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

Good morning, everyone. Welcome to Kodiak's live webinar regarding our maiden resource estimate for MPD. My name is Nancy Curry, VP, Corporate Development for Kodiak. Before we get started, I just have a couple of items to go through. This recording will be -- or this webinar will be recorded for replay purposes. We will also be making some forward-looking statements, and I would point you to our website for relevant guidance. And lastly, there will be a Q&A at the end of the presentation. You will see the Q&A button on the bottom of the screen. Please put your questions there and not the chat. I will not be looking at the chat. So with that all done, I'd like to take this opportunity to introduce our CEO, Claudia Tornquist; and our Chairman and Founder, Chris Taylor. Good morning Chris, Good morning Claudia, a big day for Kodiak today.

Thank you, Nancy. Thank you, everybody, for calling in. We started this journey and started working on the MPD project 6 years ago in 2019. And from the start, had the vision that this project has the potential to become a major mine in the future. So we've worked towards that vision. And today, a big milestone, our maiden resource estimate that demonstrates what we have in terms of tonnage, grade, how many pounds of copper, how many ounces of gold. And that significantly derisks the project. It gives us a baseline from where to grow. And there's no doubt in my mind that there will be a lot of growth and lots more to come from here. Let me take you through a bit of background first, where we are located, very important point to keep in mind. We are in Southern British Columbia and in an established mining district between two copper mines. That is a big advantage now and has been over the last few years because our exploration costs were very low because we have all the infrastructure there. But going forward, that will be an even bigger advantage the fact that MPD is located in a big mining -- in an established mining district will make it so much more cost-effective and easier to build and permit a mine in the future. And that's a big difference maker compared to many of our competitors and peers who have projects in remote locations and yes, a very big advantage of our project. As I mentioned, we are close to or between two large copper mines, and we have Copper Mountains, 20 kilometers to the south, geologically very similar to what we have at MPD and then Highland Valley is some 30 or 40 kilometers to the north. Let me just quickly zoom into those. We have here the reserves of Copper Mountain in this case. Obviously, reserve is not directly comparable to the resource that we now published, but it gives a good background of what is mined in the area and what is economic in the area. And Copper Mountain has a reserve of 346 million tonnes of 0.25% copper and 0.12 grams per tonne gold and Highland Valley, which is a slightly different type of porphyry but also copper, so their grades, 0.3% copper, no gold and some moly on the side. So good data points to keep in the back of one's mind. Now as I said, we started our journey 6 years ago, 2019 and have over the last year's consolidated a district. This slide shows our property package. It's very large. You see the dimensions on the side and the city of Manhattan as a comparable. And many of the properties that we consolidated had a lot of historic exploration. You can see all the black dots, that's historic drill holes on the map. And the obvious question is why did nobody before us make this project a success. And one of the key reasons for that is that nobody ever had critical mass. All of this exploration took place over the span of decades and always on small land packages and although previous operators had some good results, nobody ever had enough to really make a go of it. And by putting all these land packages together, we have created a critical mass that has now enabled us to come out with a main resource that really demonstrates that this project has scale and potential. So that was done over here, a period of 6 years. And during those 6 years, we also explored and drilled a lot in total 90,000 meters, so big drill programs every year, and this is where we are now today. We have a maiden resource that comprises 7 deposits. That's the 4 in the Northern cluster, Ketchan, Gate, Dillard and Man and then 3 in the South, West Adit and South. We have in our resource grades that are very comparable to other porphyry projects and mines in North America. We have a number of deposits that are shallow, has high grades near surface, that's very important characteristics as we move towards economic evaluation. And importantly, all of the deposits are still open and most in multiple directions, so lots of room to grow. Let me show you the numbers. So this is our full main resource. We have, in terms of tonnage, between indicated and inferred, some 440 million tonnes. So this is already a significant size and that grade copper equivalent is for the indicated 0.39% and for the inferred, 0.32%. So compares very well to neighboring mines or other mines and projects in North America. And in-situ metal, what's in the ground, we have a copper round about GBP 2.4 billion in the ground between inferred and indicated and in gold, round about 1.7 million ounces. So scale already, but as I said, lots more room to grow. We've also shown some sensitivity scenarios for our resource, our cutoff grade that we chose for the mineral, the main resource is 0.2% copper equivalent, which is quite a conservative value. The mines in the region are mining at much lower cutoffs, 0.12 or something in that ballpark. So very likely over the course of that has developed -- advancing this project moving to development, a good likelihood that the cutoff will go down. And if you look at the numbers for the lower cutoff grade scenarios, which are, of course, not mineral resources, but they give an idea of just how much more tonnage and metal in the ground, there is, if the cutoff drops, then yes, the tonnages are much larger here for the 0.12% cut-off scenario we have, if I do my math right, 780 million tonnes and the copper equivalent pounds in the ground than GBP 4.4 billion million. So yes, lots of potential to get bigger just by dropping the cutoff grade as well. Now let me show you what that all looks in 3D. So this is our overview map, and let's go underground. We have the Northern cluster for deposits. And you will remember that for those, we already came out with a resource estimate in June. We then drilled some more on the 3 southern deposits and added those now to our resource estimate for the full maiden resource estimate. So 3 more deposits, West, Adit and South partly at indicated level here at West and South. It's a little bit hidden behind the inferred. The inferred is the blue, the indicated is the red. And you can see here the resource by rate, 3 open pits, let's Zoom In on to West first. West is a gold-rich deposit, we have copper grade of somewhere in the point 2s, and then 0.242 grams per tonne of gold on top. So the copper equivalent grade is 0.37% or 0.36%, which is quite a bit higher than what's mined in the region. And with West as well, what's important is that loops the high-grade mineralization is very close to surface. You can see here the pinks, the highest grades right from surface. And that, of course, will be important in the future as we move towards economic evaluation. Over to the Adit deposit, which is, in many ways, quite similar, also high grade, higher than what's mined in the region. And you can see here it's situated on the hill, which means that all of the mineralization we drill is actually very close to that topographical surface. So also, just like West near surface, right from surface, hybrid mineralization, which will be important going forward. And lastly, south, that is a large deposits. Target lots of room for expansion also still. This is about a kilometer in length and lots more room to make it bigger. As I mentioned, lots of room for those deposits to grow. You can see the open arrows here in all various directions for all of those West, Adit and South. And very much the same also for the northern deposits, which we published earlier, still open in many directions. And I'll hand over to Chris, who will speak a bit more to all this expansion potential.

