Kodiak Copper Corp. (KDK) Earnings Call Transcript & Summary

Hello, everyone. My name is Knox Henderson, Investor Relations for Kodiak Copper, and thank you for joining us on our first webinar. With me today is our President and CEO, Claudia Tornquist; and our Vice President, Exploration, Jeff Ward. Thanks again for joining us. We will be making some forward-looking statements, so we exercise caution and ask you to do your own due diligence and consult a professional adviser. So with that, I will turn over the webinar to Claudia Tornquist. Thank you.

Thank you, Knox. Good morning, everyone. I hope you all and your loved ones well and healthy and safe in these challenging and very fast-moving times. I'm happy to report that our small Kodiak team, we are all healthy, we're all well, not too much impacted by the virus, fortunately. Business-wise, it's very much business as usual. We are fortunate in that in BC, exploration has been classed an essential business. So we can -- we are not impacted by any lockdowns and can just progress with our work as we had planned. We are financed. We just closed a financing, so we have a full treasury. So we're in a good position in these difficult times. The big news, obviously, this year, this week is our name change to Kodiak Copper. We've worked furiously and all our new website, social media channels, everything is up now, so check it out. You might wonder what's behind the name Kodiak Copper. We picked that name in honor of our founder and Chairman, Chris Taylor, who's also Founder and CEO of Great Bear, which is obviously one of the great exploration successes in Canada in the last 2 years, a major gold discovery. And Kodiak, as many of you well know, is a bear species, a large bear in North America. And yes, that's the connection that's really in honor of Chris and his success with Great Bear. And a little tidbit, our new logo, when we went out and looked for a logo to -- for our new company name, we got a couple of suggestions from a graphic designer. But the logo we eventually picked was designed from Jeff Ward, our VP Exploration, who's also on the call, who've made the nicest design that we eventually -- eventually picked. And we are now thinking of promoting him from VP Exploration to also VP Graphic Design as per needed. So thank you, Jeff, for the nice logo.

You're welcome.

