereby they could earn in at the asset level. So they spent $11 million. We did about 50,000 meters of drilling, you know, not a huge amount of drilling for these types of gold systems and outlined over 700,000 ounces of gold at 4.9 grams per ton. So great grades, some of these resources come right to surface. So there's potential for shallow high grade open pit mines. And this is a real opportunity for us now as a, as an operator in country with surplus capacity at our, at our mills.
So taking a fresh perspective of these assets as an operator is critical. So we were able to strike a deal with IAMGold back in August, where after they had earned into their 70%, we struck a deal whereby we could acquire that 70% back for some shares and an NSR. And that's an exciting, unique opportunity for us as an operator in the country, because now, you know, versus an exploration company that would require a $100 to $150 plus million in capital to build your own facility, we don't, we don't necessarily have to do that. And so this presents another opportunity where the Eastern Borosi project could become another spoke or slash satellite deposit that could come down to the Libertad facility and, and would be a great organic growth story for Calibre. More work needs to be done. But importantly, we see very good exploration, potential, tens of kilometers and low sulfidation veins ranging from 5, 10, 15 meters grading 5 to 10 grams per ton, gold. And we've, we've announced some of those results back in August as well. And those are all outside of the resource. So from my perspective, now that we own this a hundred percent, we're looking at this from an operator perspective, and that's a new opportunity for Calibre Mining.

SH: With gold hovering in and around the $2,000-an-ounce US price, can you discuss the long term strategy for the gold mining sector specifically in Central America moving into 2021 and beyond, Ryan, what should investors really be watching?

Ryan King: With the gold price hovering around $2,000 an ounce, our little sector here has not been getting a lot of attention. You know, big tech companies have. And when you step back and you look at, you know, at these gold prices, what's strong, focused businesses in the gold sector are doing? I'll just name a few, you know, Kinross, a number of them Barrick, Newmont, several of them reinvesting in the business, but generalist investors just aren't looking at this space yet. And I'm, and I feel like the longer we stay at these gold prices and, you know, the macro landscape is set up in such that we likely should, that it's only a matter of time before generalist investors are going to be looking at this sector as an incredibly cheap opportunity to get into the gold space.

I think it's a very exciting opportunity. And eventually this narrative is going to be shifting and people are going to begin to be looking back in 2019, 20, 21 and saying, I should have been getting into the gold sector at this point in time. Look, I don't have a crystal ball and I'm not going to forecast any gold price assumptions. I don't know where that's going to go. For us, it's focusing on our business. You know, we use a reserve and a reserve price of $1,400 per ounce gold. So we make sure that we have a good margin there in good, a good cushion between wherever the gold price may be and, and what we what we estimate our resources and reserves at. That's really critical and then reinvesting in the business for future growth. We're putting track in front of the train, if you will.

And, and making sure we have production with a margin and reinvesting in the business. And so with gold at $2,000 an ounce, yes, we are seeing higher revenues allowing us to reinvest in the business, but be very diligent and stewards of capital for our shareholders, making sure we have a share price returns and focusing on that, that's really important. I mean, you know, you look at the sins of the past and I think, I think the sector really learned from, from those from those times, and it's not just getting bigger for bigger’s sake, but being focused on good, good quality projects, reinvesting in them and growing businesses creatively on a share price perspective. That's the focus.

SH: You mentioned them briefly, but can you tell our audience a little bit more about your corporate management team, along with the experience and innovative ideas that they bring to the metals and mining space?

Ryan King: Yeah, that's a great question because I believe we've got a really unique situation. We've got some of our team…our chief executive officer Russell Ball had been at Newmont for over 20 years. One of the largest gold mining companies in the space, when he left Newmont, he was for a number of years, he had been the Chief Financial Officer overseeing over 19 mines around the world. So he's got that senior company understanding, but at the same time, he I guess he probably got fatigued of the bureaucracy and want it to be more entrepreneurial and, and see that when you do have drill results and you do find new, it can have a real material impact on valuations for a company. And so that was the pivot for, for Russell. I think that also at the same time, our Chief Operating Officer is, is really critical.

He also comes from Newmont. He was there over 25 years, Darren Hall. He worked in all different places around the world and countries around the world. Now I'm going to say he was a gentleman within the organization at Newmont that was identified as somebody that could see opportunities, whether it's cost savings, throughput opportunities, mine optimization, mill optimization, to be able to unlock further value for those individual business units within Newmont. So he had worked at, in Australia, he'd worked in Nevada, in Peru, in Indonesia, so many different places around the world, and he learned how to optimize those operations. He was our Chief Operating Officer at Newmont, which was turned out to be quite successful with his, with his assistance and the same here at Calibre. He was the one who identified and designed this new hub and spoke integration of the assets to be able to unlock more value.

And I think that's just, we're still in the early innings of that. I think there's much more opportunity. He continues to work with the team to identify additional cost savings and throughput opportunities, as well as new satellite deposits. And then at the same time, when you shift that the other founders, including Doug Forester, who's been in the sector for over 30 years, only as a, as an entrepreneur, starting new ventures, finding new deposits, selling them with his partner, Blaine Johnson. Who's our who's our Chairman of the Board has been involved in that partnership with Doug over decades in the M&A space raising capital and the capital market space. So we've got a very unique blend, if you will, of senior company executives that know how to successfully run businesses. And then the entrepreneurial side that have done it before acquired, sold and merged companies to create more shareholder value. So it's a great, it's a great mix.

SH: Well, finally, Ryan, what I like to call the million dollar question. What can you tell our investor audience regarding the current valuation of your stock and why it's a good value buy right now?

Ryan King: Oh yes. The million dollar, multi-million dollar question, right? Yes. Oh, for sure. I mean, when I stepped back and look at the space, I'm excited about the overall gold sector right now for various reasons. I mean, coming from guys like Ray Daleo multi multi-billion dollar funds looking at the sectors saying it's very under invested in, and, and of course then the macro landscape, you look at this whole macro landscape globally, putting the COVID 19 pandemic aside, you know, you just look at the debt levels and you look at the debasement of currencies around world, and you say, this is, this is very sad that this is happening, but it is good for hard assets and commodities, particularly gold. So from that perspective, I'm excited from, from the respect of, of putting that all aside and focusing on Calibre in the business.

As I mentioned, we've got a great blend of, of this team that have done it before, and that know how to operate businesses very well, to be able to cut costs and increase organic production as a growth company, which we are. And so, you know, it's only been 12 months and Calibre has seen some great returns over that last 12 months, but, you know, our focus is to continue to work hard, heads down, decrease costs, increased production. If we can look at organic growth opportunities within the business, because we do have a million tons of surplus processing capacity where the capital has been sunk. So anything new that we find that could be that could be fantastic, organic growth for the company without a huge amount of outlay of capital for a new processing plant or something like that. So that's a unique opportunity, I think, in our space while we generate good cash flows to reinvest in, to be able to have that opportunity, right, with the, with the production that we have. So early days drove results. We'll have meaningful impacts. I'm sure, because we're reinvesting in the business as mentioned before finding new or expanding, I think is a significant value add for the company as well. So lots of different triggers here and I believe the right sector. So it's a great opportunity for Calibre and Calibre shareholders.

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FULL DISCLOSURE: This is a paid article produced by Stockhouse Publishing.

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