General Precious Metals
Calibre Mining (TSX: CXB)(OTC: CXBMF) Senior VP Corporate Development Ryan King on Delivering Record Gold Production for Fourth Straight Quarter
Gerardo Del Real: This is Gerardo Del Real with Resource Stock Digest. Joining me today is the Senior VP of Corporate Development & Investor Relations for Calibre Mining — ‘Caliber’ for my English speaking friends — Mr. Ryan King. Ryan, it is an absolute pleasure to have you on. How are you today, sir?
Ryan King: Excellent, Gerardo. Thanks very much for having us on. I really look forward to this and I'm pleased to talk about an exciting story in front of us and what's unfolding.
Gerardo Del Real: Well, listen, let's get right to it. Typically, we've been fortunate enough to be able to work with groups and teams that we're familiar with and that we enjoy working with. And typically, we get approached by someone who wants us to help tell their story. And then, we go through that whole vetting process to see if it's a story with merit.
This was actually the opposite. I reached out because I see a breakout in the precious metals space. And we talked a bit off air that I think it’s going to be pretty sustained, and I think it's going to be really, really exciting.
I think the consolidation is nearing an endpoint. We've had some excellent [gold] prices. But Calibre is in such a perfect position not just to capture the upside of higher prices in a year or two years or three years but to capture that upside now.
So I wanted to get you on because I want you to just provide, one, a brief overview of the story, and, then, let's dig into the details about why I think Calibre is a standout gold stock for this market.
Ryan King: Yeah, I appreciate that. And, obviously, I concur. Calibre became a gold producer in Q4 of 2019.
And for those that may have followed some of our company’s ventures in the past, this same team, our CEO, our lead director, Douglas Forster, Chairman Blayne Johnson, myself, and the majority of this team were involved in a company called Newmarket Gold, which was a very analogous story in that we acquired production and we reinvested back into the assets.
Those assets were in Australia, and we made one of the highest grade underground gold discoveries in the world. And we then merged the company with Kirkland Lake Gold. And the stock went, basically, from when we started Newmarket trading at about C$0.50 and it went to C$5; we merged the company with Kirkland and then it went to C$70.
Of course, as we know, all ventures are not equal and not the same. But the primary focus here is you're dealing with a team that puts a lot of our own money into our deals. We focus on delivery and execution, and we stick with our deals through and through.
So Calibre is one of these ones that, again, we saw an opportunity where we could acquire gold production. We’ve restructured the company. We did a deal, a win-win deal, with B2Gold. So B2Gold owned these Central American assets.
We acquired them in Q4 2019 for C$100 million. And actually, everybody did a really smart deal in that we paid C$60 million in cash and we paid C$40 million in shares. So at that point in time, B2Gold became our largest shareholder because I believe they saw some good upside in opportunities in what we were looking to do.
And so in Q4 2019, we became a gold producer. And high level overview, long story short is we continue to invest from C$5 to C$10 million a quarter on exploration. We invest C$10 to C$20 million a quarter on mine development.
And we've now evolved the story to a pretty significant hub-and-spoke operation utilizing two process plants and great infrastructure in-country. And we've delivered on that. We've delivered for 16 quarters now since owning these assets.
And I'm proud to say that, since 2020, we've gone from 136,000 ounces to, this year, our guidance is 250,000 to 275,000 ounces. And we're actually tracking very well to the high end, if not above the high end, of our guidance. And so what's exciting about that is I talked a little bit about the reinvestment. This is all self-funded. We are investing through operating cash flow from the business.
So monies that are revenues that are coming in are helping fund the business to fund that 20% year-over-year growth. I think we've seen about a 370% increase in reserves since acquiring these assets. So it's a diligent, focused approach, and it's paying; we're seeing the benefit of that in the operations.
But at the same time, I look at a bunch of different metrics. One of them right in our presentation on slide two or three is Enterprise Value to Ounce of Production. And we trade at the low end of our peer group.
So this is why I think this presents a compelling opportunity. I’ve always said if you have success drilling, you've got operations, and you have a macro environment that's supportive and conducive to higher gold prices, which we're in, I think this is the time where we have so many people out there, so many investors out there, not looking at gold at all. And I think we're at a point in time in history where we could see this shifting significantly.
And you look across the landscape, and gold equities and gold are so under-owned in a portfolio, and I think this presents the opportunity. A company like Calibre, I think, we hit all the checkboxes, personally. Of course, I would say that because I'm an insider and an officer of the company. But I like what we're doing.
What's exciting about it is we still have growth upside. We continue to invest. Next year, I would envision — we haven't put out our guidance yet — but I would envision we'll have a similar production outlook next year. And we'll also do a significant amount of drilling, again, probably somewhere around 100,000 and 130,000 meters of drilling.
To give you an example, we've got 14 rigs operating across Central America and Nevada. So it's very exciting to be a part of that because that's a focus of ours is to reinvest in these businesses because that's what investors like. They like what is the upside of owning this. But here, you have a little bit more safety because we have operations, we've got numbers of years of mine life in front of us, and it's self-funded. So we've been growing our cash balance.