Thanks, Claudia. And this is the part I enjoy, which is the adding the discovery element to the story. So if we move along to the next slide, I can start talking about a few points that are of interest to me. And we've gone back to the southern area of the property. And this shows a couple of things at one time. It shows the West Zone, the Adit zone and the South zone. And these peaks that we see popping up immediately adjacent to some of these zones. These are from our partners at VRIFY, and it's some of the work that we're doing on additional exploration using the AI modeling. It's quite good now. We've been working with VRIFY for a couple of years. And as we feed more data into the system, it gets more and more accurate at predicting really high-priority mineralization targets. And as Claudia was mentioning, there is obvious expansion potential around these zones. And when I look at it, you've got obvious additional targets that are sitting immediately adjacent to some of the areas that we've already done the drilling. And here, if you look it at its own, it's very obvious that there's a good drill target, which is sitting just to the northwest of most of that drilling just to the southeast and out of the south zone, we've got this large target, which sits basically almost within the envelope right there. And then to the south of this area, we've had this target, which has been identified now for a number of years, and we're doing surface work to validate these in advance the beginning to drill all these new things. So what VRIFY can also do is look at projections into the subsurface of some of the mineralization and really, what it's trying to do is discriminate zones that are a higher priority within a really, really big mineralized envelope. And we know when we do reserve and resource, while resource in our case, estimations and projections, we're only using a portion of the mineralized zone. Like if you looked at the area that was actually containing porphyry-related alteration mineralization in this region, it would be a lot bigger than what's in the bulk models right now. They're sort of a global resource or a global mineralized system, which doesn't all make it into the pits and that thing is obviously much, much bigger. So within that really big mineralized envelope, you can use the VRIFY to target some higher priority zones that look like they're associated with potential for higher grade mineralization. What really -- one of the things that I really focus on here in the south area of the project is that these are really arbitrary and artificial boundaries on the mineralized zones. So if you look at the drilling that we did a couple of years ago, we have some really long exploratory holes that basically were just designed to undercut the area between the Adit zone and the South zone. And there's no evidence, no geological evidence whatsoever that the zone stops here. It's just undrilled. So when we're looking for additional upside that's really, really easy to work with, we start looking at areas like between these two, where all the evidence tells us that we have very obvious opportunities for expansion. And the same thing applies to the Adit zone. Like when I'm looking at it, what we have adjacent to it is really obvious AI targets from VRIFY, which are immediately adjacent to areas that we have done work but we also have within the area of the Adit zone, areas that look like they're unmineralized simply because they're not drilled. So these are really -- it's really low-hanging fruit for us to get drills into these parts and basically figure out what the mineralization is like in those areas. But despite the fact that we already know that, we have these additional AI targets, which are sitting immediately adjacent to the areas that we've already drilled. This reiterates that point. Like if you could see that we do a series of holes to expand the South zone, it would be very obvious that we would have that availability in these regions. And we actually have evidence striking off to the north from the Adit zone that we have mineralization there. In fact, we have done some initial drilling, which terminated in mineralization, several hundred meters off to the north. And some very obvious additional targets in this region is there's this one off here over to the South. Again, we don't have any drill holes into it. Makes total sense to me because some of the major early structures on the project run up like through this area. And in every instance where we've gone and done exploration along strike on these targets, we see portions of the mineralized system, the total mineralized system, including different porphyry targets. So this is an area I'd really like to get into and get some drilling into to look for very obvious expansion potential. Another region, I think we've got some really, really low hanging fruit is Ketchan. And Ketchan, we really like it. The grades in here are quite good. If we look at the -- consider that in the perspective of the project but it's really near surface mineralization. And we inherited this data set from our predecessors. We have not yet put a single hole into Ketchan. And so this is a very, very obvious target for Kodiak to go and proceed with. But when we look at Ketchan, we have some drilling that's already been completed, which is right beside the pit shells that we have here. And this is a 500-meter step out. Like if we look at the distance between here and here, that is 500 meters. So you've got a system that's over a kilometer long already, but you have a -- the really obvious opportunity to add like 500 meters of extension to that system. And quite simply, like there's nothing in between that says it's not mineralized because if you look at this whole here, it's just off trend on the mineralized system. So every single hole is mineralized. This one is a 500-meter step out and it looks like a really obvious way to expand this. And obviously, that's already drilled. It is not the southern termination of the mineralized system. It should continue going as well. I don't know how big this thing is. It looks like it could expand significantly. Can it double? I don't know, possibly. We're going to have to get a drill over there and test it. And one of the things that we really think about when we look at the Kodiak project, the MPD project in total is just the number potential targets that we have here. And so there's a couple of areas on the project where the early mineralized system formed porphyry clusters and one of those are centered around the Gate zone, the Dillard zone, the Man zone. We have Ketchan over here. The other one that we have is over in the South. But there's a bunch of other targets on the project, too, like further east from the Dillard area, there's indications that there's good grading mineralization here in trenches and historical work that we haven't followed up on. And then there's some other targets on the project, which are quite interesting to me. Like we have the par target here. I've got my cursor. If you can see that circling around it, so maybe I'll do this. There's a fellow that I worked with at Mount Polley. His name is Jim Logan and he's from the BC or was with the BC Geological Survey. He did mapping work in this area and at par he identified an IOCG type target with some nice grades on surface. There's a little bit of drilling. I think it's 2,500 meters of drilling that have been done in this area, which detected spotty mineralization. That needs to be followed up on because those holes need to be extended. We need to get additional work into this area. And what we did in the past year was we actually did soilprints over a whole bunch of these regional targets. We're waiting for results back. You're going to see that in the near future. And it validates where we're going to end up doing additional exploration. But up in this area, and I just want to see on the -- let's just jump to the next slide, so we can zoom in a little bit more. People are always asking me like, where do you see really good grades on the project in the near surface? And it's actually the highest grade copper assays anywhere on the property are here at this Gamma and Zig target. And there's like grab samples coming out of surface there of like 4% or 5% copper. And what we see is this is that -- reminds me a little bit of the mineralization that we have, the really high-grade stuff at the surface of the Adit zone, but it's even higher grade, like 4% or 5% here. And it's in volcanics. And it's not in an intrusive stock. So what I wonder about in this area as we do more work is whether we're going to end up with a porphyry system that we're seeing the upper reflections of sitting here like in the near surface. We have some additional results in this area like [ Ida and Bos ], and I had some notes there. I was just getting my thoughts together. And so at that one, we have a couple of historical mineralized trenches. And the key point of it is that we have a mineralized die rate, which is very similar to the Copper Mountain age, and that has good results in it. So we have the right rocks of the right age with mineralization that hasn't been followed up on yet. And so like just in this area itself, as we continue to expand the exploration focus, we could probably continue that sort of discovery cluster model that we've seen everywhere else on the project. And I wonder as we do more work in this area, we haven't developed another porphyry cluster similar to what we have at the area around Gate and prime and that we have on the southern portion of the project. So when I look at the project as a whole, we have a number of VRIFY targets. Actually, I forgot to mention, but the iota one is another one that's sitting in undrilled but it's really obvious when we look at the AI modeling, Iota, Epsilon, these guys. These are obvious targets that need to be followed up on that have no drilling into them whatsoever yet and may indicate that we have additional porphyry clusters like we've been drilling elsewhere on the property. Then I'll hand it back over to you, Claudia.