A quick elevator pitch of what the [ meaning ] is about. Great Bear is our sister company. And Chris is often asked what's the next deal. And really Kodiak is as close as it can get. Both companies are founded by Chris. Both companies, he's very intimately involved on the technical side. He is a great geologist, great technical mind. Kodiak has, in many ways, the same strategy as Great Bear, mirrored to the copper space. Both companies look for previously explored, under-explored, maybe misunderstood assets, projects that have been done in the past but aren't figured out yet. And importantly, those projects have to be in good locations, i.e., in safe jurisdictions, Canada, in our case and the U.S., and also with great infrastructure. Great Bear's Dixie Project is right off the highway, and so are our 2 new copper projects were literally meters off the highway, very accessible and very, very good infrastructure. The strategy worked right off the bat with our first drill program. Last year, we were able to make a discovery. We drilled a great discovery hole now called the Gate Zone at our MPD copper-gold project in Southern BC. We only did a very small drill program, 3 holes only, but we were able to drill the best hole in the 50-year history of the project, and we're obviously very pleased with that. Very importantly, we have a strong balance sheet and are well positioned to weather the storm, however long it lasts. We were able to close the financing just now in March, and I'm very, very grateful to our investors who stood by us and trusted us and enabled us to close this financing of $2.8 million. So we're now in a good position, we can move forward and we don't have to worry about raising funds anytime soon. And I think that's a very desirable position to be in, that many of our peers are not. As I said, our business is not impacted at this point by the coronavirus, and we have a drill program planned at MPD to follow up on our initial discovery. That should be a very exciting drill program and we have a good chance to generate some more good results and discoveries, and we'll talk more about this later in this presentation. Not to forget, MPD, our most advanced project, is not our only project. We have 2 other porphyry projects that are equally as promising and have equally as much discovery potential in our portfolio. That's Mohave in Arizona, which we also -- where we're also ready to drill and can drill later in the summer if we so choose. And we have also the Trapper project, which is also a copper-gold porphyry. It was actually drilled by Chris Taylor in 2011. It's a project up in the Golden Triangle. And at the time, Chris' company jumped to a market cap from pretty much nothing to $80 million on the back of those drill results. So our Trapper project also, in its own right, an interesting project. Portfolio of 3 copper-gold porphyries. Last but not least, we are a member of the Discovery Group, put together by John Robins. John Robins, as I'm sure many of you know, a very well-respected mining entrepreneur with a fabulous track record in Canada. And we are very fortunate, I think, to be part of such a well-known, well-respected group. It gives us a lot of credibility. John invited us to group because he believes in the team, in the projects we have. And being part of this group gives us incredible access to information, to good people, to financing contacts. And it's -- we are so much stronger as part of this group than we would be out there just as a small exploration company on our own. Couple more words about MPD, our project that we are currently working on or planning to drill. This map shows the location. You see in the little inset at the bottom, we are in Southern BC. The project is not even a 3 hours' drive from Vancouver and it is situated between two of the largest copper mines in Canada, Highland Valley to the north and Copper Mountain to the south. Other point I'd like you to take away from this slide is we have a large land package, 78 square kilometers in total. And this project is consolidated from three smaller projects that were adjacent and have been explored for over 50 years, but never in recent times as one project. So we now have, for the first time, the opportunity to look at the entire picture. This shows the claims in more detail. Most important point to take away is you see a highway at the top of the map, 97C. At the bottom left, another highway, 5A. It's less than a kilometer from the highway to our property and a lot of logging roads on the property as well. There's a transmission line that you see in the picture, there's water. So infrastructure is as good as it gets. And I will tell a story. Our drill contractor was from Peachland, just the town down the road. And he literally packed the drill rig on the back of the truck and drove right through the drill pad and drove home to his family in the evening. That's obviously a great cost advantage now for exploration. And then later to make this project eventually economic, it just has to make a much lower hurdle than same -- a similar project that would have to take further north or further remote. And also very importantly, in these times where we have all the coronavirus-related restrictions, it's a big advantage to be local, not to have to fly in to be able to drive there, work with local people and it's a great advantage to us. It's one of the key reasons why we really like this project. These are the historic drill results. As I said, the project has been drilled for 50 years almost since the '60s. I won't bore you with the details. The key takeaway from here is that a lot of copper, a lot of gold, some very good gold values have been found over a large area and square kilometers. In total, there were 129 drill holes. And the important thing here is they were almost all very shallow and down to 200 meters at the most. That's very typically how you would have explored for porphyries 20 years ago, 50 years ago. It's only relatively recent that companies drilled deeper. And that's really the opportunity Chris saw when he looked at this project. When he visited the site and looked at the results, he said, we have to look deeper. That's where the potential is, and that's what we did in our first drill program. And this is what we had. You see on the left side, the vertical hole, Gate Zone, that's the hole we drilled last year in November and we came out with the results this year in January. It was a hole down to 800 meters. It was mineralized top to bottom. The total intercept is the 763 meters of 0.28% copper equivalent. And very importantly, within this long mineralized intercept, there were much higher grade intercepts, such as here at the bottom left, 102 meters of 0.68% copper equivalent; just above, 210 meters of 0.52% copper equivalent. And these are very exciting grades. Just to put that into perspective, the 2 neighboring mines, Copper Mountain, has a reserve grade and mines a grade of 0.23% copper. And the other mine, Highland Valley, 0.3% copper. So that puts the base we have here in perspective. And yes, these nice long intercepts of 0.68%, 0.52% copper equivalent are very, very exciting and much better than what was drilled historically on this property and also compare very favorable to the neighboring mines. So a great start. Lots more to be done, a lot more promise. On this slide, you see our property and the three historic areas, Prime, Man and Dillard. In total, this is a 10-square kilometer area. All these black dots are the historic holes, all only -- almost all only down to 200 meters. And you see here in the left corner of the Prime zone that Gate discovery that we made. And so we now have this whole area of 10 square kilometers where we have shallow drilling, where we have shallow geophysics, beautiful anomalies. And our next step will be now to find the best targets here to drill deeper and see what else we can find. So far, all the deeper holes that were drilled have intercepted good mineralization, in particular, our Gate Zone hole. And this discovery has kicked the door wide open for further good results. And our next steps will be to now fly a small geophysics survey that will allow us to look deeper into the ground, down to 1,000 meters. And then that's going to happen in April. We're just waiting for suitable weather conditions. And then after that, in May, June, we have our drill program on the cards. And I'll hand over to Jeff, who can explain much better than I can what we are planning with this upcoming work.