I'll give you an example, at the end of Q3 of this year, we're at C$97 million in cash. That's a 72% increase from the end of 2022. So we're not only investing but we're building cash of treasury in a very clean balance sheet as well. So really nice to be a part of this.
Gerardo Del Real: You mentioned the balance sheet, and you mentioned the production guidance. I think the upper range of that was roughly 275,000 ounces a year. What are your all-in sustaining costs on those ounces?
Listen, production is great. Clearly, you're profitable because you have a healthy and robust balance sheet that's self funding over 100,000 meters of drilling with 14 rigs across multiple jurisdictions. But how are the margins? What are your costs?
Ryan King: Well, right now, our financial results for Q3 are going to come out November 7th. Of course, we put out production and cash from the third quarter, which was, I think, a 26% increase in cash over Q2… so giving people a sense that, okay, there's a significant amount of cash increase or free cash flow from these operations. I don't know where we're at year-to-date but the guidance for the year is US$1,175 to US$1,275 all-in sustaining costs.
So I would imagine we're probably going to come in around the US$1,200 to US$1,225 range, thereabouts. So we're talking, as of today's prices, over US$700 an ounce margin on the production. So very robust.
And at the same time, people may say, ‘Well, Ryan, that US$1,175 to US$1,235, that's something on the higher end, isn't it?’ In fact, if we look at the spectrum across small producers all the way up to the large behemoth producers, the Bank of Montreal did a survey and an analysis on all-in sustaining costs across the business, and the average was US$1,250. So we're right at the average range.
And so everyone's feeling inflationary pressures, of course, through labor, through energy, this or that. But I think our business has done a really good job because we've got fairly high-grade operations. Some of our open pits range from 5 to 6 grams per tonne gold. So it can be very profitable.
Gerardo Del Real: What do the next couple of quarters look like? We can all reach for our calculators and do the math on for every US$100 that the gold price rises, or falls, you're going to be that much more profitable or that much less profitable.
But as far as the exploration upside in those 14 rigs and the multiple jurisdictions, what do the next couple of quarters look like catalyst wise outside of what I believe is going to be a much higher gold price?
Ryan King: Yeah, the third quarter here was the fourth consecutive record quarter of production for Calibre. So we've seen this nice staircase over several quarters now of increasing quarterly gold production. I would anticipate that, next year, it will actually end up probably being similar. There'll be a bit of focus on optimization of what we're currently doing.
But for us, the big potential is through the drill bit. In Central America, we own a significant amount of mineral concessions across the country. We've demonstrated that we haul material all around the country responsibly and transparently. And what's exciting to me is that Calibre still has over a million tonnes of surplus capacity. So we probably use 70% of our installed built processing capacity in-country.
And so discovering new areas or new satellite pits could lead to production growth, and that's the opportunity, and at a very low cost. We're not building new facilities, we're not building new huge tailings facilities. So the return on invested capital here is tremendous.
And I say that with hand over heart because, since 2020, I think we've gone through three or four significant EIA processes and a very transparent, significant amount of public consultations in working with local communities. And we've gone through, I think, five or six major permits outside of that.
So we've gone through the processes, we understand the mining legislation, and we work in the confines of that following international codes of conduct. And we've proven that we can go through those processes, work with communities, work with local government, and work with government in order to spawn new opportunities to spur on growth.
And with the additional surplus capacity, we're now looking further upfield and saying, ‘Okay, well what else could we do with our business to grow the business and focus on the bottom line and accretive growth?’
And so that's an opportunity for us right now. And that's why we invest heavily in exploration because we still have lots of room to grow from a milling capacity, which, of course, could lead to growth in production. And again, all self-funded organic growth.
Gerardo Del Real: You have a heck of a balance sheet. You have a ton of drilling going on. You're profitable. I believe your margins are going to continue to increase via a higher gold price. And then, look, the exploration upside is absolutely top-notch. Ryan, it's been great having you on. Anything else you'd like to add?
Ryan King: Well, we haven't talked too much about our second jurisdiction, Nevada. Of course, everybody's familiar with that jurisdiction. And I would just say that we grew reserves last year. We've made a new discovery at our operating mine there.
And 15 km away from that operating mine we have a development stage project that is federally permitted. And we also have, right around the corner here, within the next three to six months, we should have state permits.
And so we're now working through final technical studies to see what that project could look like. So a very robust portfolio; Central America, Nevada, and Washington. And the company is focused on delivering returns for shareholders as we just announced a normal course issue of bid, in fact.
So a little tidbit at the end there for you, Gerardo. I think that's important because not only are we heavily investing back into the assets and growing our cash balance but we also have the opportunity to take advantage to return capital to shareholders through an NCIB over the next 12 months.
So, exciting times for us. And as you say, as the gold price goes up, it's going to be more robust for good operations like what we've been delivering.
Gerardo Del Real: Well, I know the Calibre team will be at the New Orleans Investment Conference, as will I. Looking forward to catching up in person. I encourage anybody that's out there to please stop by and say hello to myself and say hello to Ryan and the Calibre team at their booth.
Thank you so much for your time, Ryan. Let's do this again soon.
Ryan King: Look forward to it. Thanks a lot.Click here to see more from Calibre Mining