Karora Resources Inc (KRRGF)

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New CRUX writeup on KRRGF https://cruxinvestor.com/opinions/karora-resources-inc-tsx-krr-turnaround-story-gets-a-new-identity-more/

Karora Resources Inc. (TSX: KRR) – Turnaround Story gets a New Identity & More by Charlie Hancox, Crux Contributer @CRUXinvestor Jul. 10th '20.
cruxinvestor.com/...
« It’s hard to believe this is the same company that we looked at 1 year ago. When Paul Huet became the CEO on July 18th 2020, the company was in disarray. The Royal Nickel Company was a conundrum. Was it a nickel company? Was it a gold company? Given it didn’t it have any money, why was it spending $50M on a mill?
In just over a year, RNC Minerals has changed from an unfocussed, floundering nickel developer to a +100,000oz gold producer with significant exploration upside potential and a revamped balance sheet that didn’t even look possible. It’s churning off cash, it owns a mill, and it has c. C$40M in the bank with an AISC reducing quarter over quarter and an improved operational management team on the ground. From playing hardball with Maverix Metals over the Beta Hunt royalty, to acquiring Spargos Reward, to renegotiating and then eliminating Morgan Stanley’s NSR royalty on HGO operations, to a sensible 11:1 rollback, to bringing a focus on gold to the company by ramping up production and exploration, to a new ore sorter to increase grade through the mill, to a funded exploration programme…. Huet has done a truly exemplary job, and the much-publicised coarse gold hasn’t even been factored in yet.
With so much profit added to the company’s bottom line, there has only been one thing missing; however, it’s the most important thing of all: share price growth. Karora Resources has managed to continue hitting targets, even with national Australian bushfires and COVID-19 creating major disruption. I like management that does exactly what they say they will do. It inspires a feeling of confidence and trust. After a year of delivering on promises, I trust Huet to pilot the company into a period of growth.

As of June 17th 2020, RNC Minerals officially began trading under the banner of Karora Resources (TSX: KRR). It certainly needed to change, as institutional and gold funds still viewed RNC Minerals as Royal Nickel Company, regardless of Huet’s transparent dialogue with the market. The new name had originally divided opinion, with many investors wondering if ‘Karora Gold Resources’ may have given a more specific signal to the market of the company’s new focus. However, I was a fan from the get-go. While the 28%-owned Dumont nickel resource is no longer a core asset, it’s an exceptional nickel resource that provides good optionality for Karora Resources when the wave of EV demand begins to surge and battery metal prices rise. That said, I’d like to see RNC cash in Dumont sooner rather than later and use the capital to focus on developing the gold in Australia. In this bull gold environment, I’d take money in hand now rather than optionality in the future. The new name does well to distance the company from its confused legacy, while not entirely eradicating the company’s multifaceted, multi-commodity nature.
What does this name change really mean for the company though? What is this signal? If investors read between the lines, they will likely realise that it marks the end of an era: Karora Resources’ turnaround phase is over. This is positive for shareholders for a variety of reasons. Firstly, it demonstrates Huet’s confidence that the company has finally distanced itself from the problems of yesteryear. In addition, the new brand has been well-received by the market: trading volumes are up and a new raft of institutional shareholders is steadying the erratic, sentiment-driven short-selling. Lastly, it shows that Karora Resources’ focus is no longer solely on rectification and stabilising. Instead, the focus is on growth; that can only be good news for long-term shareholders who have seen little reward for years of patience. This is a new era: an era of growth. It’s time to see some accretive value after years in the doldrums.
What catalyst moments can investors look towards with anticipation in 2020? The high-grade, open-pit Spargos Reward will be fast-tracked into the production pipeline, adding meaningful higher-grade ounces to the company’s mill. It’s just 45Km from Karora Resources’ plant. Moreover, the recently announced Maverix Metals royalty renegotiation on Beta Hunt frees up the company to get back to mining at Beta Hunt again. It has been well received by the market as the company had already paid over A$30M in royalties since it acquired Beta Hunt. Spargos Reward has over 130,000oz gold in the resource at an average of 3g/t in an open pit. These are exciting times if Huet can deliver.
Furthermore, the company is well on track to exceed its guidance for 2020: no mean feat under what has been a difficult start to the year with the Australian bush fires, then torrential rains and COVID-19. I expect that with cash in the bank, investors can expect to see significant exploration this year, combined with more potential M&A. And did I mention the ore sorter? That should remove 20-30% or the ore, thus increasing the grade throughput at the mill. More margin. More cash. Feels good to be in gold doesn’t it. »