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

Hello. My name is Claudia Tornquist. I'm the President and CEO of Kodiak Copper. Kodiak is an exploration company, focused on copper porphyry exploration. Our main project is MPD, a porphyry project in Southern British Columbia, where we made a discovery about 2 years ago, called the Gate Zone, have since executed large drill programs last year and this year, and we're very successful in expanding upon our discovery, extending it and have also recently made another discovery called the Beyer Zone.

Well, hello. How are you? We bumped into each other when you're in London doing -- you're doing your massive European road show -- which seem to work. Share price up, [ $1.09 ]. So people are listening to your corporate story, it seems.

Well, there's certainly a lot of interest in copper at the moment. And our story tells very well because we are financed. We executed a very large drill program, 26,000 meters this year, has still lots of results coming. So good news flow, no need to go back to the market and raise finance. And so yes, it's a very exciting time.

I think that's a very important point you make there. Having cash gives you optionality. You're not having to rush back to the market and raise expensive money and you get to choose what speed you spend that. And so let's talk about 2022 first before we kind of get into 2023. So you're at 26,000 meter plus drill program completed 41 holes. How many assets have come back?

So far, we have 9 holes back. So still a lot coming in the New Year.

Right. Okay. And what's your expectation in terms of how the market will react to that? Because given at the end of September, you released some -- like over 1% -- over like 120 meters of copper equivalent. Market didn't really react or -- and it kind of seemed to shrug at shoulders somewhat. Now we've had some good news out today in terms of inflation rates out of the U.S. Do you think the mood is changing? Do you think you'll get a better reception with the -- when I'd say, remainder of the asset results come out?

We've certainly seen a lot more life in the copper market, in the copper price -- so just recently. And today's announcement with respect to U.S. inflation, dollar down, et cetera, that's certainly also positive for commodity prices. So yes, I'm very optimistic for the next year. And at the end of the day, it's really the long-term picture that counts. The market is up and down. But really in the longer term, the fundamentals for copper are extraordinary and very, very positive because of the whole green transition -- energy transition. And so, yes, there will be ups and downs in the market, but the long-term picture, that's what's important. More copper discoveries are needed to build all these electric cars, and that's really what Kodiak is about.

Right. Okay. So I'm talking of discoveries, you made another one, the Beyer Zone. So you've been talking to us so far about the Gate Zone. When you say discovery, what do you know about the Beyer Zone as you're calling it?

Well, the Beyer Zone is a brand-new discovery in trenching. It's a high-grade gold-silver discovery on surface that came out of our regional exploration work as of our sampling program and prospecting work. It's very exciting. It's a wide zone, 14 meters of very, very strongly altered rock, so something really going on there. We've only just discovered it. Only done this tranche with some good results. And now we'll definitely follow up on that in the next year with some more trenching, probably in drilling. So that essentially added a new target or a whole new class of targets to our list of targets that we have already.

Right. And how do I -- okay. I mean, funding one, just making one discovery is geared -- making to even better, and they're rare. I keep having to remind people, these are not easy things to do. So in terms of the work that you did, the time that it took and the cost of making that discovery, I know that's not indicative of future success. But I mean, can you give me some sense of how you found this and what you zoned in on?

Well, the Beyer Zone, we knew that our property was prospective for gold as well as for copper, and it is quite common in the context of large copper porphyry systems to also see precious metal zones. And from historic exploration, we knew there are some -- there were some good gold values. And then during our prospecting, we found a very hybrid gold sample just where the Beyer Zone is, and that then led to the trenching. And yes, we then came up with the recent discovery. It's large -- [ probably starting ]...

Only with -- because I think, again, I'm so keen on sort of introducing people from out -- investors from outside of natural resources to kind of come in and kind of get into certain thesis. Obviously, copper is a very, very big one. People have come into looking at it because of the EV revolution, but there's also infrastructure programs as well going on. So when companies say we've made a discovery, how does it qualify as such?