Thank you, Chris. So just a couple of words to wrap it up what's coming up in the new year in terms of milestones, catalysts. We'll will have some results coming from our soil sampling and the drill targets that Chris just spoke about and also in the first quarter, some results from our second round of testing. We will start drilling again. Typically, we drill will start in March, April, so springtime. So around that time, expect to hear from us that we'll mobilize and do well, both drilling to -- on the existing or on and around the existing resource zones and deposits to grow them, but also testing some of the new targets that Chris just spoke about. And then, yes, from the summer onwards, we'll have exploration results coming, and we are aiming for an updated larger MRE in something like a year's time. Our capital structure. A couple of key points to highlight. We have financed this autumn, EUR 8 million in the treasury. So cashed up for a good size drill program next year. We still only have 95 million shares outstanding. Even after 90,000 meters of drilling, we've raised, in total $56 million over the last years, so have been able to keep dilution to a minimum. And you see our share price here at the bottom. We're up over 100% already this year, but there's still a long way to go and this slide really shows that very clearly. This is a comparison of us to some of our peers, we also explore for porphyries in North America and are already more advanced, have already a resource, maybe a PEA, so are one or two years ahead of us. And you can see their market valuations or in case of GT Gold, they were bought, acquired by Newmont. So their take out value is much, much higher than our current market cap, which is around EUR 70 million. And our resource estimate is a big stepping stone for us to close this valuation gap because it really demonstrates to the market. What we have that this project is real, has the potential to move forward into economic development and has the potential to eventually become a major mine. So this valuation gap for us is an opportunity for our investors. I think we are very well positioned to generate some great returns for our shareholders going forward. And that brings me to the end, and I'll hand back to Nancy for some Q&A.