As Claudia mentioned, we've been sort of not really affected that much in this Q1. We've proceeded as we normally would, sort of integrating the data. Some of the image that you see here, this is early IP anomalies, sort of a patchwork of geophysics. And so we've been putting that together and also putting together the soil geophysics -- sorry, soil geochemical data over the same area. And as we integrate that, we're coming up with a plan for 2020. We were hoping to get about 4,000 -- up to about 4,000 meters drilled, particularly focusing on -- the obvious part is we now have this data, we will get some guidance from the airborne, but really we need to start at the Gate Zone. That's the best intercept on the property to date, as Claudia mentioned, in 50 years. We're going to start following up in that area using the rework data sets and the rework IP in inversion as well as the airborne survey data. And we're going to move out from that Gate Zone and step out from that single vertical hole we have and see if we can move this thing along strike and up dip and start to see with more holes, you'll get a structural context, you'll be able to use the airborne infrastructural context as well, and we'll move out from there and start to figure out where we are in the system. Is it bigger systems? Is it multiple centers? And use that as sort of our model because it is a great place to start. It's the best hole on the property. Once we have got some holes into that, we start to be able to work off of that. We hope to take that analog and reproduce what we did last year, which was to take that model and move over to Dillard. We'll have not only the airborne, but more holes at Gate Zone, plus with more results. And then go over to Dillard, because Dillard is a similar thing where Fjordland have done some good work, but most of the holes over there are shallow as well. They -- I think there's only a handful that go down to about 300 meters. The IP data doesn't go below 150 meters to 300 meters. So we'll benefit over there from the airborne. The airborne survey that we're doing is going to see down 1,000 meters, so almost a kilometer. So we'll be able to have not only the drill data set, but we'll have a geophysical data set at the same time. That will start to tell us where to go and where we are in the systems. And so certainly, we'll start at Gate. We'll move over to Dillard with a better toolkit of geophysics and drilling and chemistry and everything. And then we'll be able to start moving out from there. And that will give us some guidance on where to go for the rest of the property. So certainly, start with what you know, go to where the next data sets is, similar things are happening and then you'll spread out across the property. And the great thing is we've got -- you can see from these circles, you've got 4 good circles there, where there's been some work done, but we're benefiting from that work and now being able to look at it in a new context.

I'm very excited to get to work on that. We'll have a larger program, more holes, and we have a lot more information than what we had in our first program, particularly with these deep geophysics that will show us how these beautiful anomalies, how they expand the depth. So we should be able to define some very exciting targets and then generate, hopefully, some good results. I think we'll have a very good kick at the can here. Lastly, our share chart and capital structure. As we just did a rollback, we now have a very nice and tight share structure, only 36.6 million shares outstanding. That's obviously a plus. And the feedback I'm getting from our shareholder is overwhelmingly very, very positive. They like this tight share structure. Our share price at $0.23 is obviously not where we want to see it. It's very depressed, like most everybody else's. You look at our insider filings, you'll see that many of our -- or several of our insiders, including myself, have been buying heavily. We see the current price, share price, as a cheap entry point. Obviously, that coronavirus hasn't changed anything in the underlying quality of our assets and the promise and the new discovery opportunity that we have here. We do have a strong balance sheet, so we can weather the storm, we can weather the downturn. And we are in a position that we can continue our work and move forward. Many of our peers, as I had before, are not in that position. So I think we are in a very good position to come out of this strongly. How long this storm will take, very, very hard to say. I'm cautiously optimistic. What we know is all dynamics are temporary. It will be difficult for some time, but history is the guide. Life will be back to normal eventually. How long will that take? Looking at China, where now, after only 3 months, the economy starts humming again, life is going closer back to normal. That gives me some optimism that come the summer, come when we are planning to drill and will have results, that life will be much different and the economy will look much different than what it is now, where we're still in the midst of this pandemic. So I'm cautiously optimistic. Obviously, we don't have control over economy, over the market. But we do have control over our work. We'll continue to do good work. And we'll be ready with, hopefully, more discoveries when the market returns and then make a very strong comeback. So that's it in a nutshell. We are open for questions. I know Knox received some questions already from you. If you have more, please submit, and I will be -- we'll be very happy to answer them.

