Calidus Resources Limited (CAI) Earnings Call Transcript & Summary

Hello, and thanks for joining us for this Calidus Resources presentation. I'm Paul Armstrong from Read Corporate. Calidus is ramping up production at its Warrawoona gold project in the Pilbara. Calidus Managing Director, Dave Reeves, and his team have overcome some big challenges in building this project, not least of all COVID, labor shortages and of course, cost inflation across the industry. Calidus has published an updated presentation today, which is available on the ASX platform, and that will be part of today's presentation. Dave will now give a short presentation, and then he's happy to take questions. If you'd like to ask a question, please click on the Q&A tab on the side of your screen, and we will endeavor to put as many of those questions as we can to Dave once he finishes his presentation. Over to you, Dave.

Thanks very much, Paul, and good morning or good afternoon, everyone, and thank you for joining us on this webinar. It's going to be a pretty short and sweet webinar. I think the slides speak for themselves in general and really an opportunity for Q&A from everyone. So without further ado, let's tackle the 3 main areas we've been looking at, which is grade. So we saw a very good correlation between predicted grade at a 10% dilution to mill feed grade. And then we also, I suppose, the point on this slide that stands out is we did a trial of 2 days of low grade, then 2 days of what we call our peripheral loads which averaged about 0.6 grams. Just batched them through as want to see how they reconcile not just the main load and pleased to say that the reconciliation of those was also very good. So all in all, very happy with how we've maintained 10% dilution through November against our grade control model. The next big issue we're looking at is tonnes through the mill, so we milled 164,000 tonnes dry in November. That's 2 million tonnes per annum. Our target is, of course, 200,000 tonnes, which we're aiming to get to in January 2023. How we're doing that? We've got a water bore on site at the moment drilling 4 water bores that we'll be equipping and slowly introducing that water through December. In addition, we are upgrading the thickener. We're doing a temporary solution [indiscernible] in December, which will get us operating with that thickener in January as we do the more permanent final solution. But between those 2 initiatives, we see ourselves at full run rate in January. We also at sometime in late January should be intersecting water within the pit which obviously will only assist moving forwards as well. Just to show you what 40 mills of rainfall in 2 hours, we suddenly got a fair bit of water running to the tailings dam. And currently, for the first part of December, we have been milling at that 2.4 million tonnes per annum, which shows as soon as we get the water up to the mill, the mill can certainly operate. And as I say, 4 water bores going in as we speak slowly being plumbed in with that thickener, initial temporary job into a final position during January. We'll see us eliminating this bottleneck once and for all. Mining, we'll spend a bit more time on. Mining has been a bit of a constraint to date. We were budgeting on 550,000 cubes per month. But we have been looking at the availabilities and labor availabilities. So availability of machine and labor availability and what we believe is actually a sustainable run rate with Macmahon and the equipment we've got on site. So we're currently in the process of -- we're rescheduling the mine, bringing down our budget requirement of 550,000 cubes to 450,000 cubes. We can do this by essentially staging and scheduling the pit in a different way. It's the same pit, just doing it, if you like, a little bit smarter to even out our strip ratio over the life of mine and take the pressure off the mining fleet. We have had a week already in a row, over 45 degrees at Marble Bar. It's very tough on machinery and personnel, and we believe the 450,000 cube per month target is something we need to bake in as realistic. That keeps the mill fed at our 200,000 tonne a month, reduces cost by $1 million a month from budget and just spreads out that movement over the life of the mine. We are working with Macmahon's on some initiatives for better labor retention, better availability of that mine plan, and that really is our main focus now. We're pretty confident and comfortable where we are with grade. Comfortable where we are with the mill throughput already at 2.4 million tonnes per annum and extra water coming in as we speak. So really, our focus is turning to the last piece of the puzzle is making sure we've got a sustainable mining rate that delivers that 200,000 tonne per month now that the mill is doing that. So as I say, work in progress over the next couple of months, some new initiatives there to ensure we maintain at 450,000 cubes. But working with Macmahon, very confident that we will see that as a sustainable rate for the years to come. So really, that's a quick summary of where we are, pretty much in line of where we expect it to be, except slightly ahead of where we are at milling just because of that rainfall. By the end of this year with that water then locked in, really pretty happy with how we're set up for 2023. While on this call, though, I thought it would be good to just briefly touch on Blue Spec West drilling as well, looking a bit further afield and month-to-month as we have overcome the operational ramp-up challenges. Certainly, where we're looking to in the future, very excited with what we've seen out of Blue Spec West so far. The list just 2 holes the other day, the first hole 41 meters at 2.4 from near surface was a brilliant intercept for an area that's got no old workings and now drilling at all from the past. So a great job by the exploration team. And we're just looking at one little area at the moment, where we've done our first mount and drilling out over 1.5 kilometer strike length. So these are very wide spaced holes. Just trying to get a feel for what we are looking at out of Blue Spec West. If we zoom in a bit, there's multiple sheer zones and alteration zones stacking up together, which is great. You can really start to get some critical mass in tonnes and ounces per vertical meter when you see something like this. Really solid grade through that 41 at 2.4. It was carried by 1 meter at 30 grams, it was very consistent grade through that, which is good. Drilled a hole beneath it, we're seeing the same alteration. So we think we've got the plunge component or the dip component sorted out. And we're just waiting on more results to come in. All being well, we should get one more announcement out on this before Christmas, if not, early in the new year. I was up on site just a week ago, walking across the ground with our exploration geos. And certainly, it's quite impressive to see on the ground. And fingers crossed that we see some more of these results coming through. So as I said, pretty short and sweet and really here to take any questions because, as I said, I think the slides speak for themselves particularly on the grade, water is almost complete and really just focusing on sustainability and mining. So Paul, if there are any queries, let's get into them, shall we?