I just want to say again, if you have a question, please use the Q&A button on the bottom of the screen. I do have a couple of questions here. You've outlined 7 pits. Will you lose economy of scale with 7 pits?

That's a good question. And first thing I would say is that several pits is not unusual at all. If we look around us, they are mines that are similar geology to what we see at MPD, Copper Mountain or New Afton, all of those have or had multiple pits. So that's very common because these porphyry just occur in clusters. And several small pits can be more efficient than one very large pit, and they give you a lot of optionality and flexibility as well. So I don't think it's a negative. It can be very much of a positive, and that is very common.

I'll add to that as well. Like when I worked at Mount Polley with Imperial Metals in BC, which is the same belt of rocks, it's just further to the north. We had, I think, when I was there, it was 5 pits, which turned into more. And so it's very, very common for the porphyry projects in this area. One of the things that you have to think about, if you have really big pits, think about the time it takes a truck with a bunch of ore in it to drive up from the bottom of that pit and get up to the processing facilities. These are not inconsequential. So one of the advantages, like Claudia said, of having the multiple pits is that the trucking distance can be over flat ground and that can be pretty efficient if you think about it. There's also things that you can do from a mine planning perspective, which make use of starter pits to store and move material around.

Sorry, next question here is about the network. You have network coming early next year, can you elaborate on its importance, like what's happening with the network?