Okay. Thank you, Claudia. Actually, do you want to go to that last slide? I like that pretty picture of the core in there, the very last slide. There you go. [Operator Instructions] I'll just give it a minute or so to see what's coming in, and we'll quickly cover those off between Claudia and Jeff. So just give me 1 minute. Awkward silence. Okay. We've got one coming in. What about Kahuna, Claudia? Some people are asking, now that we're a copper company, we've completely morphed into a copper company, what about our diamond assets in Kahuna? Kahuna in Nunavut?

Yes. Good question. We have the Kahuna project. We still like it. It's, at this time, a noncore project. We are not spending any money on it. We are in a very fortunate position that we don't have any expenditures this year to keep the project. So it's in good standing, and we don't need to spend any dollars on it. We are looking at opportunities, transaction opportunities, selling it, joint venturing it and have our feelers out for that. And as and when something comes to fruition, we will announce.

Okay. I've got another question in from [ Dale Jackson ]. Dale, I'm going to allow you to talk. Can you -- can you -- do you want to ask your question? Dale?

I can see a mute sign on Dale's screen.

On mute. Yes, I'm trying to unmute it, it's not doing that.

At the top right corner of the screen, there's a button to unmute.

There we are. Dale is able talk now.

Okay. Can you hear me?

Yes.

There we go. All right. Did I see something in the last couple of days about the coronavirus germs not being able to live on copper.

Dale, I can't hear you very well. Can you speak a little bit louder?

Can you hear me now?

Yes, I can. Thank you.

Okay. Did I see something over the last few days about the coronavirus not being able to live on copper?

Yes, there have been a number of articles about the antiviral, antibacterial properties of copper. That was discovered many hundred years ago when, in historic times, doctors noticed that people working with copper, the smiths, et cetera, didn't get any infections. And copper is very -- has very strong antiviral, antibacterial properties. And viruses can only survive for I think 4 hours on it. That's why, historically, many implements in hospitals were made from copper. And that's obviously a big benefit there. Masks, face masks being made with copper in them now. And yes, but I'm very pleased to see this news being written. That's obviously a positive for copper and hopefully will give a little bit of support to the copper price as well.

Well, in the days ahead, this should be. That should work out as sort of a major positive bullet point characteristic of copper itself. The world having gone through this pandemic, and hopefully, going -- finishing going through it soon. And then I want to ask you one other question about your business plan. As you are proving up these assets, will you be looking for a joint venture partner? Or what are your thoughts? What are your goals?