Well, discovery is always a first step. If you take the Gate Zone, it was 2 years ago that we drilled a hole, that was really a transformative moment for the company with a big spike in our share price and we're able to raise over $12 million. It was a nice, long, high-grade copper gold intercept. And what followed are 2 years of drilling now. And now we have extended the Gate Zone to 1 kilometer of length, north-south, cross about 350 meters east-west and down to a depth of 900 meters. So we've really drilled quite a sizable amount of mineralization. And that's very encouraging progress. We see a lot of size and size potential could be even bigger here. And yes, that's sort of where we got towards the Gate Zone. And now we just discovered the Beyer Zone and also very promising start, but more work needed. We'll be trenching and drilling and just the -- how much mineralization is it? How big is it? How is it oriented? How deep down does it go? And, yes, just explore it further and see what we really have to have.

Right. Okay. So let's look at $8 million in the bank, and let's look at what 2023 needs to deliver for you as a company because it's been a difficult year for equities. I would say, copper has had a sort of -- a bit of a run at the beginning of the year as it come off in terms of price and that sort of influences lot of the equities of the copper explorers. So how do you position yourself for success in 2023? What do you need to deliver in terms of the narrative, in terms of the outcomes?

Well, the name of the game for Kodiak is really discovery. We are -- have now started to take the approach that was successful at the Gate Zone that led to our discovery and apply this to other targets on the property -- other copper targets that are very similar to Gate and that they were previously drilled by historic -- by previous operator and have some shallow mineralization already. And we will test deeper and see whether we can find just like a Gate higher-grade mineralization. So we have a number of copper targets lined up that we have started drilling already this autumn and will continue to drill next year with the aim to discover the next Gate Zone. And now with the Beyer Zone discovery, we discovered a passive metal zone, which is in a long -- over 2-kilometer corridor of gold soil anomalies. So there are multiple other similar targets to Beyer. And so we now have the Beyer Zone, obviously, which we will explore further but also multiple other localized targets to Beyer that we will also test for gold and precious metals mineralization. So lots and lot of content...

Where does the value comes from though? Sorry to interrupt. Where does the value come from? Because -- obviously, the model there is, if I make a discovery -- the hypothesis is, if I make a discovery, we get credit for that, we get valued for that. And you can sort of keep making multiple discoveries. And at some point, you've got to then do something with those discoveries. So how much longer of the discovery phase do you think you want to run? And how long before you think you'll be put under some pressure -- not pressure -- how long before the Board decides they need to kind of then work out? How do you monetize each of these discoveries?

That's a good question. It is a strategic choice for our company. We could go and start defining a resource on the Gate Zone and work that way. Or the alternative is to test other targets on the property, of which we have numerous with the aim to discover one or several other Gate Zones and really going for scale and for size. And that for now is our strategy. So next year will all be about discovery. And once we have tested our high-priority targets, then we really know where we have the best mineralization, the most mineralization, the highest grade mineralization and then we will be in a position to decide where and when to focus in on a resource.

Okay. And fair enough. That's a strategy. So can I ask about -- again come back to the money component here. You've got money, you've got choices about how you spend the money, where you spend the money and how quickly you spend the money. But when you sort of see instances like when you announced 1.83% copper equivalent over 117 meters, 0.34% over 735 meters. Again, good enough -- good grades, right? And the market not reacted. Does it affect the way that you plan your drill programs?

It doesn't know. It's obviously frustrating to release good results and the market just [ shrunk ]. But that's just the markets, and we don't have control over it. It's very much the same for all the exploration companies. Sometimes the market is just not responsive to any results, but it doesn't influence our exploration work. And over the longer term, if we keep generating good results, eventually the market will recognize.

Right. Okay. And just remind me, just again for new people looking in, what -- if they were thinking of investing in this company, what type of company are you? Are you an explorer, developer? Or are you just an explorer or obviously, to be a minor requires a whole sort of skill sets and take a little bit longer. But where do you position yourself in the market for -- as copper market?

Well, we are an exploration company. We're about discoveries. And we're focused on copper porphyries. We like porphyries because they are big target. What that means going forward, if you look around the world, I don't think there is a single porphyry mine that was actually built and is operated by the junior who originally discovered the discovery of that deposit. So in the longer term, likely, if we keep having success, there will be a bigger company being interested in us. And so I don't think we'll become a developer. Really, Kodiak is about exploration and discovery.

Well, Claudia, thank you very much for that end of year round up. We've got a sense of how you're going to tackle 2023, exciting times for copper, I suspect. And with the money in the bank, you should be able to take advantage of that one. So have a great Christmas and break. We'll see you in the New Year.

Thank you. Have a great break too.