Yes. Well, that's a good question. We didn't touch on it in the webinar. We did our initial network earlier this year, and that came out very positive. Essentially, we have very simple plain vanilla metallurgy, good recoveries, no deleterious elements and good concentrate grades. That's what became clear already with the first round of met testing. And that's very important because difficult metallurgy can be a real drag on future economics. So taking that box easily and having really simple metallurgy will be a big advantage for the project going forward. And having said that, metallurgy is very much an optimization process, we've now embarked on the second round to just improve test further, expiring further and improve on what we got in our first round of testing.

One of the typical things that you come across with porphyries like this is that they have both copper and gold in them, and if you notice, like there's quite a significant amount of gold in our resource, it's about 1.7 million ounces now as we were just discussing. So one of the things you can do from a metallurgy perspective is depending on the metal prices and your projections for the longer term, you can tweak that system so that you end up with something that, for instance, favors gold a little bit more than it would in a base case, and you might end up with different economics. So these are the kind of things the company needs to look at is really what is the optimized product that this project ultimately if it becomes a mine, would end up producing.

Okay. Awesome. I've got a bunch of questions, so I'm just going to put them all together. How big will your drill program be in 2026? Will it focus on discovery or MRE expansion? And are you going to finance? There's all three.

Well, let me make a start. We'll do a lot more work over the next couple of months to really figure out what we do in terms of exploration and drilling next year. So all the details are yet to be determined. What I would say is with our EUR 8 million in the treasury, we have financed for already a significant build program. So expect a large program next year. and it will be split between resource expansion and exploration drilling. What the exact split will be yet to be determined whether it's an 80-20, 60-40, whatever will come up with over next few months with further work and further analysis. But you'll see both making the resource bigger and then maybe, well, drilling for the next discovery. So last point of the question, not to forget, will be finance again? For an exploration company, the answer is always yes because that's what the exploration is about. We are at this point, finance, as I said, for a really good-sized program. but we're always opportunistic. And if a good financing opportunity arises, then we will go ahead with it.

Yes, I'd say the only thing I'll add to that, Nancy, is the portions of the presentation I went through. I mean it would really behoove us to get a few holes around the margins of some of the resource areas that we've already got out, that will add significant mineralized tonnage in a very short period of time.

I have someone here who's reading the notes, the copper equivalent, we're using 2,600 gold. Can you explain why we have such a conservative number?

Well, we've used the app, 2,600 gold and $4.20 copper per pound. Those are clearly conservative estimates. They are the same we used when we came out with the first part of the resource in June. At the time, we chose conservative estimates. Since then, copper and gold have both rallied to all-time highs. So now these estimates look even more conservative. But they are what they are. And obviously, if in the future, we do a resource update and have higher commodity prices, then that will boost the resource that way as well. But for now, just yes, very solid and conservative baseline, I would say.

I think that's all the questions I have at this moment. you guys have any final thoughts or anything you want to leave the audience with besides what a big milestone and how happy we are to get this out to the market before Christmas?

Well, I'll say a couple of things, and then I'll let Claudia do the final wrap up. It's kind of just a point in time, right, is the way I would look at it with what we've seen in this property so far. There's -- every time we've gone out with the drill, we find a lot more copper and a lot more gold. So I would anticipate that will be an ongoing part of the process. It will continue to grow. So this is just a point in time in the growth curve, but I'm really happy to see that the project now has a foundation of billions of pounds of copper equivalent in the ground. Certainly, come a very long way. The other comment that we were having this morning, Nancy, was that it's kind of funny to think about it like there's a weird comparison that would make to the great Bear story, and it was the fact that we've drilled 90,000 meters so far, and we have about 1.7 million ounces of gold in our resources. And I would say that when we got to the point of sale on -- great Bear, we had drilled about 400,000 meters to come up with maybe about twice that resource. So kudos to the team. They very efficiently added a lot of pounds of copper and a lot of ounces of the gold with a small amount of drilling from that point of view. So congratulations on your capital efficiency.

Well said. Well, from my end, I can certainly say that I'm generally excited that we now have a resource and can really demonstrate what we have at the project. We've been working towards this for 6 years. and lots more to come, lots more room to grow. So yes, point in time is a good way of putting it, and I'm looking forward to growing from where we are and generating lots of returns for our shareholders.

Thank you, Chris. Thank you, Claudia. Thank you, everyone, for joining us today on this webinar. If you have any questions, please reach out. The contact information is on the screen. And upwards and onwards. Let's go Kodiak.