Well, if you look at porphyry mines that are in production, they are typically very large mines, i.e., mines that cost many hundreds of millions, if not billions, to build and have lives that last decades where they generate hundreds of millions of cash every year. So they are large, large mines. Porphyries, by their natures, are large deposits that then become large mine, if you can make them work. So keeping that in mind, the mines that are on this planet, they are porphyry mines and mostly run by big companies. The Rio Tintos, BHPs, Antofagastas, Glencores, et cetera, of this world. And so I think the likely scenario is that we have more drill success that eventually, a bigger player will come in, in some shape or form, whether that's a sale of the project of the company or a joint venture. Some way, a bigger player would come in. And our job or our aim is obviously to maximize the value of our projects with the drill bit, with making more discoveries. So we eventually then have a big price tag on the company. I think Great Bear, our sister company, is a very good example. 2 years ago, Great Bear was very much where we are now, had an initial discovery hole, an initial hole, had a nice bump in the share price, raised more money, drilled more, had a big, big, big jump in the share price, a real rally, and is now -- has now the largest drill program in Canada and over $20 million in cash in the treasury. And [ essentially ] has drilled out a deposit that, in my opinion, must be on the shopping list of every major gold company on this planet. So that's really what success would look for us, too, but obviously, in the copper space.

Another question that we have, Claudia, could you compare the grades again that you -- that we've made at the MPD project versus the surrounding mines and other mines in the area?

Yes. Let me just go back to the relevant slide here. So this is the discovery hole we drilled. And the overall intercept over the entire length of the hole was 0.28% copper equivalent. The average grade mined in Canada, copper grade, is 0.33%. Keep in mind, that includes smaller, higher-grade underground mines as well. The neighboring mines, as I said before, Highland Valley is 0.3% copper. And Copper Mountain in the south is 0.23% copper. And that's their reserve grade. So with our 0.28% copper equivalent for the entire drill length, that's round about in that area. And what got us very excited is that we have long intercepts of almost twice that grade, up to 0.68% copper equivalent, and that's obviously great. I sometimes get asked, what about this 1% copper mines? That -- wouldn't a good mine have 1% copper or so? But those days are long over. It used to be even 20, 30 years ago, that you were looking for much higher grade. But in copper, more so than in other commodities, grades have really, really declined. And yes, Canada, 0.3%, 0.33% copper equivalent. I think the U.S. is slightly below, also around 0.3%. And the only higher rate larger mine are in higher-risk jurisdictions, for example, in Congo, there is a large copper mine being built there. That one has higher grade but obviously, you have to balance then the jurisdictional risk of mining in the Congo.

And actually, to your point, I seem to recall around the Vancouver Resource Conference when we put this news out, we had a lot of interest from of a lot of the majors when we put these numbers out.

Yes. We had. That was actually quite interesting. When we put these results out, I had lots of geologists congratulate us. And we had, I think, in the 2 weeks after the results came out, 6 major companies to our offices wanting to look at what we did, look at our results, [ sign TAs ], et cetera. So people who know their porphyries like the results. At the time, the market didn't react particularly well. That was already the start of when copper -- the copper price declined and the coronavirus just came in. So yes, we didn't get the market reaction that we hoped, but those people who really know their porphyries, they like what they saw. One of the majors who we talked to, the team, I remember the guy saying, "Well it looks you're on to something." And I thought that was a great comment, very encouraging to me. And yes, I think that's how we feel about these initial results. We have a great start, and onwards and upwards from here.

I have another question. The name is [ Xperia Z5 Premium ]. That's an interesting name, but I'm going to allow you to talk.

That's me.

Okay.

My name is [ Nils ]. I was wondering, which horizon do you think you need to provide the information so big buyers are interested in the project?

So what will we need to achieve still so a big company would be interested in the project, is your question?

Which horizon? Which timeline?

So I'm not sure I understood the question, please.

Which time path? So how many -- how much...

Drill the holes, et cetera, how much...

Oh, I see.

Yes. How much do we need to prove up?

Sorry for being a bit slow to understand. Well, that's a difficult question. And I think that can vary. Again, Great Bear, our sister company, is probably a good example. They've been drilling now for 2 years on a large system. And they definitely have now something where they have people knocking on their door. So a year or 2 of more work is probably what you're looking at. But yes, as I said, it can be very different for different projects.

Thank you for that question. Actually, we have this other one come in. What is the drilling strategy in the next campaign? Jeff, I know you did touch on drilling, but that's the question. What is the drilling strategy in the next campaign?