There are some questions, Dave. A couple of these you touched on, but let's just put them to you anyway, and you can perhaps elaborate. The first question was on the water. "Will the water issue be solved once and for all? Is there any issue finding water?"

No. So we did exploration drilling during November. That's allowed us to bring in the water rig for these 4 bores. That, together with the thickener work sees water solved. We are actually going to do more work on water just to bring in more redundancy for backup just in case the network is ongoing in the background with some dualization of pipelines over the coming months. But for the short term, water, we believe, by end of December is sorted.

Moving on to a slightly different flavor, Dave, M&A. "Any thoughts on doing acquisitions in the next couple of years and looking at stranded assets and the like?"

Look, absolutely in the areas, stranded assets make sense. Over the next couple of years, yes, absolutely. In the short term, definitely not. Focus, 100% on getting where we need to be on the mine, looking at our own exploration, spinning out lithium. We've got a lot on our plate, but #1 has been all focused on the mine.

Moving to the financials, Dave. A viewer has asked how the current production is impacting your financial position. Is Calidus breaking even, et cetera. Obviously, the gold prices are getting better. And of course, the question is, is there likely to be a capital raise?

So pretty well washing the face with the operation to a large degree. There are other costs and some washer development costs on bore fields, airport, interest rates, et cetera, but certainly no plans on a capital raise in the near term at all.

And what about repayments?

Yes. So we're working closely with the bank on that. They've been very supportive and flexible to date, understand that we've been working through these issues. And I think they see a clear line of sight as well into where we're heading.

Analyst Paul Howard, [ or should I put it as ] Paul Howard, an analyst saying, "Hi, Dave, would you say November was a good indicator for overall December quarter production?"

Paul, I love Paul and his questions, they're straight to the heart of it. Well, we've sort of put out where we were in October, you can see roughly where we were in November. Our tonnes will be up more so in December through the mill than we saw in November. As I said, we have dried up our blasted stocks with mining that we're working on recovering. So we are a bit hand to mount on the grade side, so we've just got to push on the map and make sure we're feeding what we want to feed, and we're working with Macmahon to make sure they catch back up to where they should be.

I suspect this is from a shareholder, Dave, given that he uses the term we, "Are we still a 90,000 ounce per annum project?"