Well, I think it's important to point out, I mean, we were -- this was the first maiden drill program that the company had done, and we benefited from tuning on the data, we're integrating sort of what had devulcanized by other companies and sort of picked our best couple of holes, or our best priority holes to start to figure it out. And we're -- our challenge right now is to look at this as a bigger picture rather than all the several companies that had, had it before. So we really only have a one hole into our -- the best on average drilled on the property, so our strategy is to take and learn from that and look at it from a bigger picture. So we need to -- there's never been any airborne flown on the property. That's why we need that. These are basic data sets to tell you the structure, lithologies, depth of responses. Then you can put the older work into a better context and what you need with that is also drill core. There -- we only -- when we got this, there's 3 zones. 3 zones to date have been -- had been identified over the property: the Man, the Prime and the Dillard, and they'd only been really evaluated to shallow depths. There was no core leftover from any of it, except for the Dillard, which Fjordland had done a good job and retained some of that. So we can use that and integrate it with the rest. We need to get some core from the best area now, which is the Prime, and maybe a bit from the Man, and start to put that into context because then you start to build your data sets together. Then -- and porphyry is important. You need to know the [ alteration ], you need to know the mineralized packages, and you need to see how you can identify those geochemically and geophysically. Geophysically, we're going to do that in the next month or so, to fly the airborne. Geochemically is something that we'd like to start filling in the gaps during the summer, and we already have put all together all these multiple soil grids. And it shows these broad areas are coinciding with the drilling. So the drilling strategy, as I mentioned before, is to start with what you know, move out from the Gate Zone and start to move -- if you can, start to get some structural context and see where you are in the system. We don't think we're right in the guts of it right now. We think we're sort of off to the side based on what we've seen in this 1 and a little bit into the whole off to the side on MPD-19-002. So start at Gate, move out from there. When we think we've started to get a bit of a handle on that, move over to Dillard and see if we can repeat the process. And that's sort of our strategy in this one. And that will take up the -- up to 4,000 meters just to try and learn what we can here, see if we can find shallower depths, higher grades and figure out where we are in the system and then apply that elsewhere on the property. So that's sort of the drilling strategy.

So yes, really, in summary, our next activity will be to conduct the airborne survey. And then down the road, we're going to follow up with the drilling. And hopefully, we can follow that time line based on the current environment that we have.

Yes, yes. And everything to date says, I mean, we've been in contact with people, and we're planning on commencing work on the property, the airborne, this month. And that seems like that's still a possibility. We've been in contact with every contractor that we've been involved with, and we're really -- we haven't been affected that much, as Claudia mentioned. Mineral exploration is a nonhealth essential service that you can proceed as long as you, like everybody, change how you operate. That's how everybody is going to have to figure it out. But we're lucky. We're a Canadian company working in Canada. We're a BC company, working in BC. And the equipment that we're going to fly the airborne with is actually in Kamloops. The drill contractor that we would prefer to use and did a great job last year, full force, they live in Peachland in Kelowna. That's how things are going to have to be. If you can keep it close to home and keep it local, things might go along, albeit adjusted, but you can move on much as before.

Yes. I mean, I guess, like our sister company Great Bear, we're benefiting from a local labor pool and local suppliers. So that's great. So Claudia, if you would like to just kind of wrap up, we'll -- I don't see any more questions at this point. So I'll allow you to close it up.

Well, thank you, everybody, for tuning in. It's been a pleasure. If you have any questions, want to talk anytime, please do get in touch, call us, email us, always happy to talk. And we'll keep doing videos, webinars. I think, in these times of fast change and big uncertainty, communication is more important than ever. So we'll stay in touch. And thank you for your support. I think we have some good work and good kick at the can. We have good results coming up, and we're really well placed to come out of this strong. And I hope you're all healthy and well. Stay well, stay healthy, and thank you.

Okay. Thank you, everyone. I'm going to close the meeting in 5, 4, 3, 2, 1. Thank you.

Thanks.